“If it really was a no-brainer to make it on your own in business there’d be millions of no-brained, harebrained, and otherwise dubiously brained individuals quitting their day jobs and hanging out their own shingles. Nobody would be left to round out the workforce and execute the business plan.”
– Bill Rancic
There are a ton of “business gurus” out there who will tell you that you need to write a business plan, or even that you must write a business plan before you even get started. It’s not just the “business gurus” who are guilty of offering this bad business advice. Go look at the Small Business Administration’s page for starting a business. What’s #3 after thinking about it and finding a mentor? You don’t even have to click the link to guess. It’s writing a business plan.
The order is ALL WRONG!
Let’s look at the “commonly accepted wisdom” of “business gurus” for how to start your business.
The untold story is of the crushing debt that these business owners face if they fail. In fact, try to find good data about the average difference in debt load of a failed business owner. I don’t think any reliable information is out there. If you can find some, put it in the comments!
Here are the three most common myths about business plans perpetuated by “business gurus”:
“What if you need angel funding or VC funding? You can’t get anyone to invest in you without a business plan!” If I want to invest in a small business, I’m much more concerned about kinetic energy than I am about potential energy. If you can’t show that you already have a customer, and preferably customers who have committed money to you for your product or service, then you’re telling the same story that every other person who was in line before you and who will be in line after you are going to tell. You’re in a much stronger negotiating position when you don’t need the money, but it would be nice to have.
“You need to have a business plan to know where you are going!” You should have an idea, a concept on how to execute, and a list of potential customers, and then you should go out and get customers. From that point on, the customers, and then the market are going to tell you where you are going. Having some detailed document written out with detail down to the ¼ second of each day is only going to serve to create some heavy reinforcement for an anchoring bias (“but, it’s in the plan!”) and keep you from serving your customers and providing value for your market.
“You’ll never sell your company without a business plan!” Just because you don’t have a 50 page fully detailed fill-in-the-blank business plan written out (with the help of the “business gurus”) doesn’t mean that you don’t have a plan for your business. I never had a written business plan when pitching to potential buyers. I had a 12 page Power Point presentation. Plus, your buyer may come from within your own company. If that buyer doesn’t know your business without the help of a long formal document, then they have no business buying you out in the first place.
So, arguably, the answer to the question I pose in the title is simple. Never. Focus on getting your first customers, then exceeding their expectations while getting more customers, and repeating that process ad infinitum. Time you waste writing down an enormous business plan is time you could spend getting that process started.
Did you write out a full business plan? What are your thoughts about it? Join in the conversation in the comments below!