Business Plans are worthless and a con

Monday, February 3, 2014 12:13

Simple business planIn talking to entrepreneurs the subject of business plans often comes up. While some have excellent plans, others haven’t and feel that business plans are a complete waste of time and just there to line the pockets of consultants.

I think the issue is that the phrase “business plan” has become over used and lost its meaning, conjuring up complicated and costly documents that have no real practical help. Just another form that has to be filled in.

However if you were to ask whether someone has a plan for their business, not a “business plan”, but simply do they have a plan for their business, then most will say yes of course.

Few would imply that they have no idea of what their business is selling, the market it is in and what its aspirations were, even if it’s not written down but just in their heads.

When communicating to potential Investors or applying for a loan however they will want it written down in order to decide whether it is something they are interested in and to filter all the many approaches they receive.

They can’t see or talk to everyone, they need to look at something to decide if the opportunity is in a suitable market area and has sufficient quality that they will then invest time in following up.

That has lead to the structure that we now call a Business Plan. But if you are not applying for funding is there any point in writing down the plan for your business?

Well yes. Because the discipline of having to write down your thoughts for the business is a great way to force you to put in place actions and ideas that will develop your business.

While it’s all in your head it is easy to be fooled that you have this grand plan. Start writing it down and get some detail into the woolly thoughts that you have.

If it is not for funding but only for you, it can be in any format and as long or short as you wish. An action list that goes beyond a few months is a business plan.

So is planning your business worthless? If applying for funding is it unreasonable for the potential Investor to ask for information about the business and its plans in writing so they can read it?

 

Other resources:
Writing business plans for business angels

Marketing plans

 

 

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11 Responses to “Business Plans are worthless and a con”

  1. Bryjames Miller says:

    May 26th, 2014 at 7:46 pm

    I agree that a business plan are sometimes useful and not because mostly, it  has different outcome than what was perfectly expected. The only good thing is that it is really an entrepreneur’s guide towards success in a way that it can always be a reminder to someone who engage in a business perspective.

  2. Phil Rose says:

    June 3rd, 2014 at 3:37 pm

    the title of this article says what many (although not most) business owners feel when it comes to planning. Often those that do not have a written plan (however brief) are the ones that just go with the flow. They feel written plans will bind them. They don’t really have a direction for their business and don’t always understand why they should have a direction. In their case ‘any path will do’.

    Writing plans down automatically frees the owner to work on the plan with a clear context for the business, his employees and himself. How liberating is that?

  3. Graham Harvard says:

    June 3rd, 2014 at 10:28 pm

    Ah,
    In the strange world of communication,
    only today did I discuss the ‘Business Plan’, with my accountant,
    whilst one has an idea I do feel it needs credence.
    No matter how far out the box it needs to be assessed by others.

    I did this only in that I need ‘Angel’, investment not so much for cash, but expertise within a field I know little about.
    If it is a good idea then the accountant can perhaps gauge a market value to the concept. So perhaps then he can produce a ‘Plan’, to take things forward.

    We all then eat cake !

  4. Tom Mawhood says:

    June 4th, 2014 at 7:54 am

    Business plans are essential – however only if it is a good plan – unfortunately there are a lot of templates for business plans which are repetitious and far far too long

    Accompanying a business plan should be a financial plan – particularly cash flow – business has to understand and manage its cash flow as a priority

    Finally – for many – remember profit isn’t cash – you can’t spend profit until it is in your bank

    Interesting debate

  5. Arshi says:

    June 4th, 2014 at 9:50 am

    Business plan is vernacular for lot of people who are in business but actually it means predicting the future based on set of assumption and projections. Business plan’s life are very short , so a business plan is only viable if it is a dynamic document with real inputs every month, which is quite rare. So to sumup my thoughts , nothing wrong with the document but its usage which is critical to the outcome.

  6. Anne Jessel says:

    June 4th, 2014 at 10:37 am

    Yes – Business Plans are necessary to collate all the info necessary to create a common aim and goal for both yourself and interested parties.
    Business plans should not be looked at as the prime ingredient, business plans cannot talk and radiate the enthusiasm, ambition and drive a prospective business owner has built, both within him or herself to make a success – so a business plan is not the be all and end all most interested parties seem to depend upon before getting involved.

    A business plan is written for that moment in time only. The economy changes, personalities change or do not gel, structuring and systems change according to outside influences and… investors themselves can throw caution to the wind when not really understanding THE BUSINESS the plan is written about!
    All they see are figures (and possibility of a quick get out having made a bit extra on the way and just sit and wait for it all to happen.)
    Some think there are no other additives to help make that business a success even when blindly stated in the contract
    Contracts can, on reflection become a farce and breached on account of THE Business Plan and the one track minds of interested parties.

