The need for good business planning is as strong as ever, and the potential benefits are as important as ever. Every business owner ought to have a business plan. But the best strategies for business planning are different than they used to be.
With that in mind, I’ve identified 8 pervasive myths that stand between you, the business owner, and the planning your business ought to have.
1. A business plan has to be long
Not necessarily so. A business plan can take whatever form is most useful, even if that’s just a few lists and tables.
2. A business plan is hard to make
It doesn’t have to be. List your key strategy points and key tactics, and a few important major milestones (like deadlines, tasks, the new launch or new website, and necessary hires). Include projected sales, costs, expenses, and cash flow. Voila! You have a business plan.
3. Nobody creates business plans anymore
Well-run businesses use business planning the right way. They keep a simple, lean plan up-to-date and refreshed. The review and revise it monthly. In straw polls I’ve taken for years at management workshops, the best 20% or 30% of the companies represented have a management process that includes a lean business plan as well as regular reviews and revisions.
Smart startups use basic business planning to help them see starting costs, projected early sales and spending, cash flow, and key strategy points and milestones before they launch. Then, they review these monthly.
4. Business plans are for only startups
True, well-run startups generally use business planning to help figure out which steps they need to take, and which resources they need. But that doesn’t mean mature businesses can’t use business planning to constantly set milestones, strategy reminders, and forecasts. Mature businesses keep a business plan up-to-date, and review and refresh it often. The more a business grows, the more it can benefit from good business planning.
5. You can’t plan because change comes too fast
In the real world, a good business plan manages change. It isn’t voided by change. You keep the plan current by making revisions as real events unfold.
It’s like dribbling in basketball: if you plan to go a certain direction, and the other team blocks you, then you go a different way. Having a plan means that you’ll have the information you need to make quicker, easier, and more natural revisions.
6. Business plans require market research
I read and review lots of business plans from mature businesses that don’t include fancy market research. Business owners have to know their market, and taking a step back to review your market is a good idea. But with good planning process in a business, you can stay on top of your market. You don’t need to include market research in every version of your business plan.
Only in special cases will you need market research to prove your market to outsiders. For example, startups looking for investment, or businesses applying for loans, might need market research. Mature businesses know their market and plan without the research requirement.
7. Investors don’t read business plansI was in an angel investment group for eight years. We didn’t read business plans for all the proposals that came in. We rejected many on the basis of summaries alone. For those that interested us, we invited them to present their pitch decks. From there, we narrowed the list down further.
For those that remained, the business plan was a vital part of due diligence. And for all of them, they should have had their bare-bones business plans made before they wrote their summaries and pitch decks. Without the business plan, the pitch and the summary are like movies made without scripts. Ultimately, seeking investors without a plan doesn’t work.
8. Nobody needs a business plan
Does every business need a plan, strictly speaking? No. But every business would benefit from good business planning.
People, even experts, still say nobody needs a business plan, but only because they are locked into the decades-old mentality of the big business plan document. If we redefine the business plan the way it should be, as a flexible record of key strategy points, tactics, milestones, and essential numbers, then all those experts would agree with me – that every business deserves a business plan.