One of the biggest dilemmas budding entrepreneurs come up against is whether or not to write a business plan for their start-up.
While conventional wisdom suggests that you need one, it’s not always a prerequisite, and your decision may depend on your industry, the scale you’re going after, who you are working with or area of focus.
Here are some important pros and cons to consider:
The argument for:
It’s a route map to where you’re going
Starting a business is a long-term undertaking and you need to plan for every step of the process – from those initial weeks and months to your potential exit strategy.
“Every business develops in a series of stages,” says Joel Cortez, founder of marketing agency Intellistart. “A solid plan will help you to propel things in the direction you want, keeping you focused on your goals.”
Breaking your plan down into short-term, medium and long-term goals will help you to manage the transition from one phase to the next. But, as Joel adds, “you can’t be a slave to it and probably as much as every month your business plan will change.”
It’s essential to secure funding
Any potential investor wants to have visibility of how their money is going to be used and when they are going to start seeing a return. With scores of people likely to be vying for your financier’s attention, a business plan is also a way of communicating your USPs and getting an edge on the competition.
Susan Binnersley, founder of career transition coaching company New Leaf, advises new business owners to have two plans in place: one for themselves with “key goals in terms of sales revenue, customer service, financial management and achievement” and one for the bank or investors.
You have a responsibility to those around you
It’s not only your bank manager that you’re accountable to: you also have a responsibility to those around you (whether partners, employees or dependents) to keep things ticking over financially month-to-month. A plan will help you maintain a steady cash flow, foresee potential bumps in the road and have contingencies in place should things go awry.
It also keeps everyone on the same page, as Daniel Squirrel, founder of digital communications agency, Yard Partners, advises: “if you’re working with a larger group of directors then it’s very sensible to have all of them focussed on the path the business is taking and have that clearly laid out.”
The argument against:
It could be that the time spent putting a detailed plan in place may be better invested elsewhere. This is particularly true in sectors where significant capital or resources aren’t required to get going and the risks of failure are relatively low.
The online technology space may be one of these. Rajeeb Dey, founder of work placement site Enternships, feels that entrepreneurs often have little to lose by going with their idea and figuring things out as they go.
“You could spend your time writing out a plan or you could spend that time actually putting your idea into practice,” he says.
Best laid plans…
Few start-up concepts are set in stone and you may find that your ideas and objectives change and evolve significantly during those early weeks and months. Again, this is particularly true in the fast-moving digital arena. “The technology industry is constantly changing,” says Dey. “You might find that your plan becomes defunct very quickly.”
On balance, it’s better served to create a business plan than not, though it will depend to an extent on your industry and the kind of start-up you’re working on. If you do decide to write a business plan, the important thing is not to be a slave to it – understand that your plan, like your idea, is likely to change month-to-month, and particularly during the early stages.
As Philip Lambert, founder of public and media relations company, Investor Dynamics says “It’s essential as a means of communication and structuring and challenging of the ideas in your head…, but a business plan is the best guess. I’ve never ever seen a business plan that’s exactly right. Such a thing does not exist.”