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Business Plans – Are They Even Necessary?

April 13th, 2007 by rosie · 1 Comment

Let’s imagine that you have a great idea for a business. You’re excited and have started researching different aspects of your idea. Maybe you’ve even shared the idea with your significant other and a few friends and they all think it’s viable and that you could definitely succeed in this business venture. You feel confident and don’t want to lose the momentum you feel; you are eager to just do it.

You then go to www.sba.gov to get some pointers on how to get started, and in the process you find and contact a SCORE counselor and tell him about your great idea. His response- that you need to write a formal business plan- is completely overwhelming. The business plan outline he sends has 7 different sections and some seem impossible to accurately fill out, such as the 3-5 year projected balance sheet. Suddenly your clear-cut successful business idea has become much more complicated.

Just how important is a formal business plan anyway?

In the January issue of The Wall Street Journal, Kelly Spor wrote an article called “Do Startups Really Need Formal Business Plans.” In it he cited examples of entrepreneurs who had impeccable business plans but still managed to fail, and of startups with no real plan but that had incredible success. All in all, the article’s summary was that formal business plans are overrated. The thought that big plans are overrated is not new at all. Dwight D. Eisenhower said, The plan is useless; it’s the planning that’s important.”

There has perhaps been a misguided emphasis on writing the perfect business plan when the real emphasis should be on adequate planning. But, that is not to say that a written business plan is useless. A good business plan will help you turn your great business idea into a great business.

A business plan is the road map for your business in which you will establish your goals and outline specific steps needed to reach them. You will objectively develop your business strategy and get an overall better understanding of the many different aspects of your business. In the process of writing a business plan, the planning and research you end up doing is absolutely necessary. A well-written business plan is also essential if you plan on getting outside financing, as most investors want to see something on paper that explains just what your business will be doing and why it will be successful. Writing a business plan will also give you a more realistic and informed viewpoint of your business idea.

Remember to keep your plans concrete and specific, with dates, deadlines, and clearly outlined responsibilities. Specify what your goals are, what your focus and priorities will be, and be specific in outlining your strategy. There should be some financial content as well, such as projected cash flow. Don’t overdo the plans, and keep in mind that some adjustments will need to be made along the way. A simple, clear business plan will allow you to track your progress, make needed changes, and direct your business more successfully.

A written business plan is the means to an end, with the end goal being extensive planning. All entrepreneurs need to plan if they want to be successful. So the question should not be “are business plans really that important?” The true issue is that planning is imperative in achieving business success.

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    1 Comment

    Comment by gables estates
    2011-09-26 07:06:56

    Its quite tricky to answer but I think a lot depends on the situation, the deal and the decisions of the people involved. I’ve never taken any steps without a formal business plan but I also agree that there are times when the situation demands smart decisions and such situations shows that those running businesses should show that little extraordinary quality sometimes.

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