I don’t know whether you remember me but I emailed you regarding your website and you gave me permission to reference your work. It is coming along well. I was wondering if you had any statistics on relative success comparing people who created business plans with those who hadn’t created plans for their business. I’m just trying to find out how much it helps. By the way I am currently writing my business plan and your site has helped me immensely!
If there’s one area of creating a business that I have found entrepreneurs consistently don’t get, it’s writing a business plan. I even know of entrepreneurs who hire someone else to write the plan, as if it’s the final document that’s important, not the process (I have written about the problems with that approach extensively too, including at Why successful startups never outsource their business plan).
Not to sound too new-age or anything, but it’s the process of forming the business plan that’s important, not the final document itself. Sure you want to have a good plan when you’re done, one that reflects all your great ideas for your business, savvy analysis of your competitors, accurate and believable financial projections, good executive and founder bios, and so on. But even a mediocre business plan is a ton better than no business plan.
There are a couple of reasons for this, in my opinion. First, by being able to create a business plan, you demonstrate to potential partners, investors and even executive hires that you have thought out all aspects of the business. Indeed, many plans are built upon the MBA fundamental SWOT analysis: Strengths, Weaknesses, Opportunities and Threats. Can you accurately identify all four with your current business?
Perhaps more importantly, though, since you have to go through all the fundamentals of your business — not your product, not your idea, not your establishment — then you are forced to face the threats and dangers and address them in the plan. As I said, it’s the process of producing a plan that’s so darn important to the success of a business.
And a typical business plan will take you at least a few weeks if you’re going to do a good job on it. Some parts are a breeze, but others, like having realistic and credible projections for your finances are incredibly tough (and the very first thing just about any potential investor views are your financial projections, and if they’re out of the ballpark, you’re dead before you start).
Well, let’s just say that if you’re a small business, or you’re just birthing a company, either solo or with a few partners, the time you’ll spend developing a solid, coherent business plan will more than pay for itself in corporate strategic and tactical clarity as the company grows.
And, finally, I also have an online site, Startup 101 Info, that offers a simple tutorial on how to write a business plan that you might want to read too: Creating a Business Plan.
Good luck! There’s little more exciting than trying to turn a smart idea into a viable long-term company!
Nice comment without any background, Charles. I’m not going to pull out my credentials other than an MBA, four startups of my own, and consulting work I’ve done for venture capital funds for years. You have your experience, I have mine. I stand by the importance of the *process* of writing a business plan, of the *process* of arguing about strategy and numbers with your partners, and of the importance of *defending* your data, analysis, market SWOT, etc, with a potential investor. If your investor doesn’t care how your business plan was created, they’re probably the one without much experience…
Dave doesn’t have much experience. Yes writing the plan is important, but financial backers arent going to watch you write it. They are going to read a COMPLETED DOCUMENT. The completed document is HUGE unless you are independently financing your venture.
I love boot-strapping start-ups.
Sounds like Dave offers you sage advice here.
I would chime in that a well designed spreadsheet is like a road map to the past, present, and future to your plans.
Plan for everything your business needs in the plan, and err to the very expensive side. Then, and only then, project your sales without regard to your costs. Sorry, but you must plan your sales very low.
Now, if your plan only loses a little money, you’ve got a good fighting chance. Planning expenses low and sales high, seems to me, is an excellent model for failure.
My spreadsheet changes daily. I look at the past as a future predictor, and then I reduce my future predictions lower than my past results. In other words, run your business as an optimist and your spreadsheet as a pessimist.
When we develop software I follow the double-double rule. Think how long you expect it to take to develop, double that number, and then double it again. If you have achieved your goal in that period of time, you did better than would be expected. Much better.
Plan for losses…it will help you win. Plan for not having enough money at the time you need it. This will make a man out of you (or a good woman).
That’s my 2 cents worth.