This newest wave of startups entering the market is bringing some revolutionary changes in how we view or expect the process of launching a company to take shape. Entrepreneurs are evolving to meet these expectations – but as this evolution takes place, it’s only natural to wonder if every new process we are creating, and all of the legacy processes we are leaving behind will cost us in the long run?
More and more lately there is an emerging trend with new entrepreneurs balking at the necessity of writing a business plan. Most points made against the activity revolve around it taking too much time to write a full plan, or that focusing on the document first will result in delaying product development/launch – plus given the fluid nature of startups (particularly tech startups) the fact is that business plans often require constant revision and update. Whatever the case may be, a growing number of entrepreneurs are moving into the camp of viewing business plans as a barrier of startup entry, versus an exercise in strategic development.
I’m not sure if this new trend in bucking the art of writing a good business plan is evolutionary, revolutionary, or perhaps even generational; in any regard, I can’t seem to wrap my head around the idea that planning, it an of itself, is a worthless exercise. Whenever I consult or advise an entrepreneur, one of the very first activities that I do to kickoff the engagement is to review their business plan – and if they do not have one (or an updated version), then I recommend they begin writing one. Writing a business plan, as an exercise, forces would-be entrepreneurs to frame certain questions which they may otherwise gloss over or avoid:
- What is the market problem I am trying to solve? Who am I targeting to sell my solution to? What are all of my monetization opportunities?
- How big is the market I am going after? What are my barriers of product adoption? Who are my main competitors and how am I differentiating my product/service?
- What exactly are the resources I need (aka “the ask”) to get the business from the current stage to the next?
Outside investment capital, more efficient client acquisition, improved profitability potential -the answers to these types of questions will provide founders with a windfall of tangible benefits as they launch and continue to grow their ventures. But, there are also some intangible (and often overlooked) benefits that the practice of business plan writing affords to entrepreneurs:
Making the business real: There are tons of people who have (or think they have) good ideas for innovative products and services; but just a few good ideas doth not an entrepreneur make. There is a huge line between business concept and business reality – and it can be challenging for loved ones, partners, investors (or even the founders themselves) to take a business concept seriously given the volume and frequency of would-be entrepreneurs coming up with new ideas every day . The task of completing the business plan can serve as that first piece of proof that the concept you are working on isn’t so “pie-in-the-sky”
Developing company culture: Between the lines of financial projections, market analysis and sales strategies will be the first sparks of creativity which help form a company’s values and culture. Certain parts of the business plan such as a mission statement and identifying key stakeholders will serve as the first steps on the path of discovering what your organization will truly stand for.
Getting the first win: Seeing measurable or significant levels of success is usually a longer-term pursuit for new startups; which is why it is critical for entrepreneurs to take every chance they can to celebrate small victories of progress, especially during the early days of their businesses life. Writing and completing the business plan will likely be the first winnable moment for the founding team – which can help carry the company through those early challenges on the path towards startup success.
So what’s the bottom-line on business plans? Well, I’ll say first that the entrepreneur building their business should know best what the appropriate amount of time is that should be spent on writing a business plan and then developing their concept/product. But I’ll also say that to be successful, an entrepreneur is required to have more than an innovative or creative capacity, but also a remarkable ability to build an executable plan for achieving a vision – a business plan lends credibility to entrepreneurs positioning for attention in noise-filled pipeline of new startups – a business plan will serve as a source of validating the founding team’s ability to define a vision – a business plan will verify the team’s ability to plot a clear course of action to achieve big results.