Do You Really Need a Business Plan for Your Startup?
A business plan is usually one of the first things anyone with an idea for a business creates. However, writing a business plan can be like trying to read a crystal ball: You’re trying to predict the future of your idea. But setting goals for your (perhaps non-existent) business with limited knowledge of how your product or service will perform in the real world should be left to Miss Cleo!
Most founders write a business plan because they’re looking for funding. But if you’re planning to bootstrap, you may not want a business plan. Entrepreneurs also view a business plan as a way to stay organized, keep their team on track, avoid major mistakes, and ultimately have a bigger “goal” to work toward. Sounds great, but business plans also present some problems; they’re often challenging and time-consuming to create, and they can leave little room for flexibility, such as adapting to industry changes or dealing with unexpected hiccups.
So before you sit down to write one, ask yourself these three questions:
1. Do I really need a business plan?
Some businesses really do need a business plan. For example, if you’re a manufacturer of heavy equipment, you may have to forecast the amount of product you need to produce and deliver at specific times in order to be sustainable. It makes sense to have a plan to keep your manufacturing efforts and employees on track so you reach your delivery quotas.
Startup software companies, professional services, or technology companies can be more nimble and may benefit from not having a formal plan. I learned this firsthand when I had an idea for a business, wrote a detailed plan, and presented it to my father. I had high hopes that he would be so impressed with the spiral-bound book I had printed at Kinko’s that he’d help fund my business. He complimented my efforts but told me that I needed to go out and get some clients first.
“See how it goes once you have your first paying client,” he said. “You’ll learn a lot.” He convinced me that my ideas for the direction of the business could change dramatically based on what my clients wanted. “Once you’ve tested the waters for a bit, you might be able to tell me with a bit more accuracy where your business is headed,” he said.
He was right.
No matter what sector you’re in, take a step back and look at your industry. Is it fluid? Or is it the type of business that has changed very little for decades? If your business idea is in a sector that’s changing all the time (e.g., social media or technology), a business plan might only make things more difficult.
2. Can I live with a 30-day plan instead of a 365-day plan?
You may have determined that you don’t need a business plan, but you most likely still have goals, objectives, and strategies for your business. Try creating a plan for the next 30 days instead of the next several years.
It’s really difficult to say where you’re going to be a year or two from now, but a month from now is a different story. By not planning too far ahead, you’re able to stay abreast of industry shifts and more quickly adjust your business and your plans. But by thinking about potential pitfalls and playing out different scenarios in your head you won’t be in a panic if they do happen.
I’ve read interviews with Uber CEO Travis Kalanick where he talks about the eventuality of self-driving cars. He might not know exactly what this shift will mean for his business, but he knows it’s an issue that he’ll face, and I’m guessing he’s spending at least a little bit of time thinking about how he might modify his business based on that change.
I have a little bit of personal experience with this sort of “panic” pivot. For a long time, my company was almost entirely focused on integrating our software with Facebook. One day we found out Facebook was changing its platform. The way we had been doing things for almost three years vanished literally overnight, and our core product was at risk. Obviously we needed to shift our product very quickly. Fortunately, I’d already been thinking about some things we might be able to do to distance ourselves from Facebook, just in case. For example, I’d talked with the development team about whether we could modify our platform so users could publish their apps on platforms other than Facebook. Our “guerilla-style” culture and operating methods helped us adapt to the changing landscape and, more important, keep our customers happy.
3. Can I keep the team on track with good communication?
I mentioned earlier that one big reason people like business plans is because it can help the company and team stay organized and working toward the same goal. However, having strong, frequent communication can do the same thing.
I’m not a huge fan of weekly staff meetings, but I do believe communicating and being transparent with my employees is critical to our culture. Every other week, I gather my team to share the latest company performance numbers. Positive or negative, I share everything I know. By keeping my staff in the loop, everyone knows where we’re doing well and which areas need improvement. The goal should be for your employees to understand your vision, even when your vision changes frequently. No business plan that I’ve seen can do that. I’ve learned that transparency creates trust, loyalty, and understanding. Previously misunderstood projects or deadlines start to make sense when everyone can see the numbers behind the efforts.
Remember that communication should go both ways. Your employees are working on the frontlines every day. They will see things you won’t, so listen to what they tell you. I make sure to have one-on-one or small-group conversations with my team at least once a month. The more I listen, the more opportunities I have to make the right decisions.
Deciding whether a business plan is right for your business is a decision that no one can make for you. Having started a few businesses, I’ve learned over the years that it is possible to have a successful business without a concrete five- or even two-year plan. You should always be looking ahead, of course, but you should also trust your gut and be prepared to adjust your focus at a moment’s time.
Photo of man with plan courtesy of Shutterstock.
Jim Belosic is the CEO of ShortStack, a self-service platform used to build engaging campaigns for social, web, and mobile. ShortStack contains 40+ widgets and applications where users can integrate contests, sweepstakes, RSS feeds, Twitter, YouTube, MailChimp, and Aweber newsletter signups that maximize their online presence and potential. You can follow ShortStack @shortstacklab.More from this Author