Do You Still Need a Business Plan?
By J. Gary McDaniel, TCV Growth Partner-
"Do you really need a Business Plan? Is writing a Business Plan really the best use of your time?"
To me, the answer to these questions is "Yes and Yes!"
I have had many people in recent years tell me that Business Plans are irrelevant, that they are the dinosaurs of the modern business world. I wholeheartedly disagree. While Business Plans may no longer be the 250-page tomes of the past, a Business Plan is still a very important and strategic tool for any business, large or small. A good Business Plan helps you focus on the specific steps necessary to make your business ideas succeed and to achieve both short-term and long-term objectives.
Let’s look 5 reasons why you should write a Business Plan:
1. To raise money for your business.
Potential investors or lenders want to see a written Business Plan before they give you money. It’s that simple. They want to make sure you have a thorough business and financial plan that demonstrates a likelihood of success. Investors understand that your business will likely wind up looking somewhat different than the business described in your plan. As Jeff Bezos said, “Any Business Plan won't survive its first encounter with reality. The reality will always be different. It will never be the plan.” Investors know that, but investors do want to see that you have at least thought things through and that you have a clue about what you are doing. Do you understand your market? Have you done customer discovery? Do you know your competition and how you stack up against them? Do you know your value proposition? Do you understand your business model, i.e. how you will make money (pricing, cost structure, cash flow, etc.)?
Potential investors and lenders want to see the true potential of your business idea clearly laid out in hard facts and numbers. A Business Plan is the best way to provide this information, and to demonstrate that you have the knowledge and tools necessary to adapt when you do find yourself facing those inevitable “encounters with reality”.
2. To make sound decisions.
Certainly reason #1, raising money, is a major reason for writing a Business Plan, but I actually think that it is not the best reason.IMHO, a Business Plan should be as much for you as it is for wooing investors or lenders.I view the Business Plan as a “roadmap” that you create for your
business. As Henry Kissinger said, “If you do not know where you are going, every road will get you nowhere”. He is right. Writing a Business Plan will help you define and focus on your business ideas and strategies. It will force you to not only concentrate on financial matters but also on management issues, human resource planning, technology, and creating value for your customers. To me, having a roadmap to help you make sound decisions is the best reason for writing a Business Plan.
3. To help you identify any potential weaknesses.
Writing a Business Plan is often the first real struggle for the business owner who wants to launch a new venture or product, but doesn't want to consider that his or her business idea may be a bit flawed or is not yet fully developed.
However, writing a Business Plan helps you identify those flaws or potential pitfalls in your idea. And, identifying gaps early on in the process gives you a chance to shore up your research, test your ideas and take steps to make your business stronger and more viable. This may initially seem like a step back, but any and all further work can bolster your chance of success before investing time and money in an idea that is likely to fail.
Share the plan with others who can give you their opinions and advice. Identify experts and professionals who are in a position to help you and share your plan with them. (See my blog on “The Importance of Mentors”: https://www.tcv-growth.partners/post/the-importance-of-mentors).
4. A Business Plan Can Give You New Ideas.
Discovering new ideas, different approaches and fresh perspectives are some of the best things that can happen from the depths of the business planning process. Despite the sometimes negative reputation, a Business Plan isn't just a long, stiff, and structured document.
In fact, an effective Business Plan is the opposite; it's a flexible, growing and dynamic tool that can help you think creatively and come up with new solutions for some of your toughest business challenges.
Creating a Business Plan involves a lot of thought, but It does not need to be complicated. At its core, your “roadmap” should identify where you are now, where you want your business to go, and how you will get there. Writing a good Business Plan does not guarantee success, but it can go a long way toward reducing your odds of failure. “In preparing for battle I have always found that plans are useless, but planning is indispensable.” Dwight D. Eisenhower
5. A Business Plan Creates an Action Plan.
A Business Plan is a useful document. Your Business Plan is a tool to help you outline action items, next steps, and future activities. It is a living, breathing document that not only outlines where you are and where you want to be, but it also gives you the directions you need to get there.
Going back to the original question of whether or not you really need a Business Plan, you may still be able to build a successful business without a plan, but it is most certainly easier to do with a well-constructed Business Plan in your hands.
To sum it all up, I would like to quote one of the deepest thinkers of our time, Yogi Berra, who said, “Without a plan, even the most brilliant businesses can get lost. You need to have goals, create milestones, and have a strategy in place to set yourself up for success.”
If you need help with your Business Plan, the experts at TCV Growth Partners would be happy to help!