Perhaps it’s a millennial thing. More frequently we are seeing startups shun the traditional business plan. Taking lean startup to the extreme, 21st-century ventures are ditching the formal business plan and replacing it with experimentation. It’s all about flying by the seat of your pants rather than traditional development.
Around here, we are not known for old-fashioned ways or stale ideas. But in our opinion, there is no situation that warrants skipping the business plan. Whatever form it comes in.
With the help of online tools, business incubators, and mentors, there are many ways to create a business plan
The unquestionable truth is that your best chance of success lies in a strong business plan. This is the place where you validate your very existence (isn’t that something we should all be doing?). Without a business plan, how do we know what our point of being is?
The words contained in a solid business plan will do much more for your new venture than talking about it ever can. The process of writing it down will force you to think through all aspects of the business idea. Why are you doing it and what is your strategy? A business plan will test not only your assumptions but also interpret the results. This is where your idea is validated and provide vital insight and confidence to move forward.
Timing is Critical
As you develop the concept of your new business, it’s likely the idea will evolve as you move through the learning process. Working through your idea, seeking feedback and testing assumptions will likely result in changes to theoriginal business model. Waiting until you’ve fleshed out the initial idea before you sit down at the keyboard will save a whole lot of work ending up in the trash. Before beginning the business plan, make sure you have advanced the business idea to a point that you can validate it. If you present to investors too early, you may end up stuck with a business model that’s not viable.
The quality of your business plan says a lot about you and the quality of your business venture. There are many ways to create a business plan, and whether you want to go with a weighty novel or an online insight, the business plan should all make sense. Bringing together your value proposition, marketing assumptions, operations plan, financial plan and staffing plantogether in one place is the best way to test that it will work. A strong business plan should answer all the questions investors are likely to raise. And a business plan should be a powerful tool for attracting the very best new talent.
Why, Why, Why?
Even if you have no intention of presenting your business plan to a bank or an investor, it’s still a critical piece of work. The business plan holds within it one vital attribute – accountability. As the founder of a new enterprise, you are the sole point of accountability. On a daily basis, the business plan provides a baseline for monitoring performance and milestones.
Say you have targeted a result of 250 sales by the end of Year 1. By putting this down in the business plan, you’re obligated to go and make it happen. Targets in the business plan become your actionable goals, not just something to make it look pretty.
Don’t Run Before You Can Walk
The business plan is a way to work critically through the business idea. A crazy dream may evolve into a viable business model, or it may be put out to pasture. It’s the best way to ensure that the business model you take to investors, or to market, is not half-baked.
You may have had a stab at how much money you need to launch. But it is the business plan that will test your assumption. Here, you can lay out allaspects of the business together in one place and get a realistic understanding of what you need to launch. Critical analysis will uncover any hidden costs that have been overlooked.
Keeps Your Feet on the Ground
Entrepreneurs are good at big ideas and big dreams. That’s why a business plan is your best friend when it comes to a healthy reality check. Big dreams and grand ideas are great, but they need to be countered with reasonable and measurable goals. The business plan forces you to take a good hard look at the market, the competitive landscape and how your product will fit within the two.
Know Where the Money Goes
If you are successful in achieving funding but aren’t yet operational, a business plan will ensure the money isn’t spent in the wrong places. You have clearly identified where the money needs to goto support growth. Technology, thought leaders, and new fads will all influence the look and feel of a business plan. But the relevance and importance of the document will never change. Whether it’s to raise funding, attract customers or hire a winning team, a business plan is the one step you can’t afford to skip.