“Do I really need a business plan?”
It seems like such a waste of time…
I hear you… and if you’re asking that, you obviously don’t want to write one.
But do you need one?
Unless you have a specific event where you have to present your plan, such as pitching to investors or applying for a loan or business grant, then no, you don’t NEED one.
If it’s for your eyes only, putting together a 40-page formal business plan IS probably a waste of time.
Let me be clear. Spending your day copying and pasting from business plan templates, obsessing over grammar and formatting, and developing a perfectly bound document you will never look at again is a waste of time.
However, the act of business planning – the act of writing down all the strategies, concerns, and to-do items floating around in your head into a clear action plan – is not.
The Pros of Business Planning
Writing a business plan and planning your business are similar, but distinct. A good business plan is a practical, action-based blueprint for the near future that will guide you towards your goals.
Business planning involves mapping out what, exactly, needs to get done, how you will do it, what resources you will allocate, and who is responsible for each task. A business plan is the written version of that. When should you spend time on business planning?
- To define your new business – Start a business involves keeping track of a lot of details. By organizing things into a logical structure, you can evaluate its true potential and clearly explain your business model – and why you want to invest in this endeavor – to others. By creating benchmarks and estimating expenses, you can determine this particular business idea is a good use of your time, money and resources to move forward.
- Prove cash flow – Having enough cash on hand to cover expenses is a primary reason why businesses fail. Can you take in enough revenue to cover your costs? What revenue targets must you hit each month?
- Set metrics – Working for yourself means managing yourself. What milestones and deadlines do you need to set to hold yourself accountable? How will you measure your success?
- Create a framework for decision making – Every day you will be presented with new opportunities. When you have a business plan, you have set priorities and can evaluate how good a fit the new opportunity is with your long-term business goals.
- Identify flaws – No one has a 100% accurate bird’s eye view of their business as it interacts in the marketplace, so you will always have incomplete data. However, by thinking through what could go wrong, you can pinpoint potential flaws in your plan, avoid mistakes, and create alternative strategies.
- Generate new ideas – Business planning helps you brainstorm and think outside of the daily grind.
- Get partners on same page – If you have business partners, creating a business plan can clarify and manage what each of you expects from the other, who will do what tasks, and how you will split profits.
The Cons of Business Planning
While business planning is essential for analyzing what activities need completed or helping to navigate a sticky situation, there are a few drawbacks.
- It’s never finished – Your business plan is never complete until the business ceases to exist. It needs revised every 3-6 months to account for new developments, course correct, and set the business back on track.
- Unrealistic assumptions and blind spots – You don’t realize what you don’t know until you start working, collect real world data, and analyze the results. Your cash flow projections may be based on a rosy outlook, positive thinking and a lack of real world evidence. You may not know your business will fail until you try.
- It takes time – Putting together an extensive competitive or industry analysis can require considerable time to collect data, analyze it, and write it up in a clear, easy-to-understand format.
- Analysis paralysis – Sometimes having so much data can overwhelm you to the point of not knowing what to do with it.
- Never getting starting – You can spend so much time crafting the perfect plan on paper, but never get around to executing it. Planning is worthless without action.
So no, you don’t always need a business plan. But if you run your own business, it’s good practice to set aside time for business planning.
You may not need to write a formal business plan document, but having a simple, easy to follow plan on paper can help you stay on track. Keep it concise, focused on the short term, and commit to taking action. The best plans involve doing the work, evaluating your results, and adapting.