Tag Archives: business plans

Do NOT Write a Busines Plan

When we think of a Business Plan, we usually think of the mighty tome that has been expected by Venture Capitalists and Angel Investors in the past. Dozens of books; hundreds of articles; and thousands of blog posts tell us exactly how to write this epic document.

But—consider this:

“Plans are useless, but Planning is essential.” —Dwight Eisenhower

If anyone knew about the power of planning, it would certainly have been General Dwight Eisenhower. If his planning—and his ability to modify that planning on the fly—had not been extraordinary, we might all be speaking English as a second language today.

 

Man with Planning book-200The emphasis here is on planning, not on the Plan. A business plan is good for about the same length of time as the morning newspaper … and worse yet, it never survives first contact with the real world.

At the same time, the prior post on this blog pointed out the necessity for writing down our goals and what we wanted out of life—and our business.

So, if we are to believe that a business plan itself is of little value, how do we reconcile this with the admonition to write down our plans?

Actually, it is quite simple: a business “plan” is a document, and business “planning” is a process.

Many of the experts are now calling this planning process—business “modeling”, or business “mapping.”

Regardless of what you call it, or what form you use to record things, you simply start by writing down your goals and then adding what you learn as you begin your planning process.

You can do this on a stack of cocktail napkins, butcher paper, in a notebook, or whatever form you choose—just be sure to write it all down.

No one else will ever see this material—it is for your planning process only. In fact, this may be all you ever need to do in planning your business—as long as you keep your planning up to date as you learn more and more about your business.

Also be aware that things are changing in the investment world. With the popularity of the “lean startup” concept, coupled with the “show—don’t tell” approach to presenting Business Plans to VCs, the whole concept of Business Plan presentations is changing.

So, don’t be hasty about writing a Business Plan—but also don’t forget that business Planning is essential.

What do you think—do you have your planning up to date … and is it written down?

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Why Plan—If Nobody Reads Your Plans?

I have been following an interesting discussion in one of my groups on LinkedIn, about whether or not a beginning business should have a Business Plan.

One lot says a Business Plan is essential—and another lot claims that planning is important, but a formal Business Plan is not always necessary.

Then, there is the third (and largest) lot of new entrepreneurs that think “planning” is a time suck and unnecessary … they just want to get their business started—they have all the details in their head.

Back in early 2009 I wrote a post about why new entrepreneurs should write down their plans instead of just keeping them in their head.

Here is a recap of that post, with a few additional comments thrown in:

  • Some time ago, a study by Yale University found that years later 3% of their graduates had more wealth than the other 97% combined.
  • A study by Harvard Business School 10 years after student’s graduation found that only 3% of them were financially independent.
  • A study by the Ford Foundation discovered that only 3% of the population achieved their goals 89% of the time.

What was the significance of the 3% in each of these studies?

In every case, the 3% of successful people wrote down their goals and plans.

In addition:

  • The SBA has stated “Entrepreneurs who completed their planning were six times more likely to actually start a business [than those who did not have a written plan].”
  • Then, of course, if you ever intend to seek investor money, you must have a written plan—or else.

So, here is my take on all of this:

You don’t need to write a formal Business Plan unless you are seeking investor money or a loan.

However, I also believe it is absolutely essential that you write down your “planning” somewhere—if you want to have any hope of success with your business.

People tell me that they get lost trying to write a Business Plan according to all the formal standards and advice that’s published regularly by the business gurus and experts, and so, they simply give up in frustration after awhile.

I agree completely and in upcoming posts I intend to discuss how to plan in a simple manner—and how best to write down those plans.

So, each week, watch for more articles about small business “planning” … there’s more to this topic than meets the eye.

For a preview, take a look at the “Planning” section of my Business Solutions website—click here.

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Exit Strategy–Forget It!

An exit strategy is of interest only to a very small percentage of the over 6 million new businesses that will start up this year. Yet, there are millions of words written, videoed, and recorded extolling the necessity of having an exit strategy in a startup’s business plan.