    Business Plans are really theorising. They take up the valuable resource of time producing and within hours, the structural outside influences can make a mockery of any Business Plan and consequentially signed.

    On account of the Business Plan being always a vital ingredient, the “in thing” for business, before you sign away your intellectual properties and years of blood sweat and tears is to ask an investor for THEIR Business Plan and what they will be doing for YOU .

    Have it in writing. On account of the Business Plan you could be reading all about what you will be handing over to them and then discover they do nothing. And… know nothing! (unless you entered a contract stating they will be sleeping partners of course, and not making glowing promises of a very experienced marketing team as stated!).

    A Business Plan can be useful to serve as a guide for the day – because it results for the owner much research in it’s collation and very beneficial. As far as figures are concerned at that time they can be worthless over ensuing weeks due to dependancy on a static state of outside generic “forces” for ever – which is definately unlikely.
    Call it a Proposed Business Venture and what you would like to achieve starting with the resources you have, and to a certain extent yes! go along with the flow, but see yourself safe and sound first and foremost.
    You cannot stay still because the world will leave you behind. You need to continue going forward modifying your path as you go along. Your Business Plan can change every day.

  7. dinger says:

    June 4th, 2014 at 11:06 am

    a business plan is speculative, subjective and consequently fundamentally corrupt and is invariably a mechanism for third party interests who don’t entirely understand, don’t particularly care and have no intrinsic investment other than financial gain

  8. James P says:

    June 4th, 2014 at 4:12 pm

    Let’s agree that the term “Business Plan” in today’s world relates to a goal of getting buy-in to a venture from 3rd party stakeholders, typically investors.Therefore it is a sales and communication tool so has a purpose at a given point in time.

    This is seperate to the concept of “business planning”. Ever heard the expression “proper planning prevents p**s poor performance”? You must have a plan. A long term plan including mission, vision and financial objectives, a shorter term plan with financial objectives, including execution priorities, key metrics to track progress and timeframes to achieve those priorities. You build a business brick by brick, those bricks must though form a house when put together.

    Entrepreneurs who dismiss planning invariably end up needing investor/board/external support to professionalise their businesses and get them on the right track. Therefore why not always have a plan and always adjust that plan should things change. It cannot be smart to “wing it” the whole time with a premise of “we’ll just see what happens and change things if we need to”. If nothing else, you’ll save a lot of heartache and headache by planning outcomes and how to get to them, rather than stumbling upon them by accident.

  9. JG says:

    June 4th, 2014 at 7:37 pm

    I already knew that business plans were as worthless as the invasion plans at Omaha Beach at Normandy during World War II (most of the officers were killed so the privates decided to ditch the plan and circle around behind the bunkers). I am an entrepreneur and I used to be a banker and so I have sat on both sides of the desk. Bankers do not understand business plans because they are employees or executives and most likely have never started a business from scratch. I have seen the puzzled looks and I know that most business plans end up in the circular file (the waste basket) or the shredder unread.

    The reason bankers and investors ask for business plans is because that is what is expected and that is what the Small Business Administration preaches and Harvard Business School teaches. The SBA basically sends 99% of their clients to banks with the advice that they need to take a business plan and have lots of collateral, a day job, and a willingness to pledge every cent of their net worth (retirement, investments, home, first born) and let everyone see their tax return. Sort of like a proctology exam done in public with a jeering audience. Always fun.

    To their credit, investors with an accounting background do know how to read a business plan but bankers and angels (dentists, physicians, lawyers, etc.) are often clueless. The SBA says you need a business plan which is reasonable but then it goes down hill from there. You spend so much time on the plan that you don’t have time to actually start up the business or run the business.

    In a perfect world, entrepreneurs should be able to focus on starting and running a business. This is why so many of them buy an off-the-shelf business plan or have a business plan writing service write it for them. Cynical but you have to do what you have to do to keep the hindrances off your back.

  10. Anne Jessel says:

    June 7th, 2014 at 10:49 am

    Here here. From experiences, like everything else a “Business Plan” is a plan of nothing.
    Get on with it practically, the substance accumulates and formulates day be day.
    I agree, most of the bankers just out of school or those into third decades haven’t A CLUE what a business plan is and, as I suggested above…any so called Investors, get THEM to write you a “Business Plan” ha ha and write down what they will be doing FOR YOU before you sign any contract.

  11. Bill Moore says:

    June 14th, 2014 at 6:59 pm

    With 50 years experience and many successes (and some failures, too) under my belt I have found two things to be true… 1. An ‘Operational Plan’ is better (because it is a living , breathing, changing, growing, ongoing business plan that goes and grows with the company… 2.  A new book out called BGI Strategy on a page is the best ever precursor to a business plan if published – going through that process assures a business plan being created that actually means something…

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