In the early stages of a start-up, there is too much to do and too few hands are available to do it. As a result, the topic of whether or not to write a business plan is frequently debated. Let’s end the debate here.
There are only five conditions where you won’t need a business plan:
- You will self-fund your venture (I’ll throw “I’ve got a rich Aunt” in this category - maybe),
- Your venture will immediately fund itself (via profitable product or service sales),
- You will fund your company with a Kickstarter campaign or similar crowdfunding strategy,
- You are able to attract government funding to start your business (Local grants, SBIR/STTR), or,
- You attract investment with a pitch deck or some other short form business plan.
The above all evolve around the cash you will need to start your business. Specifically, these are fundraising scenarios where due diligence may be abbreviated or non-existent. If your fundraising approach is not on the above list, you might wrongly conclude the only value of a business plan is to help raise money. That would miss the value of the business planning process.
As U.S. President and General Dwight D. Eisenhower (Ike) said, “Plans are nothing; planning is everything.” People liked Ike, and we won World War II, so there must be something there. The value in a business plan is dominated by the learning that occurs while one is being created. There are many lessons gained from innumerable ideas tested and refuted. A well-crafted plan talks to resource deployment, timing, the sequence of actions for your business, marketing/sales plans, product positioning and competitive strategy to name a few of the most important elements. If you are able to raise cash without a business plan, I would still give serious thought to putting one together. If your fundraising approach isn’t on the five bullet list above, get cracking now.
One caution, as you plan, consider the words of Alexander Osterwalder, inventor of the Business Model Canvas,
“Founders go wrong when they start to believe their business plan will materialize as written. I advise entrepreneurs to burn their business plan - it's simply too dangerous to the health of your business.”
Well OK Alex, that’s a nice quote to get you published, but really, I think a bit inflammatory. For my readers, let’s just focus on the first sentence…that’s the sage advice. Until your business is really humming and even thereafter, you want to be nimble. Don’t get stuck in your office writing a plan when you should be out getting to know your market and making sure you’re addressing an unmet need. Don’t continue to follow your plan when the events around your business are telling you it’s wrong.
In the resource constrained and ever evolving life of a start-up, you’re going to want to be thoughtful about how you build your business plan. Your priority is to start with summary plans, test them, and refine. As your plans are validated, turn them into a “pitch deck” and “one-pager” that you can share with early investors, employees and partners. When serious investors are giving you a look, have a fully developed business plan ready to go. As the money rolls in – we all hope – don’t forget to reflect on the lessons learned during your planning process. There’s gold somewhere in there. Finally, keep that growth mindset alive as you drive your business forward.