Are Business Plans Dead?
Once considered a startup staple, business plans have entered a murky territory in recent years as amorphous tech startups spring from shared houses, competitions spawn the birth of new companies overnight, and adaptability is prized in a constantly changing marketplace. Are business plans still relevant?
The traditional business plan will always have a place in the world of entrepreneurship.
“Startup businesses need a plan,” agrees Steve Radley, CEO of NetWork Kansas. “A business plan provides a good map for that plan.”
Diving in to a new business venture can be exciting, but ultimately if a business is unprepared, it will likely mean lost time, revenue, or worse – costly expenses and missed opportunities.
There are too many stories of a business that realized too late that they needed to file a certain license, reach a different market, or entirely revamp their product. While these learning pains are part of growing a business, a well-prepared venture can minimize losses and maximize gains. Business plans are also important for recruiting funding, especially at the startup stage, but also during expansions and other transitions.
“I believe a business plan is vitally important to the success of a startup business. A properly-done business plan will help the entrepreneur identify and answer the important questions that need to be addressed long before the bank loan is applied for,” says Erik Pedersen, Director of Entrepreneurship Communities at NetWork Kansas. “A business plan will help address competitive environment, market research, staffing, inventory, etc.. all of which are important to ensure there is a market for the product or service and that sufficient startup capital is being applied for.”
The purpose of a business plan varies, depending on who you ask. Too often, entrepreneurs create a business plan simply to qualify for bank financing, instead of using it as a tool to chart their course.
“The danger of a business plan is when an entrepreneur does a business plan just because a bank requires it,” cautions Radley, “Entrepreneurs
must also understand that a business plan doesn’t guarantee success but can help reduce the chance of failure.””
According to Tim Berry in an article for Entrepreneur magazine, the fundamentals of a sound business plan include the following:
- Business and results-focused (instead of emphasizing style, formatting, or writing)
- Facilitates ongoing planning (the best plans are a process)
- Manages change (assumes change will happen)
These principles are timeless. Yet, current business plans need to be able to weather a rapidly changing world. They need to be revised more often. Instead of sitting proudly on a bookshelf gathering dust, these are living documents that should be reviewed as often as every few weeks and changed.
This is easier than it used to be, because business plans today are shorter – perhaps as brief as 10 pages.
Business plans should also be easy to access, and result in a different generation of information. Digital plans, available instantly from an online network, are a good way to keep the road map handy. Information like an elevator pitch and executive summary can be fashioned from a good plan’s content, making a business plan a productive tool instead of a paperweight.
While lengthy documents produced at great cost for a third party’s sole benefit are relics of another age, doomed to extinction, a good business plan is still an invaluable resource for a company, especially when used as an evolving document. Rather than a finite encyclopedia of a business’s projected progress, a good business plan is like an early explorer’s map – constantly evolving to color in details of a world not yet discovered. This kind of business plan has a long, long life ahead.
Source: How and Why Business Plans Have Changed
