Business plans are a strangely divisive topic. If you’re starting a business, it would make sense that you would have a plan for it, right? And yet, there are articles and blog posts from a number of reputable sources saying that the business plan is an outdated concept.
They will tell you that modern businesses and markets change too quickly for you to create a formal plan. That planning will eat up time that could be spent making money with your business. But let’s look at it from a different angle.
Let’s say you’re the commander of an army, and there’s a battle before you. What do you think will happen if you charge in immediately, saying to your troops “we’ll just figure this out as we go”?
You’ll probably lose.
And without a plan of attack, your business’s chances of losing increase significantly. According to a study by Bloomberg, 8 out of 10 businesses fail. More conservative estimates say that by year 5, half of new businesses no longer exist. And other surveys show that the majority of businesses these days don’t have a formal plan.
Sure, your business could make it through without a business plan, but why risk it? There are plenty of great reasons why you should have a business plan:
Having a Plan Means You Make Stuff Happen
Data from the Panel Study of Entrepreneurial Dynamics shows that people with a business plan are two and a half times more likely to start their business. Because they’ve laid out how they’re going to go about their business, they know where to begin and where they’re going, and they actually do it.
If You’re Getting Investors, It’s Not an Option
Looking to get some venture capitalists and other investors behind your business? They’re going to want to see your plan. They don’t want to hear you describe the picture you see in your head. They want to see the picture drawn out for them. The same is true for banks. Even friends and family may want to see a plan before handing over any money.
They’re Simpler Than You Think
A common reason people skip over making a business plan is because they think it’s a huge amount of work. They imagine this novel sized outline of every little detail about their business that will take months to create. There may have been a time when this was true, but that time has passed.
A modern business plan doesn’t have to be overly complex. They don’t need pages of spreadsheets and estimated figures. Most of what they contain, you probably already have worked out in your head.
By writing it out, however, you’re able to better see and conceptualize it. You might spot issues you wouldn’t have thought about otherwise. You can show it to other people, whether it’s investors, coaches, contractors, or employees.
They’re Not Set in Stone
Just because you write out a business doesn’t mean that’s exactly how you’re going to have to carry out your business forever. Business plans are relatively short term in the first place. Even in the short term, you’re free to change things as needed.
But the business plan can also act as an anchor that grounds you on what you’re doing and why you’re doing it that way. In business, you will get emotional, and emotions don’t always lead to the best decisions.
The plan is unemotional. It’s a constant. Every experiment needs a constant, and in many ways, starting a business is an experiment.
So make a plan.
You can learn more about how to make a business plan by purchasing Business is Art here.