8 Business Plan Myths That Can Hurt Your Business
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| By Tim Berry, Guest Blogger, SBA |
With that in mind, I’ve identified 8 pervasive myths that stand between you, the business owner, and the planning your business ought to have.
1. A business plan has to be long
Not necessarily so. A business plan can take whatever form is most useful, even if that’s just a few lists and tables.
2. A business plan is hard to make
It doesn’t have to be. List your key strategy points and key
tactics, and a few important major milestones (like deadlines, tasks,
the new launch or new website, and necessary hires). Include projected
sales, costs, expenses, and cash flow. Voila! You have a business plan.
3. Nobody creates business plans anymore
Well-run businesses use business planning the right way. They keep a
simple, lean plan up-to-date and refreshed. The review and revise it
monthly. In straw polls I’ve taken for years at management workshops,
the best 20% or 30% of the companies represented have a management
process that includes a lean business plan as well as regular reviews
and revisions.
Smart startups use basic business planning to help them see
starting costs, projected early sales and spending, cash flow, and key
strategy points and milestones before they launch. Then, they review
these monthly.
4. Business plans are for only startups
True, well-run startups generally use business planning to help
figure out which steps they need to take, and which resources they need.
But that doesn’t mean mature businesses can’t use business planning to
constantly set milestones, strategy reminders, and forecasts. Mature
businesses keep a business plan up-to-date, and review and refresh it
often. The more a business grows, the more it can benefit from good
business planning.
5. You can’t plan because change comes too fast
In the real world, a good business plan manages change. It isn’t
voided by change. You keep the plan current by making revisions as real
events unfold.
It’s like dribbling in basketball: if you plan to go a certain
direction, and the other team blocks you, then you go a different way.
Having a plan means that you’ll have the information you need to make
quicker, easier, and more natural revisions.
6. Business plans require market research
I read and review lots of business plans from mature businesses
that don’t include fancy market research. Business owners have to know
their market, and taking a step back to review your market is a good
idea. But with good planning process in a business, you can stay on top
of your market. You don’t need to include market research in every
version of your business plan.
Only in special cases will you need market research to prove your
market to outsiders. For example, startups looking for investment, or
businesses applying for loans, might need market research. Mature
businesses know their market and plan without the research requirement.
7. Investors don’t read business plans
I was in an angel investment group for eight years. We didn’t read
business plans for all the proposals that came in. We rejected many on
the basis of summaries alone. For those that interested us, we invited
them to present their pitch decks. From there, we narrowed the list down
further.
For those that remained, the business plan was a vital part of due
diligence. And for all of them, they should have had their bare-bones
business plans made before they wrote their summaries and pitch decks.
Without the business plan, the pitch and the summary are like movies
made without scripts. Ultimately, seeking investors without a plan
doesn’t work.
8. Nobody needs a business plan
Does every business need a plan, strictly speaking? No. But every business would benefit from good business planning.
People, even experts, still say nobody needs a business plan, but
only because they are locked into the decades-old mentality of the big
business plan document. If we redefine the business plan the way it
should be, as a flexible record of key strategy points, tactics,
milestones, and essential numbers, then all those experts would agree
with me – that every business deserves a business plan.
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