Business plan – ultimate waste of time or absolute necessity? #startups

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There is an enormous amount of information and advice about creating a business plan for one’s startup.

The advice ranges from the necessity to prepare a traditional narrative form business plan document, to preparing a business model canvas, or using a business planning tool or app.

There are even notions like the idea-less startup, where the team is formed before the startup idea comes together.

No business plan at all is not a good idea

While the consensus nowadays seems to be that shorter business plans are better, some folks even argue that preparing a business plan is a complete waste of time. Others who argue that business plans are a waste of time suggest:

“Throw your business plan in the recycling bin. Instead, focus on your team and on getting to market as quickly as you can.”

What a business needs to think about

That notion of no business plan is all very well. But a new business does need to consider things that are traditionally covered in a business plan, such as:

  • Business purpose – the purpose for which the business exists (some like to include mission and/or vision); what makes the business and its products special or different
  • Markets in which the business will operate – including competitors, geography, since these inform operational matters such as logistics and distribution
  • Sales – how the business will make money, as Guy Kawasaki said recently during his visit to Canva in Sydney: “Sales fix everything“, also need to consider pricing and distribution
  • Business finances – funding sources, financial projections including operating costs and revenue; how the business will make money
  • Business structure – incorporation, board and directors
  • Management and ownership – who will manage the business operations, who owns what and what obligations are to be fulfilled
  • Key personnel – people required to run the business, either contract or staff positions
  • Products or services, innovation, and intellectual property – including how the product will be developed and brought to market
  • Insurance and risk management
  • Legal considerations
  • Business operations – how the business will manage production, logistics, distribution, customer service, sales, accounting, bookkeeping, statutory requirements, etc

If these types of information are not written down it is hard to ensure that all participants share a common understanding.

Quick approaches to business planning

My approach to business planning is to do it in stages, with each stage focused on checking the team’s current understanding of key issues, risks, and obtaining agreement as to sensible next steps.

Lean business model canvas

A good way to start the planning process is to use a lean business model canvas to get the team thinking about the key issues for the business. If the team cannot answer the questions posed in this document then it is a clear risk signifier for the project.

Once agreement is reached on the high level information in the lean business canvas it is a good checkpoint for the team. The canvas also provides a helpful artefact for sharing with potential collaborators and investors. It is a useful way to assess the viability of the business idea.

More detailed planning

For the preparation of the next level of detailed business plan I had traditionally used the narrative form document with charts and tables. However, recently Avis Mulhall put me onto a business planning tool called Live Plan. I’m now a total convert to this approach (please note that I have no affiliation with Live Plan, just find it a very handy tool).

This kind of tool asks the right questions and enables the team to prepare a good looking presentation document that includes sensible categories of information.

This more detailed plan provides another useful artefact for sharing with potential collaborators and investors.

Quick business planning

For a few startups I’m working with, the teams went through the entire planning process outlined above – including lean canvas and detailed business plan – in a single day.

The business planning process does not have to be onerous.

Business planning at its best

At its best, business planning is about the team asking sensible questions about:

  • how the business will work,
  • how it will find and keep happy customers,
  • how it will make money,
  • how the risks will be mitigated,
  • and how the rewards for success will be shared among the founders and investors.
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