As I’ve said before, I am a big believer in business plans. I think it’s important to have everything in one place, and by everything I mean the data, the vision, the strategy, the analysis, the marketplace then and now and in the future and anything else that’s going to support moving the operation in the right direction: forward.
Now that I no longer have to write them, I have the joy of reviewing them for entrants to the Unreasonable Institute. So you can imagine my surprise when I was reading Entrepreneur Magazine and came across this headline: How Your Business Plan Might Be Holding You Back. At first I was a little shocked. Then I was a little irritated. For every rare and almost sacred bit of truth must there always be at least one voice out there announcing that what we’ve believed all along is actually incorrect? Of course!
The example that drives the article is dramatic. An entrepreneur spent eight months writing a 150-page plan that yielded his startup $500,000. In 2011 his two-page business plan allowed him to raise $2.7 million to fund his startup. Instead of writing, the entrepreneur spent four months testing the concept behind his new venture by conducting more than 100 meetings with potential customers, industry experts and others.
In my opinion, the article does make a couple of excellent points. One is that market conditions are changing so much more rapidly than they used to that spending many months capturing those conditions on paper – or on the screen – is an exercise in futility because the conditions will have changed by the time your plan is ready for presentation. The other point that I think is worth considering is that the venture capitalists who read the plans and decide whether to fund them or not have, like all of us, more demands on their time they used to, meaning they have fewer hours to read hundreds of pages of anything.
I’d like to take this opportunity to put a stake in the ground on behalf of traditional business plans. (Full disclosure – mine were 20 pages, including market research and financials.) Sure, you’re launching your startup in an industry at the mercy of an economy where conditions change every few seconds. Sure, you’re trying to appeal to people who – just like you, just like me – have more demands on their time than ever before. And sure, all of this is taking place in a world where many, many things are limited to 140 characters.
Your business plan, however, is not one of them. While I thought I’d be a lot older than I am now before I started to sound like an elder, none of the conditions mentioned in this blog or the article that inspired it are an excuse to not write a business plan. Not one that can be Tweeted or conveyed via a status update on Facebook, but a real, old-fashioned one. There’s an important fact that the article – and the trend away from business plans in general – misses, and that is that laying out your vision, your strategy and your roadmap isn’t just for the benefit of others. It’s a process that deepens and sharpens your thinking and grounds you more firmly in your business and your industry. Your startup is going to be your entire universe for quite a while, and when it comes to your knowledge and understanding of the adventure upon which you’re embarking, there’s no such thing as too much information. Of course you need an easily and quickly readable and digestible snapshot of your business (a resume for your startup), so I’m all for the two-page version touted in the article and elsewhere, but you also need a substantive and comprehensive plan. So get busy.
And, if you have opinions pro or con, please share them here.