Why Write a Business Plan?

I am frequently asked; Why Write a Business Plan? In fact, I recently asked one of my clients for a copy of their business plan and I got an email back that said, “Plan? I need no stinking plan!”

Too many entrepreneurs believe that planning takes too much time and energy. “Why can’t I just start my business and run it…it’s more difficult to write down “plans” than it is to just-do-it. Any plans I write down are quickly obsolete, so why write a business plan…it is a waste of time.”

Well, there are many reasons why you should write a business plan, but first—consider this:

Some years ago, Yale University conducted a study that found 3% of Yale graduates had more wealth, years later, than the other 97% combined.

Harvard Business School did a study on its’ students 10 years after graduation and found that:

27% of them needed financial assistance.

60% of them were living from payday to payday.

10% of them were living comfortably.

Only 3% of them were financially independent.

Why is there such a drastic difference between the top 3% and all the others? It doesn’t stop with these university studies either. Let’s look at some additional information:

From a more recent study sponsored by the Ford Foundation:

23% of the population has no idea what they want from life and as a result they have very little.

67% of the population has a general idea of what they want, but they don’t have any plans for how to get it.

Only 10% of the population has specific well-defined goals, but even then, 7 out of 10 of these people reach their goals only half the time.

The top 3%, however, achieved their goals 89% of the time.

What is the significance of this 3% number that keeps popping up in various studies? Well, it is quite simple really…in every case of the successful 3% (and only the 3%)—they wrote down their goals.

Dreams and wishes are not goals until they are written on paper as specific desired results. In some real sense, writing them down materializes them and brings them to life. The experts claim that the act of writing makes an imprint on the brain that helps set the direction of actions by a person. If that does not address the issue of Why Write a Business Plan? then here is...

More Reason Yet

Still not convinced why you should write a business plan? How about this: A recent report from the Office of Advocacy of the U.S. Small Business Administration cited the Panel Study of Entrepreneurial Dynamics, which stated; “Entrepreneurs who completed a business plan were six times more likely to start a business [than those who did not].”

And, “Those who completed written plans were likely to engage in more startup activities than those whose plans were unwritten…”

These are pretty compelling reasons as to why you should write a business plan, but don’t forget…if you are going to seek outside financing from a bank, Angel Investor, or Venture Capitalist, you have no choice—you will develop a very detailed, formal business plan.

I also know from experience that as you are about to move from your pre-venture planning to actual startup planning you can hit the wall of information overload and begin to wonder if you can really pull this off—doubts start to creep in.

That’s when you spend some time reviewing your business planning to reassure yourself that you have covered every base you know of at this time. You may do this countless times, before you see your first dollar of revenue.

Why write a business plan? As I said earlier—you don't always need to write a formal plan...but you do need to do a considerable amount of "planning." I am going to repeat a quote here because I think it is important:

"I have always found that plans are useless, but planning is indispensable." --Dwight D. Eisenhower

I'm sure I have confused you by now; but the point is...you do need to plan, and plan carefully, but you do NOT need to follow the prescribed formats laid down by the business pundits of the day. Most plans are not for Venture Capitalists—they are for you, and you can write down whatever you want.

And I do encourage you to write down somewhere, all your thoughts, visions, and calculations...and then use them as the basis for ongoing planning as you build your business.

Stay with me as we look at some of the various methods of preparing a small business plan—it is not as hard as you might think. I suggest we start with the Simple Business Plan report. I'm sure as we proceed you will better understand the difference between planning and plan...and together we will answer the question, "why write a business plan?"

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3/29/12

SBI!