The death of the traditional business plan has been discussed over and over again. Writing a business plan is often cited as the first thing an entrepreneur must do before starting any new venture. However, a traditional business plan rarely (if ever) survives the reality of the market once the full document is completed.
So, do you really need to sit down and write a traditional business plan, or is it a waste of time?
This is the question. No doubt this probably isn’t as big as the Nature vs. Nurture debate, but... it's very relevant to many small businesses and entrepreneurs.
What I mean by a ‘traditional business plan’ is the more detailed and much longer document that includes all the traditional sections that a business plan includes:
Within each of these main sections there are usually a number of sub-sections that break down into more detail.
So, what is the case against writing a traditional business plan, and what is the case for writing a traditional business plan?
There are really big names out there; huge influencers like life coach guru Tony Robbins who say "Throw out your business plan."
Robbins writes, "The pace of change in the professional world has accelerated to the point where a business plan is no longer enough to plot the future of your company with any certainty. Disruptive technologies or unexpected competitors can come along and displace your business overnight."
…I totally agree with this. BUT, this mainly applies to technology startups that are entering a niche market.
The problem with many people writing a traditional business plan is that most small businesses and entrepreneurs want to use their business plan as a cookbook. They want to follow it step by step like a recipe in order to grow their business. However, because it's such a fast-paced world, this simply doesn't work. This is the point Tony Robbins is trying to make. Yet Robbins’ target market does not include the ‘Mom and Pop’ shops out there that need extra working capital to purchase new equipment, or add additional staff.
There are still certain times when you must have an investor-ready business plan prepared.
A traditional business plan serves a specific purpose for a specific time and place. You can’t use your business plan as a cookbook. You have to realize that your business plan is a living document. It needs to be changed and enhanced continuously based on the business decisions you make.
If you’re seeking funding in any capacity, you will need some form of a business plan to present to investors and lenders. Here are the 3 situations where you will need to have a business plan written.
A traditional business plan is the foundation for your eventual funding and growth. Whether you’re seeking seed funding to launch or working capital to grow, an investor-ready business plan sets you up for success. When seeking a bank loan, your business plan must be unique to your specific business. It doesn’t have to be eye catching and flashy, but the content has to be your own. Let your lenders know why they should invest in your company, and in you.
In fact, the Small Business Administration (SBA) says directly on their website, “Before you start talking to lenders, have a look at the abbreviated checklist to see if you’re ready.”
And what the first item on that abbreviated checklist? “Business Plan.”
This is a very similar situation to seeking a bank loan. Unless you’re seeking funding from friends and family, nearly every private investor or investment firm will ask for some sort of business plan.
In this situation your business plan can be scaled back a bit from a ‘traditional business plan’, but it still has to include the 3 integral pieces of information; the where, the what, and the how.
Again, if you’re going public you will need a business plan. The Securities and Exchange Commission (SEC) requires all companies to include a business plan within their registration documents.
There’s a strong chance that if you’re reading this article, you probably aren’t going public… yet. Once you get to that point, you’ll be working with a securities law firm that has business plan writers (like me) to make sure you’re adhering to all SEC rules and regulations. However, this is a situation where you will need a business plan, so I needed to include it.
Besides the fact that writing a traditional business plan is required in many situations, the whole business plan writing process helps you discover valuable information to help you succeed. Even if you're not seeking funding, writing an investor-ready business plan as an internal roadmap can provide huge benefits to your business. You'll discover what competitors are doing, and find holes in the market that need to be filled. This leads you towards a better definition of your ideal customers, and in turn, a better sales and marketing strategy.
All that said, don't prioritize planning over doing. If your business plan is for your eyes only (an internal roadmap), make sure you're focusing on the Plan of Operations by actually DOING. Create milestones and goals, and then continuously edit your plan based on your decisions.
Cheers to success!
As always, you can always reach out for free resources to get you unstuck and eliminate the business plan writing overwhelm.