Depending on the resource you consult, you will see a business plan defined in all kinds of variations. Here are a few popular variations:
Basically a business plan is your entire business soup to nuts on paper. Most entrepreneurs are fast to pull the trigger and jump into business without fully thinking it through. A business plan forces an entrepreneur to think and answer some of the tougher questions that will bring a clearer perspective to several aspects of the business such as: people, product, channel, capital, processes, competition, market, business continuity and exit strategy. Often times an entrepreneur may realize after completing the business plan that the business is a bad decision or really not for them.
Entrepreneurs tend to be impatient and scatter brained. Instead of focusing on one task, their minds wander around and often this leads to lost productivity. A business plan helps keep the entrepreneur on track by defining his or her priorities and the urgency to execute on them. A business plan also helps ensure that the entrepreneur has covered all corners and have thought through all aspects of the business. And finally, a business plan provides the entrepreneur with an exit strategy in the event business doesn’t pan out as envisioned.
I’m not going to go in depth on how to put together a business plan. There are several resources online you can use to model yours after. You can even download free templates. I firmly believe the audience of this blog is savvy enough to navigate through this step of starting a business.
It depends. Not everyone needs a business plan depending on the business venture. If you are planning on starting a business on a full time basis, a business plan should be the first step you take. It is the single most important thing you owe yourself. In fact, if you are relying on securing financing to start your business, a business plan will be a necessary document your lender will want to review prior to lending you money.
On the other hand, if you plan on starting a part time business on a smaller scale using your personal finances, a business plan may not be needed immediately. However, I do recommend you do it at some point, preferably before you start the business to ensure you have thought through the various aspects of it. Part time business failures are more forgiving in nature because you have a full time job to fall back on. That is one of the biggest reasons I recommend not quitting your full time job immediately.
The reason why I am usually ok with going back and putting together a business plan is because the act of putting together one can be daunting. Business plans cannot be put together overnight, at least not good ones. This often causes the paralysis of analysis and precludes the entrepreneur from moving ahead while they have the fire under their belly. Instead, the entrepreneur’s wandering mind goes off in tangents which delays the process of going into business.
Is there a way to completely do without a business plan? Of course there is. You don’t have to do anything. Rather, you should do it for your and your business’ well-being. One area of entrepreneurship where I think you can get away with a formal business plan is when you decide to become a freelancer. When you freelance, you are still trading your hours for dollars, however you may decide to work on your own terms at an hourly rate you are comfortable with. Because it is similar to working a job in many ways, I don’t think a business plan is too critical for your success in freelancing.
In fact, many Freelancers make big mistakes spending time on costly and useless endeavors that never translate into anything. One of those is putting together a detailed business plan. Often times, a new Freelancer may also want to incorporate his or her business, print business cards, build a website or blog, and do 80% of those things that yield absolutely no results. I am not saying you shouldn’t do any of that if you want to freelance, but those tasks can certainly wait until you get ingrained in the business.
These tasks are not as critical to complete up front as it is to get yourself out there in the trenches to meet your ideal clients and start getting business. I often recommend Freelancers to stop wasting time and money on non productive activities and focus on those 20% of activities that drive results. Formalities can always be completed later and along the way.
I am certainly not advocating that you jump into freelancing without a strategy. You still have to think through who your ideal client is, the overall market demand, your marketing strategy and such, but you don’t necessarily have to spend weeks putting together a business plan per se to get there. So while a business plan is critical in some cases, it is optional in others. My simple rule of thumb is that if the business requires significant capital, then you should really put together a comprehensive business plan before diving in.
Readers: What is your opinion on business plans and having one?
Here are my thoughts on what should come first, a life plan or a business plan?