I do not believe in business planning.
There – I said it.
It probably shocks you considering I TEACH that shit at university. I have written ‘manuals’ and have spoken much about it in public. I don’t have a business plan. I don’t know any small business owner who does.
Every consultant and speaker and wannabe guru advocates that having a business plan is important and in fact that it is the difference between success and failure.
The government gives millions and grants to professional trainers and invests millions in websites to advocate that simple message: get a business plan. The bankers tell you so, the financial planners tell you so.
They fall back on one simple fact to ‘prove’ the importance of a business plan: The vast majority (make up your own statistic here) of all small businesses that fail do not have a business plan, ergo the lack of a business plan is to blame for failure, and that having a business plan will lead to success.
If you were honest with yourself, you would appreciate that such a conclusion is not only objectively/ statistically/ methodologically invalid, it is just plain stupid. 100% of business that fail are run by people, and success will be assured if it was run by something else. Or 80% of business that fail have fewer than 10 products, so success will be assured if you diversify (OK, I made up that last statistic, but you get the point.)
There is no causal relationship between having a business plan and the success of a business.
If there were; I guarantee that every small business would have one. Entrepreneurs are not stupid, they know in their heart of hearts that it does not make a difference and that is why they don’t have one.
Business plans have been invented by consultants, bankers and other assorted wankers to give them something to do. I offer nothing more factual than this: If having a business plan was a recipe for success, then everybody would have had one. That is just a simple fact of human nature.
Fundamentally a business will succeed or fail on one thing and one thing alone: do you have a product/service/solution that actually meets a (sufficiently large) real need that people are willing to pay for? If not, failure is guaranteed. If you do, you have a chance of success. To achieve success you now have to execute (not plan) just execute. The bigger the business gets, you will find that the communications processes (internal and external) gets more complicated.
To facilitate communication, you need systems, processes, procedures etc. A business plan could play a role as one of these systems, but it is by no means the best or the only way, and it is definitely NOT a prerequisite.
As entrepreneurs think about their business, the nature and the scope of the opportunity, they may jot down notes. This may vary from the ‘back-of-a-napkin’ plan to something more formal, depending on their style. The reality is that as soon as they have finished putting pen to paper, the plan is obsolete anyway. As long as they have a handle on the business model and they continue to execute it, success is possible.
(The interesting thing is that there is not really good literature on business models. Either it is long academic tomes, or internet fluff that confuses simplistic and simple. My suspicion is that we have not really nailed a suitable framework, and still must rely on entrepreneurial intuition to luck upon a workable business model.)
I know it. Most entrepreneurs know it. Now, to convince the bankers.