Full disclosure, I’ve taught business plan writing in both a short-form six-hour workshop and a long-form 18-week class, where each session was three hours long. Previous to that, I was skeptical of formal business plans. I was under the impression that all business plans had to be 40+ pages in length and that every element of the standard template had to be populated. Now I know better.
That said, if an Entrepreneur intended to launch a venture that required a physical location, several employees and a bank loan, I would have encouraged that person to write a business plan. But for those who will operate as a Solopreneur who provides B2B or B2C services, then my feeling was (and still is), that planning can primarily center on developing a business model that will bring in clients and a comprehensive marketing plan.
Some Entrepreneurs have been known to build a successful venture without writing down a single word. Their businesses are typically small and self-financed, maybe with some additional backing from friends and family. Particularly if the owner has already run a business, even one that failed, it is possible to learn valuable lessons to apply to a new venture. Writing a business plan is time-consuming, prompting some to recommend that Entrepreneurs can learn by doing. Why not create business strategies on an as-needed basis and test them in combat?
A study of 11,046 companies published in 2010 found that business planning benefits existing businesses more than start-ups. It was hypothesized that leaders of existing businesses know their customers and business environment more completely than leaders of start-up ventures. Leaders of existing companies have more information, i.e. historical data, so there are fewer faulty assumptions born of inexperience.
Another study found that while many businesses can succeed without significant planning, ventures operated by leaders who plan grow 30% faster and are overall more profitable than those whose leaders decline to plan. The link between business planning and growth was reinforced by yet another study that found 71% of fast-growing companies, i.e., companies showing a 90% or greater growth in sales over a 12-month period, were led by a team that planned. Creating marketing and sales strategies, setting sales goals and creating budgets make a difference, as does defining customer needs and the company’s value proposition.
As you may have surmised, a business is less likely to fail when there is a plan in place. A study of 223 companies demonstrated that while business planning cannot guarantee success, it will decrease the occurrence of business failure.
Realize that business plans are not etched in stone, but are intended to be guidelines that can be adjusted as necessary. Identify key metrics and track company performance to test whether your assumptions perform in real-time. If customer needs are changing, then observation of your metrics will signal you to amend your strategy and keep your products and services relevant in the marketplace.
Your start-up business plan, strategic (long-term) plan, or operating (one-year) plan need not be long and elaborate. Keeping it lean and focusing on customer needs, defining your value proposition and business model, spelling out goals and the strategies that will achieve them and identifying metrics that demonstrate either success or the need for adjustments will do your business a world of good.
Start-up Entrepreneurs were reported to be 152% more likely to actually start their businesses when they developed a credible business plan. So if you want to make your dream come true, do the necessary research and put into writing how you intend to make good things happen.