in Startups

Writing a Business Plan?

bkstckpct.jpgI am currently writing a business plan because I have a very defined reason for needing it. A particular source of income absolutely needs to see one as part of their process. I am OK with that, but it has really made me think more about Business Plans, their usefulness and non-usefulness.

Business Plans can be very useful in the right situation and for the right reason. If you have never started, run or ruined a business, a business plan can be a great way to run through scenarios in your head, especially if you don’t have a partner to stand in front of a whiteboard with to do dry runs of ideas.

A business plan can also be a great way to get help from people who are far more experienced and/or smart than you are. When you hand them a business plan, you are telling them that you have put every important idea about your business on paper, and you can give them the freedom to make their own assumptions about what they are reading (rather than giving them less material and forcing them to wonder if they are making a good assumption or not).

If someone is considering investing in your business, a business plan can be a great way for them to get confidence that you have thought about the future, even if you may not end up anywhere near the business plan you wrote. A lot of investors worry that entrepenurs aren’t thinking beyond getting funding, or getting those first 10 customers, etc.

So while business plans can be good, they can also be dangerous.

Writing a single, sensible and usable plan for 3 years in business is unequivocally impossible. Your business will change, your customers will change, your product with change, you will change, your circumstances will change. If there is one thing I have learned about the world it is that things keep on changing, and they don’t care what I have to say about them.

You are not smart enough to understand the changes that might come. I hate to break it to you (and myself), but the very act of trying to start a business from nothing is a pretty stupid thing to bother doing. You could go get a job for a comfortable 150k a year, wouldn’t that just be smarter?

So, if it is going to constantly change, isn’t there some sort of easier device to use to keep a running plan of how you are operating your business? I have been using a 10-page slide deck that I ignore for long periods of time and I come back to begrudgingly. In the past, as a business has grown, financials have been the complete domain of my accountant and I keep a little spreadsheet of my own projections.

Sales projections remain one of the most creative, nonsensical, asked-for and confusing parts of futurism I have had to take part in. Are they bad? No. Are they going to make or break your business? No. Should you spend hours and days on them? No.

So, I’m not going to tell you not to write a business plan. There are a lot of good reasons to write one, but what I am suggesting is that you cannot rely on your business plan. We need a much more evolved way of understanding how our business is changing each day, week, month and year. Constantly editing a business plan is going to suck your time dry. Updating a deck of 10 or 15 slides will be a lot easier. Blogging about the changes internally for all your company to see will be a far better way of seeing the future take shape. You’ll also learn a lot more about how your business has evovled. “Recent Changes” is far too hard a way to see the real progression of the conversation.

If you need to sit down to write a business plan, there are some fantastic resources out there. There is the CBSP Small Business Planner which will guide you through almost the entire thing. It’s a great way to maintain some structure, but it also hides all the other pieces of the plan from you as you write it, which helps you keep a focus.

PlanHQ is also shaping up to be a great tool. It is still young (and it shows), but it will only get better. It also uses a goal-based approach and helps you keep your plan updated on an ongoing basis. Very Nice.

My best suggestion however is to keep a private blog. Write an entry for each of the main components of your business plan and use comments or new posts to update it regularly as it changes. You can also invite your advisors, friends and employees in to help out as well.

What about you, what are your experiences with business plans? Good or bad, I want to hear it.