First of all, of course, if you are
starting or running your own business you need to think before you act. That is mere common sense. Second, you do not need a 100 page document
that describes the entire universe of your business category complete with a
positioning analysis of every competitor in your marketplace. Nor do you need an in-depth listing of all
the products or services you will offer during the course of your business, and
how each one differs from the offerings of other enterprises. Last, you do not need to indicate the
starting and ending cash balance in month 27 before you’ve even opened the
doors to your new venture. Unless you
are vying for millions of dollars in venture funding you don’t need a business
plan. Even then, you probably don’t need
a business plan except to satisfy venture funding sources. In a study published in 2006, by five
researchers from Babson College, arguably the premier institution on
entrepreneurship in the United States, it was noted that “…there was no
difference between the performance of new businesses launched with or without
written business plans.” The researchers
studied 116 Babson graduates who launched new ventures between 1985 and
2003. The study concluded that “…unless
a would-be entrepreneur needs to raise substantial startup capital from
institutional investors or business angels, there is no compelling reason to
write a detailed business plan before opening a new business.”
What? If you are starting a
business or seeking business improvement the most likely counsel you will
receive is, you need a business plan! If
you have the courage to ask why you will likely be told something like, “the
failure rate among small business startups is (fill in an astronomical number
such as 70, 80, or even 90%) the first year, and then it gets ugly.” You do not need a business plan and small
businesses survive at 83% or better (2004 U.S. Census Bureau). That’s correct! Small businesses have a very high survival
rate and the vast majority of those business owners have not written a business
plan and never will. How can this
be? And why are all these well-meaning,
well-educated business experts wrong? Some background.
Most graduate educated business
consultants, educators, and advisors received their education at colleges and
universities that utilized the Harvard School of Business teaching model, that
is, the Harvard case study method. It is
an elegant, effective, and exciting way to teach modern business concepts. A case study is a story. Usually the method teaches famous stories of
brilliant success or spectacular failures of well-known, and very large,
businesses. The stories are reduced to concepts
and tools that can be tested and utilized in new settings to maximize success
or minimize failure. The business plan
is an important tool for larger enterprises. If a firm is investing from tens of millions to billions of dollars in
equipment, tools, training, and marketing to capture or create market share,
the enterprise needs to know the dimensions of that industry and the relative
positions of players in the marketplace.
Too, the business plan was the
foundational teaching tool for the early educators in entrepreneurial
training. The thinking went that if it was
good for big business it must be good for the smaller enterprise. That is why if you present yourself for
advice on starting or growing your business you will be counseled to write a
business plan. You may even be given a
helpful guide to assist you, advised to buy a software package, or told to go
to the bookstore to purchase one of the many books on the topic. If you Google “business plans” you may select
from among 43,000,000 choices. Most
importantly, you will be told that if you attempt to start or grow your
business without a business plan, you are liable to find yourself among the
millions of failed enterprises littering the business landscape.
Relax! If you are in business and
haven’t written a business plan you are in good company. If you plan to start a business but don’t
want to write a business plan, then don’t. You can still survive, succeed, and thrive in an enjoyable small
business ownership experience.
I’d like to tell you I arrived in
the business counseling setting and announced:
Small business has a high success
rate; and, You don’t need a business plan.
I did not. As a new instructor fresh out of graduate
school I told my students and clients that they needed a business plan or they
would likely fail. They opened
businesses, survived the birth, did not write business plans, and reported
varying degrees of success. Over the
past two plus decades I have assisted 600 startups, served more than 2,000
existing companies and reviewed one business plan. It was a great plan. The business failed in 18 months. Not because of the business plan, but rather
because the business owner excelled at the technical skill of the business but
was a poor business manager.
My students taught me that business
plans were unneeded. Instead of laboring
over a formal business plan, focus on a general sense of where you want to go,
where you are, and a few thoughts on how to get where you’re going. Then act. The actions will yield insights and inform you in more meaningful ways
than planning. It’s not a business plan
that yields a successful business. Rather, it is a thoughtful business person acting in an informed manner
that produces results. Simply, create a
sense of direction, focus your energies, then move towards your goal. Be open to surprise and success. Most importantly, stay focused and believe in
the power of informed action.
Let now be beautiful.
Blessings,
Thomas
Excerpted from Dr. Jones' book, Ten Things You Should Know Before Starting Your Own Business...Even If You Already Have.
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