Do I need a business plan? I cannot tell you how often I get this question. Early in my career, I was an avid supporter of Business Plans. Not the business plan itself perse, but the planning process. Planning, in itself is crucial to the success of a business-or so I thought. However, over the years I have become more of a cynic.
I have seen man well-planned businesses fail. These were businesses where the entrepreneurs wrote business plans, strategic plans, revised, reviewed and planned their hearts out. Some entrepreneurs plan for years before launching, but even the best laid out plan, can fail–and they do.
I have seen many ideas, developed after intense all-nighters, go on to flourish and sell for seven figures within two years without ever having a single page of a planning document.
What is the difference? Why is it that some can survive without a business plan and others seem to live and breath by their plans?
The Evolution of the Business Plan
To fully understand this this, we need to take a step back and ask, what has led to this business planning phenomenon?
The answer can be found, both in our business culture and our communities. There are parts of the world, where business plans do not exist. Yet in North America, the Business Plan is seen as a crucial component of the business process–and the torment of Entrepreneurs and their Financiers.
Years ago, when we wanted to borrow money for a new business, we went to our local bank-the one we had dealt with for years. The bank or lending manager knew you by name. He knew where you lived, your family, your Church and your habits. Further, many people had higher levels of personal savings. These were tapped and used at key moments such as this.
Entrepreneurship in itself, was less common. One might run a family farm, a general store or small restaurant, but imagine the lack of bureaucratic read tape of the Wild West compared to setting up a business in a large urban city today? From non-existent to a nightmare.
As our communities grew, as newcomers entered, as borrowing markets expanded, knowing everyone that we dealt with was harder. What was needed, was a rigorous, scientific process, that would standardize the objective financing process and introduce some scientific validity to what had previously been a very personal decision.
Enter the business plan, the savior of the Financier and the Entrepreneur. Over the years, particularly since the 1980’s the use of the term business plan has skyrocketed. For example Google traces the use terms used in books from the 1800’s onward.
So, with such a long history, how can it still be unclear when a business plan is needed? Be sure to follow our blog for the answer.