Most people have a love-hate relationship with business plans. It’s a grey area that has generated heated debate among entrepreneurs. Those in favour of a business plan will insist on how it brings clarity to your thought process, blah blah blah, while those on the other side of the table will sagely inform you that 60% of Fortune 500 founders did not have a business plan when they started their businesses, etc. etc. It’s never-ending, this debate.
So what’s my take on this issue?
I believe it comes down to definitions. I think when most entrepreneurs hear the term ‘business plan’, they immediately think of a 40-page document written in flowing prose, complete with detailed market analyses, charts, graphs and spreadsheets that can make your head spin. I believe writing such a document before you start your business is unnecessary unless your bank or investor asks for one. While the ‘plan’ isn’t important, ignore ‘planning’ at your own peril. Planning involves a simple, structured way of thinking about why your business exists, who it caters to and how it will make money.
Below are questions I feel are critical to planning. It’s what I think about before I start a business. Don’t take this as gospel though; this framework works for me (and I believe it will work for anyone), but other entrepreneurs have their own intuitive ways of planning. Read my list below, learn about others’ views, and figure out a method that works for you.
- What problem are you trying to solve in the marketplace?
- What is your solution to the above problem?
- Who is your target audience?
- Why will customers buy from you? What makes you better than your competition?
- How will you produce or provide your product or service? (Operations)
- How will you distribute and promote your product/service? (Marketing)
- What roles and responsibilities are involved in your business, and who will fill them? (People)
- How will you make money? or
- How much sales will you need to generate to cover all of your costs?
- How much investment is required to start-up?
Remember, you don’t need to approach these questions as if you’re writing a paper for your English Literature class. You’re planning, not writing a business plan. Use bullet points and a calculator to answer these questions. Once you’re satisfied with your initial hypothesis, go out and launch your business. Once you launch, you will learn more about the market, customers and industry in general. When that happens, go back to the drawing board and refine your answers to these questions.
So, again, while I think a ‘plan’ may not be necessary, ‘planning’ definitely is. Do you agree? Leave a comment and let me know – I’d love to hear your thoughts.
image by juhansonin on Flickr
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