The short answer is yes.
The real answer is yes, but not for all of the reasons you think.
Venturing off on your own and starting a business takes a lot of time, effort and money. It also involves risk. A business plan helps you realize roughly what you are getting into and if it is truly worth the risk. Consider a business plan to be like math homework. It may be tough to do while you are doing it, though once you have spent the time doing all of those story problems you are a smarter person that is more productive without even realizing how awesome you are.
The real challenge comes in when that metaphor stops. Story problems have a definitive answer. 1+1 equals 2. Every time. Business plans will ask you where you expect your business to be in 3-5 years. How are you supposed to know? You are giving a best guess. This part of the business plan is tough because no one knows what the future may bring. Not exactly, anyways.
A business plan will touch on your initial investment and what you will sell and to whom. The actual customers you get and the problems you face rarely make it into a business plan. I have rarely seen a business plan that includes a part for Things That Can Go Wrong. Though that may be the most practical business plan ever written. Preparation trumps reaction.
The other reason you will want a business plan is because people that loan you money will want to know that you have a plan. It is much easier to ask for money if you have a dedicated document that states exactly what you are going to do with that money. Otherwise you are asking people to trust you on your smile alone. How much money will people give you for undocumented trust?
“I haven’t considered the results of my actions other than I am certain my business will succeed! Can I please have $50,000?”
On the other hand, business plans can be a huge waste of time. Have you ever traded stocks? Have you ever read the speculations from the experts on what stocks to buy and sell? These experts are often just as wrong as they are right. Many of them are very well paid to be as accurate as the local weather forecaster.
So if the stock people and the weather people cannot tell what the future will bring, how can anyone expect you to tell what the future will bring?
The marketing portion of business plans is mildly entertaining as well. How much will you spend on marketing and where will you spend this money? How many clients will that bring in? Can you tell me anyone that has had that type of consistency in their marketing that they can answer that question without hindsight?
Business plans are made to appease certain people. Sometime those people are you and your crew, sometimes those people are loaning you money. You just need to figure out who you need to keep happy.
My advice is to use your best judgement for your business plan speculation, get the minimum plan needed for your peace of mind and your business needs and sell as much as you possibly can. Your time is much better spent preparing and selling rather than speculating on what you will prepare and sell.
So to answer the question, “Do I need a business plan?” the answer is yes. The depth of the business plan needed is the real question. Get a true multiple page tome of a business plan if you need to borrow money. If you do not need to borrow money to start your business, do a simple plan, such as those 1 page plans similar to The Business Model Canvas. Unless you want a bigger business plan to help you as the entrepreneur. Just be sure to add a portion about Things That Can Go Wrong for your own personal plan. It is probably best to keep that out of the document you give to the bank.
As a side note, business plans are very entertaining to read 3-5 years after you have written them. You see what dreams you had and realize what nightmares you never expected. Maybe you will find yourself in a completely different place. I have yet to meet a business that stuck to their business plan to the letter. Looking back on how far you have come is great to do every once in awhile. Looking back at where you thought you would be is often even more fun. For that reason alone your business plan may be worth writing. Just do not have laughing at your pain to be the only motivating factor for writing the business plan.
James is a Business Coach for Draw In Customers Business Coaching in Madison, Wisconsin. When he isn’t telling people to do more and plan less, he helps them achieve success in business and beyond. He blogs successfully to the world at www.drawincustomers.com. If you are considering hiring a business coach, take a moment to call James at (608)210-2221. Plan for success, prepare for failure.
