It used to be the case that every startup needed a business plan.Writing a plan was just a de facto part of the startup journey. Everyone did it, usually in the early stages, no questions asked. Please consider us to read Basic Steps To Writing A Business Plan.
But recently the value of the business plan has been hotly debatedwith some people arguing that they have become obsolete, irrelevant, and basically a waste of time. Critics argue that entrepreneurs don’t knowenough, at least not in the early stages, about their market or theirusers to be able to make reasonable assumptions about their proposedbusiness, and therefore the resulting business plans often areunrealistic and are just filled with junk hypotheses.
The critics argue that entrepreneurs should, instead, focus theirtime and energy on learning as much about their market as they can, forexample, by developing a minimum viable product and gathering feedbackfrom potential users.
I agree, to a certain extent, that business plans can be a waste oftime. There’s no doubt that they are time-consuming to write. Andsometimes, writing a business plan can become a “crutch” for aspiringentrepreneurs. They get stuck in a loop where they revise, tweak, andupdate the plan endlessly, all the while thinking that they’re “workingon their startup,” but in reality they never make the leap from“planning” into “doing.”
I definitely do not advocate that. At some point, you have to stoptweaking the business plan and just start the business. However, I dothink that there is value in spending a reasonable amount of timewriting a business plan and updating periodically as you learn more.Here’s why:
1. It forces you to face the unpleasant realities of startup life.
Launching your startup will take (at least!) twice as much time andmoney as you think it will. A key component of any business plan ismaking financial projections. This entails hammering out all thenitty-gritty details, for example, estimating how much money you need to create a prototype, how much money you can actually expect to make inearly years, how much runway you have before will you need toraise/borrow money, etc. Forcing yourself to put down numbers (even ifit’s just a range of values) can be hard, but it’s extremely helpful,because it forces you to face the harsh reality of what needs to happenfor your startup to be successful.
2. It forces you to deal with those “I’ll think about this later” problems.
There are a million and one things that you need to do when launching a startup. All too often, it’s easy to put off some of the less-fun,less-glamorous tasks. But writing a business plan forces you to spend at least a little bit of time reflecting on ALL the aspects of yourproposed business, including the problems that you said “you’ll thinkabout later.”
And this is important. You don’t want to find out later that GoogleAdwords which you were banking on for your online marketing campaign isactually 10x what you can afford, or that potential partners areexpecting a significantly higher share of profits than you were planning to give them. Writing a business plan forces you to do a little bit ofinitial research across all potential aspects of the business. Thisleads to a more grounded understanding of the challenges that you’llface as you launch your startup.
3. It makes sure that you and your co-founders are aligned in your expectations.
It’s also important that you and your co-founders share a commonvision for your startup. You don’t want to be in a situation where oneperson wants to create a lifestyle company, where the goal is to growthe business slowly, while the other person wants to raise VC moneyimmediately and take a go-big-or-go-home approach. If there’s anydisagreement, you’ll want to address those concerns ASAP. Writing abusiness plan, where you’re forced to spell out your vision for thebusiness in a very concrete way, can be a great way to facilitate thisconversation.
Those are just some ideas I had about why writing a business plan isstill worth doing, as long as you don’t let yourself get stuck in thetrap of continually planning your startup but never actually launchingit.
Thoughts? Let me know! Consider to comment below.