When it comes to starting your own company, nothing is more controversial than the preparation of a business plan. Mixed reviews abound on whether to spend time writing a business plan rather than just starting the business. Like many business decisions, it depends.
Do you need funding? Are you even experienced enough to obtain funding? These and other questions will help to determine whether or not valuable time and money should be spent writing a business plan or if resources could be better utilized chasing opportunities.
When to Write a Business Plan
Certain scenarios absolutely require a written business plan.
If you are seeking funding from venture capitalists, private equity firms, angel investors or even SBA lenders a polished business plan is an absolute must. Such a plan will include everything from finance and marketing to business operations and everything in between.
Unfortunately for the young would-be and budding entrepreneur, obtaining millions in venture funding at an early age is the exception rather than the rule.
In most cases, venture funds are seeking out proven entrepreneurs with a previous, successful track-record. However, that doesn’t leave out friends, family, angels or other creative funding options which don’t necessarily require planning.
It also doesn’t mean you can circumnavigate writing your plan. In fact, it may mean the opposite. If wealthy Uncle Jack is going to be footing the bill for your chain of smoothie stores, he’ll probably want to see some financials as well. If you are a proven manager with a long-reputed track-record, you’ll most likely still need a plan, unless you know the fund manager directly.
I know of several rare cases where experienced entrepreneurs were given little more than a handshake to obtain $2 million+ in venture funding. The terms were ironed-out later.
Again, never treat the exception like the rule.
If you want funding, you’ll need a plan. If you want a plan and have little experience writing one, you may need some outside assistance.
When to (Not) Write a Business Plan
The bootstrapped entrepreneur is perhaps the most awe-inspiring. He or she lives off of saltines and ketchup for five years before breaking into something big.
Are you willing to make the sacrifice?
If you are, perhaps the best route to go is start running without a business plan. I can think of a few very successful entrepreneurs who started without a structured plan. Does the name Bill Gates ring a bell?
If you think a plan is going to help you at the beginning stages, you’re most likely dead wrong, especially if you are going after anything technical. Most entrepreneurs shift strategy, tactics and overall plans at least once.
When I first started my own business, I was confident in exactly what the business would do. Before I sold the business, it looked nothing like what I had originally anticipated or dreamed.
A plan may help you get a rough idea, but throwing up hockey-stick financial projections on a slide deck is waste of everyone’s time.
Whenever you plan on forgoing the strenuous process of crafting a business plan for your company, you miss some great opportunities. For instance, you will automatically fail to learn more about the industry you will be entering.
Thinking about competitive forces surrounding the market, the financial implications and the threats you may face could have you running for the door before you begin.
It also may help to effectively paint a picture of where the opportunities may lie. That said, there are also virtues to starting and starting now. It was Goethe who said, “Whatever you can do or dream you can, begin it. Boldness has genius, power and magic in it.”
If you need a business plan, prepare today and start tomorrow. Otherwise, start your business and start it now. It’s that simple.
Jon Castano is a retirement account advisor and online marketing specialist for Silverstone, an investment management, IRA & 401(k) firm located in Seattle, WA and Austin, TX. Connect with John on Twitter.