The Business Plan is Dead, Long Live the Business Plan
In the previous delivery I reviewed Business Models, primarily what it means and the main elements to think through when compiling your Business Model. Based on the number of hits, it seems that this is not a very popular topic. I think the term “Business Model” makes people uncomfortable because it seems confusing. Maybe consultants and academics are to blame for this state of affairs by unnecessarily complicating the concept, but I stand by my belief that thinking through your Business Model is a critical part of the entrepreneurial process. In this delivery, I want to tackle a controversial topic in entrepreneurship, the Business Plan. I want to do it in two parts, firstly debating my raison d’être for the Business Plan and then in the next delivery, sharing some pointers on how to construct a compelling Business Plan.
It’s all about planning
I have mentioned previously that I lecture the Master’s Degree module on Innovation and Entrepreneurship at the Harold Pupkewitz Graduate School of Business. The reason why I am mentioning it again, is because I want to refer to the occurrence that in every year’s class, there are always one or more students which seriously doubt the necessity of a Business Plan. This usually leads to some intense debate in class and over the years I have come to notice that the main argument for the “anti-Business Plan” faction is that they usually have a reference or two of successful entrepreneurs who became very prosperous without the use of a Business Plan.
Connecting over the years with many people who are aspiring entrepreneurs, I can also give some anecdotal evidence that writing a Business Plan is not every entrepreneur’s favourite part of entrepreneurial journey. So it does beg the question, do you really need a Business Plan?
First, let me refer to some research done on the topic. It was not very helpful. In essence, I came across research which found that entrepreneurs who began with formal plans had no greater success than those who started without them. On the other hand, I also uncovered research which found that writing a Business Plan greatly increased the chances that a person would actually go into business. In fact, the chances were actually found to be two and a half times more likely that the person would go into business.
So where does this leave us? In my view, it is a matter of depth. What do I mean by that? Well, every business has to start with a plan, whether it is just a mental construction never committed to paper or a more advanced description jotted down on the back of an envelope, or a 100 page document going into the finest detail. An entrepreneur absolutely has to think through things before launching a business, and that makes it a Business Plan in my books.
There are certain situations where formalities dictate that you have to submit a Business Plan – like for a business loan application from a bank – where you do not have a choice in any case. But I argue that when it comes to planning for starting a business, it is an indispensable tool. I mean, it is called a Business “Plan” for a reason! For me, the golden rule with regards to planning is: “Don’t just think it, Ink it”! When you write things down while planning (or thinking through “everything”) it triggers other ideas, helps you to organise your thoughts and get clarity of thought. So, I argue that no matter what your perceptions are of the Business Plan, or in what format you construct it (on the back of a napkin or a very professional document), if the Business Plan is used for what it is intended, i.e. planning, it serves a purpose and must be part of the entrepreneur’s arsenal.