During my MBA, I took a course which required me to write a business plan. The current movement in the entrepreneurship hubs of the world is that a business plan is a waste of time. But I think it does have a use – especially for the entrepreneur – and one way or another you’re going to do the work anyway.
A business plan is traditionally seen as the 30+ page Word / PDF doc that would get you funding. It examines all the different parts of the business you want to start. A good business plan used to touch on marketing, sales, product development, market, competitors, logistics, HR, financial model, business model, revenue generation, risk factors and a whole lot of other things. I myself wrote a nice 30 page document on Treeveo before during the MBA. This was a time-consuming exercise indeed, But it was far from useless.
Here are a few reasons why writing a business plan isn’t a total waste of your time….even if you never show it to anyone else.
It will expose holes in your idea
I never sent the business plan to any investor. I never even showed parts of it (I think). However the big use of it was that it forced me to think about all the aspects of my business before approaching investors. For example, we did research on competitors, their business models and product features. Also we ran simulations on the finances to see how different pricing options would impact the company. It allowed me to make early stage choices in product and marketing. In the end I had figured out many typical investor / client questions early-on.
Your business plan will be in front of investors
Think the business plan will never be in front of investors? Think again, It actually will, but just not in the paper form you are thinking about right now. You, as a person, will be in front of investors. And because of all the thinking you have done in writing the business plan, you will be able to quickly answer even their toughest questions. Why? Because you’ve already thought it through. You’ve already been forced to examine all kinds of possibilities and angles. Additionally, from the information you’ve collected in your business plan it becomes much easier to generate a pitch deck, a one-pager, a financial model etc. you will have to make All of these anyway, so you’re going to do the work regardless. .
It will align everyone
For me personally, the business plan has helped me to get all those involved facing the same direction. You might be working with one or more co-founders, investors, suppliers, 3rd parties and NGOs. Doing the (thinking) work on the business plan means discussing with those others. So the added benefit is that after making a business plan, all of those involved will be aligned, or at least know where you plan to take your venture mid and long term.
So should you write a business plan?
To be honest, I would put precious time in the very beginnings of your start-up into testing whether or not your project has any market. Do early stage experiments, build a prototype, learn how to code etc. Follow the Lean start-up methodology. Just the lessons learned of these exercises will be worth it. Then once you have something going, you can think about all the other things like competitors, marketing etc. Just don’t dismiss the business plan as useless of the bat. Think of it as a very extensive checklist that investors will definitely touch upon one way or another. Instead of writing a 30 page document, you could also think of a big Evernote file, or a large PowerPoint deck. It doesn’t have to be a long text document.
So if you are offered a business plan course during the MBA, now you have some things to relfect on.
And if you have the time and resources, a business plan might not be a bad idea… when you start a company you’re going to do the work anyway.