Do You Really Need a Business Plan?

by Ed Martin

Everybody says you need to do a business plan if you want to succeed, or do they? Do a search for “need business plan” and check out the results. There are a few people out there now saying business plans are just a waste of time. They are a minority and go against all that is thought to be sane, but they do have a point. Are they pointing out the emperor’s new clothes, or are they just nuts?

Let’s be clear here, there is a big difference between the needs of a microbusiness and a small business. Don Dodge writes that venture capitalists never read business plans, so why go beyond some Power Point slides. Comments to his blog post tore that idea apart saying you can’t talk money without a plan. Interesting reading, but not so relevant for microbusinesses. Venture capitalists are just a pipe dream for most, so we move on.

Let’s focus on microbusinesses. Mark Silver writes for a true microbusiness, or being self-employed, a business plan is a recipe for disaster. All you need is a target market, your produce/service, time and money. Silver adds a new business is like a baby. Babies don’t need plans, they need boundaries and toys, and you should treat your business accordingly.

The Toilet Paper Entrepreneur has a list of things you absolutely don’t need to start a business, one of which is a biz plan. Don’t need no stinkin’ experience either, says TPE. Interesting…

Who’s right? There is a huge industry built around writing business plans with software and books and experts all telling how to write one. A lot of people have a big vested interest in pushing biz plans. I’ve told people the same thing – you need to make a plan, but I’ve had second thoughts about this. I don’t think a formal plan is worth all the time and effort for lots of startups, especially microbusinesses. You’d be better off putting the extra time and effort into getting your business running.

The Bottom Line

But that is not to say you don’t need to plan. You do! You still need to think your business through, to have an idea of where you’re going and how to get there– at a high level so you’re not just flying blind and hoping there’s no mountain out there. Don’t write a big detailed plan with boilerplate and numbers pulled out of a hat. Keep it simple, 1-2 pages will do (here’s what you need.) Update it because things change. It’s a lot easier to keep a 1 pager fresh and accurate. Be flexible. One of the great advantages of being small is that you can change course quick and easy. But remember those boundaries.

When do you truly need a business plan? Certainly in these cases:

  • When you are asking for money through loan or investment.
  • When you want a partner
  • When you are incorporating

Other thoughts on skipping a business plan from all around smart guy Guy Kawsaki — Is a Business Plan Necessary? Guy also has a link to a study by Babson college that shows having a business plan had no affect on the success of new businesses. And an Inc. magazine article  says way over half of successful companies in their Inc 500 had a business plan when they started.

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