Once again this year I heard a lot of chatter about business plans. Many who teach entrepreneurs now question the utility of teaching our student using business plans.
My take? I think one of the biggest problems is not business plans themselves, but how people use them, when they write them, and most importantly how they develop them.
We set business plans up on a pedestal as if it is the holy grail of entrepreneurship. It is as if we are telling aspiring entrepreneurs that once they unlock the secrets of the business plan, the world of entrepreneurial wealth will come pouring out at them.
Are business plans all you need to know to unlock the door to success? Of course not.
Is writing a business plan a complete waste of time? Also, not true.
So why do we teach about business plans? It is because they are a way to help organize what can be a complex and overwhelming array of issues. It is because it forces us to integrate our marketing plans, or operating plans and our financial plans into one, coherent story. It is because we need to put it all down on paper to make sure that we have thought of all of the important stuff that goes into a successful start-up. It is because business plans have become the standard for communicating about a business to those with money.
Will a formal business plan make you richer and more successful?
Probably not. I know many entrepreneurs who never wrote a formal
business plan for their ventures who have made a lot of money.
But they all understood the importance of business planning. They just never took the final step of writing it down. While the business plan itself may not always be necessary, effective business planning always is.
Understand that the business plan is just a map. It is a map into an unknown territory. Our actual path in our business will likely look very different than our plan. But the plan got us thinking. It made us think about all the details. It helped us understand how all of the parts of a business fit together to make a whole venture. It helps prepare us for our journey and makes us better prepared to adjust to all of the surprises that we will face almost every day we're in business.
Success will not be determined by the plan. Success comes from implementation and execution.
I think the other part of the equation is that business planning is not static. It is not "write a business plan and then go implment". Your business plan needs to be a living document.
You are entirely correct in saying that it is the business planning exercise that is important, not the document.
Cheers,
Doug
Are there any business planning books you recommend? thanks.
I like the materials put out by the Planning Shop -- see their link in the right column.
Hi Jeff, this is Margaret Reynolds of Reynolds Consulting LLC. I agree with you 100%. Strategic planning or business planning are essential tools for entrepreneurs in all stages of the business cycle--not just at start up. A good plan will be dog-eared and coffee stained because it is a reference tool in decision making and resource planning. This article endorses the value of planning for entrepreneurs
http://www.reynolds-consulting.com/articles/entrepreneurs.pdf
As entrepreneurs, I agree it is especially important to have a fluid, constantly adjusted business plan. With the large companies today making drastic changes in their structures (see http://tiny.cc/AO1gG), we entrepreneurs have to adapt even more quickly. And as a company becomes more established, it's important to keep that sense of constant innovation and change, or run the risk of quickly becoming yesterday's news.
It is not that companies fail in the business planning. In fact most fail eariler in the strategic planning stage and write the wrong business plan. Entrepreneurs have a tendency to lock in on what they expect the market needs and how they deliver it way too early. They fall in love with a model and congnitive dissonance kicks in before really interacting with the market well.
In strategic planning you brainstorm and are open to major changes to the business model. Most major successes innovate the business model, not just the product. Dominos did not have great pizza - they had a 30 minute delivery guarantee. They differentiated on a key "pain" of customers. Many major successes have these little differences i.e. Payless Shoes (no salespeople, so half the price). We created and use a three step process that forces innovation early and only allows the plan to jell after innovation opportunities are explored in every area (sales, marketing, finance, product development and operations). See our Strategic Planning Kit link below.
Bob Norton, CEO Coach and creator of The CEO Boot Camp
http://www.airtightmgt.com/Strategic_Planning_Kit.html