A new business should be concentrating on making a successful start—not on how to best “exit” their business. Here is what Mark Cuban, billionaire startup entrepreneur and Venture Capitalist, has to say about the first two most important rules of starting a business:

  1. “Don’t start a company unless it is an obsession and something you love.”
  2. “If you have an exit strategy, it’s not an obsession.” –Mark Cuban

The main point here is that when a person is starting a business they must not only be passionate (obsessive?) about their business, but they must stay focused on getting their business started–not ending.

In most cases, an exit strategy will form “automatically” as the business grows and begins to mature. Here is how this will usually happen:

  • The vast majority of new businesses that start up each year will fail. This is a hard statistic to swallow, but unfortunately, it is true whether an exit strategy exists or not.
  • Many of the surviving businesses will grow and be approached by someone inviting them to consider merger or acquisition. No exit “strategy” is involved here, but it might be decision time.
  • Some of the surviving businesses will be successful and the owner/founder will tire of the business and put it on the market for sale—never planning this as a specific exit strategy when they started their business.
  • In a few cases, as a business grows and matures, a founder/owner may decide to retire and simply close their business. This is a deliberate decision, but usually not part of an exit strategy plan when they start their business.
  • In some instances, a business may take off and grow beyond all expectations, forcing the owner(s)/founder(s) to develop an exit strategy that might even include an IPO.

The one exception to the above  “automatic” exits is the company that wants to pursue Venture Capital. Venture capitalists will want the business owner(s) to provide a projected exit strategy showing an incredible return on money invested, before they will even consider investing in the business.

Actually, Venture Capital involves a very small number (less than one-half of one percent) of the over 6.5 million businesses that will start up every year.

Incidentally, the same holds true for Business Plans. If you want to read why business plans are useless, check out this post.

Well, what does everyone think about this concept? Agree? Disagree? Let me know.

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Planning–Do I Have To?

It seems, of late, that I have been running up against the idea that planning is a waste of time. All too often, I see the admonishment to “just-do-it,” instead of taking valuable time to write down a “plan.” Besides—so we are told—plans quickly become obsolete, and entrepreneurs do not have time to keep them up to date.

Thinking about this, I recalled some studies on the subject of planning that I ran across some time ago. These studies have been published many times in many places, but I thought they were worth repeating here. The first one is from a study sponsored by the Ford Foundation:

  • 23% of the population has no idea what they want from life and as a result they have very little.
  • 67% of the population has a general idea of what they want but they don’t have any plans for how to get it.
  • Only 10% of the population has specific well-defined goals, but even then, 7 out of 10 of these people reach their goals only half the time.
  • The top 3%, however, achieved their goals 89% of the time.

Why is there such a drastic difference between the top 3% and all the others? It doesn’t stop with this one study either. Let’s look at a couple of other studies:

  • Some years ago, Yale University conducted a study that found 3% of Yale graduates had more wealth, years later, than the other 97% combined.
  • Harvard Business School did a study on its students 10 years after graduation and found that only 3% of them were financially independent.

What is the significance of this 3% number that keeps popping up in various studies? Well, it is quite simple really…in every case of the successful 3%—they wrote down their goals!

Dreams and wishes are not goals until they are written on paper as specific desired results. In some real sense, writing them down materialize them and brings them to life. The experts claim that the act of writing makes an imprint on the brain that helps set the direction of actions by a person.

Therefore, it stands to reason that as we visualize our enterprise, if we write these thoughts down in an orderly fashion, as goals or action steps, the better our chances are of successfully achieving them.

The question you need to ask yourself then, is “Do you want to be one of the 3% who fulfill their goals in life, or will you be among the 97% who generally fail?”

“Life will not go according to plan—if you do not have a plan.”
—Gary Ryan Blair (“The Goals Guy”)

Do you think writing a business plan is a waste of time? Let me know what you think.