Do I need a business plan?
In this post we’ll look at whether you need a business plan. The short answer is “yes, probably you do” …but the longer answer is more of a “well, maybe”.
Whilst most businesses can can benefit significantly from planning, it’s not necessarily the be all and end all for building a successful business.
The most basic of plans can be just as effective for one business as a complex plan will be for another. It’s horses for courses. This piece will help to determine the right level of planning for you.
Some types of company aren’t necessarily conducive to business planning at all – for example, a business based on a hobby, where much experience may already have been gained. For some people, a detailed plan that covers all aspects of the business, including marketing, sales, revenue projections and so on, just makes them feel reassured – even if this level of detail isn't mission-critical for the business itself.
Business planning: head, not heart
Most startups are fuelled with a passion for the core activity of the business – and a drive to make it a success. It’s an emotional thing. And one of the strongest emotions can be fear of things going wrong.
Understandably, emotions like excitement and fear can inform planning. But they shouldn’t. Excitement can breed over-confidence, which can result in unrealistic projections. Fear can create anxiety, which can result in an over-cautious approach (or even paralysis). Business decisions are best made with the head rather than the heart. And this is why data can be more reliable than feelings.
A logical approach to business planning is vital.
When you DON’T need a business plan
The following companies might not ordinarily require a business plan, so if your business fits in one of these categories you can probably focus elsewhere:
Businesses that need a revenue stream, fast
As business author Paul B. Brown for Forbes in August 2013 put it, “The longer you plan, the longer you are not in the marketplace”. If you’re in need of revenue you really need to do stuff, not plan it. If you waste time over-planning, someone could pick up your idea and fill the market before you get round to it.
Businesses that are not looking for funding
Great, this means you don’t answer to anyone. No ‘powers that be’ questioning decisions or requesting complex financial details for funding applications. If you’re not relying on anybody else to get your business off the ground, you probably don’t need to waste time on a detailed plan.
Businesses that want to go with the flow
Many businesses are ‘happy accidents’. If you just want to start ‘a business’ (as opposed to fulfilling a specific dream) then you don’t really need to plan. Not knowing where you’re going can be half the fun!.
So, whilst most businesses need large doses of passion and drive to help them succeed, not all will need a business plan to go along with it.
When you DO need a business plan
Whilst we’ve discussed situations when a business plan is optional, most businesses would benefit from a degree of planning – and for some a high level of detail is essential. For example:
You’re looking for fast growth
If your business is looking to grow significantly, a solid foundational plan and detailed financial projections are a must.
You want to reduce uncertainty
Uncertainty is a fact of life, and there are no guarantees that any business will succeed. But there are plenty of ways that a plan can make sure that risks are properly understood, and that expectations are realistic and managed. Market share, competitor analysis and customer desire can be ascertained more readily with a good plan underpinned by research. In turn, this can provide a clear (and hopefully reliable) idea of the probability of success.
You have investors who want detail
A business plan is invaluable to any investor. Needless to say, they want to see exactly how their money would be used, and the return on investment they should expect to receive (and when). They will also use a plan as a guide for determining the viability of an idea.
You're looking to bring great people on board
If you're looking to bring peers and business partners into the fold, they'll obviously want to see what plans you have for the future. If you can't show them something in writing, then it's understanadable if they don't treat you very seriously.
When looking for fast growth or to determine the viability of your idea, a plan can be extremely useful. Convincing investors is tough at the best of times, so a well-prepared business plan may just clinch that deal.
A plan for success
Of course, there’s no magic formula to building a successful business. And no business plan can make a company successful on its own …although it certainly won’t do any harm.
Having some sort of a business plan is simply what you'd expect from a business professional taking their idea seriously. And most startups will benefit from a degree of planning. But as to how far you go with the details, that’s mainly down to how much time you want to dedicate to it – and to how useful you think it will be in helping you achieve your objectives.
For helpful advice and business plan template downloads, click here to visit the gov.uk website.
Company Formation MadeSimple is an approved e-filing partner of Companies House. To date Company Formation MadeSimple have registered over 400,000 UK limited companies and offer a number of online formation services for first-time formers and serial entrepreneurs alike.
This is a guest post by Alex Novakovic at MadeSimple – Follow Alex on Google+
