Do I Really Need a Business Plan?

Not so long ago, business plans were given *a lot* of importance. In fact, they were seen as being the first step to starting any business and the most essential part of the process. Many business awards were judged on the business plans their founders had created, and having a weighty plan under your belt felt like real progress. But in reality, a truly actionable business plan has always been a very rare thing.

More recently, especially with the trend towards “lean startups”, entrepreneurs seem to have forgotten about business plans and many bypass this step altogether. Which is not entirely a bad thing. Many good hours have been wasted perfecting business plans when what was really needed was some actual implementation and conversations with customers. This blog is about “doing the things” and I believe having a strong bias for action is what really moves the needle. It’s what differentiates the doers from the talkers.

But that doesn’t mean you shouldn’t have a strong business plan – not at all.  An actionable business plan is still just as essential as ever and there’s a strong correlation between having a good plan and succeeding in business. But before you dive into number crunching and drawing graphs, it’s best to be *very* clear on why you’re writing a business plan…

3 Reasons to Write a Business Plan

1. Feasibility Study – to determine whether a certain business is a good idea or not

   This is a specific type of analysis to decide whether to begin a certain business. We’ll look at this another time as it’s quite different from other types of plans but a good approach is to look at unit economics viability.

2. Investment Pitch – to convince possible investors to back your business

   This is what most business plan formats seem to be aimed at but in reality, very few businesses are going to get investors (although you may also need this for a bank loan). But given that the objective of this type of plan is to convince someone of the merits of your business, it’s unlikely to help you with running or growing a business.

3. Actionable Business Plan – to provide your business with focus, direction and the best chance of success

   An Actionable Business Plan is what all businesses need, but surprisingly, very few business plans seem to be designed for this purpose. In fact, if you search online, you’ll have a hard time finding a format for a business plan that is actually useful in the day-to-day operations and decision-making.

Old Style Business Plans

Most business planning approaches and templates will suggest you use heading such as these, and diligently complete each section.

• Executive summary
• Company description
• Market analysis – description, size, growth,
• Products and Services
• Competitive Analysis
• SWOT – Strengths, Weaknesses, Opportunities, Threats
• Marketing Strategy
• Operations Plan
• Management and Team
• Financial Analysis
• Risk Mitigation
• Conclusion

The problem with this type of plan is that it doesn’t really serve any of the above purposes very well. These types of plans end up as impressive looking but useless documents that sit on a shelf (or in a hard-drive) gathering dust.

These type of business plan frameworks deter people from creating truly useful business plans.

An Actionable Business Plan

A useful business plan should be something that gets you clearer about what products and/or services you’re providing and to who, and provides guidance as to how you’re going to do that. It should be fairly brief (ideally one page) and displayed somewhere so that it’s easily referenced on a regular basis. Of course, it will be updated periodically, but the best businesses make a plan, do the plan and make sure they’ve given it a really good shot before revising the plan.

So what should a practical business plan include?

1. Clear vision statement

   Your vision statement should define what products / services you provide (or sometimes what problem you solve). It should also give a brief, but clear description of your target market. These two things combined serve to keep you tightly focussed on your business objectives. Here’s a template for creating a good vision statement.
   Once you’ve crafted your vision statement, hold like crazy and ask yourself how to deliver it best.

2. One-year goal

   In almost all cases this should be a financial goal – revenues or profits. (Remember, hobbies cost money, businesses make money!) Make it a challenging but realistic goal that stretches you a bit but you can see yourself achieving it. Break it down into your various revenue streams (if you have more than one), and then break it down further into monthly goals.

3. Tactical Strategies

   Break the year down into quarters and decide what specific strategies you’re going to implement in each quarter in order to reach your goal. Most commonly, these will be marketing or sales related strategies, but they might also include organisational strategies (changes to your team), supplier strategies, or developmental strategies (eg new features to your products). First, brainstorm the possible strategies that you’d like to try but then filter them, thinking about what will work best for your clients, and what will work best for you (or here’s another prioritisation framework). Don’t be tempted to try to do everything all at once. Usually 1-2 chunky strategies per quarter is about all any business owner can handle.

4. Action Items

   Finally, break down the your strategies into actionable items. List them by month and ensure that no task is too big (if it is, break it down further). The idea is to end up with a plan that you can refer to throughout the year, month by month, crossing off the action items as you go. And these action items will lead to your strategies being implemented, which will lead to the achievement of your overall goal.

This is the type of plan that’s going to help you get results and really move the needle for your business.

So yes, your business really does need a business plan. But make sure it’s the right type of plan – one that’s oriented for action. And of course, writing your actionable business plan is only the first step, it’s acting on it in the day-to-day that counts. Commit to sticking to your plan for at least 6 months before re-evaluating and perhaps rewriting your next 12 month plan.

Have you found a good format a business plan that works for you? I’d love to hear what you’ve used and whether or not you’ve found it useful. Drop us a message in the comments below…

You Might Also Like:

Fast, Good, or Cheap – pick any two Put the Systems in Place! (Otherwise known as get a bookkeeper) How to Make a Big Decision Why haven’t you started your business yet?