One of the questions we’re most frequently asked by entrepreneurs is “Do I really need a business plan?” It happens once every few weeks, and by a surprising variety of business owners, startup founders and aspiring entrepreneurs.
Our pat answer is this. While we’re a huge believer in business planning, we’re not big fans of business plans. If that sounds strange, allow me to explain.
Let’s start by talking about business planning. There are many worthwhile approaches to business planning — the business model canvas for example — but they all share the same basic goal. They allow you to answer important questions about how your business will actually function, and they challenge you to test your business model assumptions and nail down your value proposition. The better you plan out the specifics of your business, the more clarity you have when it’s time to launch.
Business planning means answering questions like:
- Who are your customers, and how many of them are there?
- What are your products or services and why are they great?
- Why will your customers buy your products over others?
- Who are your competitors and how do their offerings compare to yours?
- How will you sell your products or services today and in the near future?
- How and when will you make money?
- What do you need to be successful, where will you find it, and how will it be used?
- What experience and expertise do you and your team possess that improves your odds of success?
There’s a ton of value in answering those questions. The process isn’t always easy or fast, but it’s absolutely necessary for thoughtfully launching your business. In fact, I don’t know how you would start a business without doing some kind of business planning.
A “business plan,” on the other hand, is simply the organized presentation of your answers in narrative or long form. The big problem with them is the format- the length makes them difficult to digest quickly and most are almost as sterile and soulless as resumes (Oh, don’t get us started on resumes!). Trust us, investors, advisors, and other prospective partners don’t want to read your 20 page, single-spaced business plan.
And, for the over-leveraged entrepreneur (i.e. all of us), business plans deliver diminishing returns over a pitch deck, presentation, or teaser document because they take considerably longer to create and don’t communicate the business any better or with more umph.
Of course, there are certain cases where a business plan is absolutely needed. If you’re applying for a traditional business loan, for instance, you might need it as part of a package to show to a commercial lender. Likewise, old-school types with traditional business background often want to see long-form business plans, so you may just have to suck it up and put one together if you wish to work with them.
The good news is that if you’ve already done the heavy lifting in your business planning, putting together a business plan shouldn’t be that difficult. But, for the love of all that’s good and wholesome, please promise to make it as short, sweet, and snazzy as possible.