In working with many different entrepreneurs over the years, planning has always been a topic of discussion. Should you have a business plan and actively review and adjust it? I strongly believe in active planning. I believe planning provides your effort with direction. I don’t want you to waste your time with fancy, formal plans that serve no purpose. Create a useful plan that helps you achieve your vision.
So you may be saying, “I don’t need to write a business plan. My business is small and I know what I want to do.” Whether you write out a plan or keep it in your head, you will complete some kind of plan. Spending the time to think through your business and have a sound plan for marketing, organizational structure and money will save you time. You can avoid some of the trial and error of business if you think through your plans on paper before you actually try them rather than facing the same foreseeable problems every day.
In reading an article on Entrepreneur.com, I stumbled on an interesting study. William Bygrave is a professor emeritus at Babson College and longtime entrepreneurship researcher. In 2006, he studied several years of Babson graduates to determine if writing a business plan increased the chances of success over students who did not have a plan. Bygrave and his team determined those with a formal business plan had no greater success than those who started a business without a formal plan.
If having a business plan does not increase your chances of success, why do it? I think the reality is everyone completes a plan. Some do it through a formal planning process prior to starting. Some do it every day while trying to build and run a business situation by situation. The difference is the amount of time you lose and energy exhausted figuring it out as you go.
I also believe going through the planning process gives you the confidence to actually take the risk of starting your business. In a study completed by the Panel Study of Entrepreneurial Dynamics, they found that writing a plan increased the likelihood of someone starting a business by 2.5 times. Planning answers the questions to reduce the anxiety and doubt that holds most people back from starting a business.
I recommend you complete a business plan but keep it simple. You do not need a 20+ page plan. You have your vision and your research to determine your idea is viable. This supplies you with a blueprint of how to build your business and market research on your target customers. The plan will build on this data and:
- Clarify how you will sell and market your product/service
- Describe the different roles needed for your company to start
- Project revenues and costs associated with operating your company over a fixed period
- Determine startup costs
The two biggest weaknesses I see with most companies are
- They do not have a clear sales and marketing plan.
- They do not review their financial information on a regular basis.
If you start your business with well thought out plan for these two areas, I believe your chances of success increase exponentially.
Once you have the plan, what should you do with it? I recommend reviewing and revising your business plan every 3 months. This is a long enough period of time to give you a chance to gain results and short enough to be able to realistically project numbers.
Planning your business is not a onetime event. You should enter each day, each week, each month, each quarter, each year with a plan. Then review, revise and reinitiate. Build your small business dream in a proactive manner and you will enjoy the journey much more.
Productivity is never an accident. It is always the result of a commitment to excellence, intelligent planning, and focused effort.
Paul J Meyer