My MBA students just finished up presenting their business plans last evening. Here are some lessons they learned about why the process of business planning is so important (beyond the obvious external reasons tied to financing):
- Business planning helps finds the things we don't know about the details -- attracting customers, staffing, managing inventory, and so forth.
- Business planning tests your desire, your passion and your resolve.
- Business planning helps to determine if all potential partners understand their roles, the time and financial commitment required, and the risk. It allows us to discover important points of disagreement or incompatibility before it is too late.
- Business planning can show us the true potential of the business -- sometimes this is a pleasant surprise and sometimes it is a real disappointment. If approached honestly and diligently, it is a true process of discovery.
- Business planning lays bare the holes in your business model, your team, available resources, and your implementation plans.
Is it common to create several business plans that once finished, you don't start the business because of your findings? Thats the situation I'm in. I've started some only to stop once I see it won't work or haven't started a business because startup capital need was too high.
Yes. We often call the business planning process "the last chance to fail on paper" before you commit significant time and money to the launch the project.
I would like to add one more reason to why the process of business planning is so important.
The Business planning process is not easy and it is very time consuming. Going through this exercise is a taste for the type of commitment and hard work that running a business takes. It forces the potential entrepreneur to think through each one of the details that will need to be coordinated if the business is to succeed as well as to realize all of the risks involved in the venture.