Are Business Plans Really That Important or Is It a Myth? );

Tiggy Johns | Strategist at GBC | 5 min read | September, 16

 

Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed it is the only thing that ever has.
Margaret Mead

 

Seeing that it is entrepreneurial week at GBC, I thought I would share (verbatim) a passage from my all time favourite business book,The New Business Road Test. I have grown to appreciate this book even more since joining the team at GBC. Critically, even before starting a new venture or innovating to develop a new product in an already successful business, ensuring you have evaluated the fundamentals comes before writing that business plan. So many – if not all – of those fundamentals are integrated into our StratPlan, small business software.

“Planning is important. But results are what count. And who delivers the results? Entrepreneurs. Entrepreneurs like you can change the world. Why then, is there so much fascination with business plans in today’s entrepreneurship community? Why are there dozens of books with titles like How to Write a Business Plan? Why are there software packages to automate the business planning process? Why do most leading business schools offer courses in which teams of students write business plans for hypothetical or real new ventures? The vast majority of business plans are unsuccessful in raising any money. Of those ventures that do win financing, many if not most will fail. What’s wrong with this picture?

At least three things are wrong:

  • First, most business plans are written for opportunities that are fundamentally flawed. Why write a business plan for a no-hope opportunity? It’s a waste of entrepreneurial time and talent. Your time and talent. Instead, put your opportunity through a stringent new business road test by doing the seven domains homework. If necessary, reshape your opportunity or invest your time in finding a better one.
  • Second, the inherently persuasive nature of business plans, a principle purpose of which is often to raise money, forces their proponent entrepreneurs into the ‘everything about my opportunity is wonderful’ mode. The likelihood – at least of attractive opportunities – is that everything is not wonderful but there are one or two things that are quite wonderful that outweigh those that are not. The would-be entrepreneur who prepares and pitches an ‘everything is wonderful’ business plan – like the ones many books and software describe – risks their credibility with investors, who know the real risks that entrepreneurial ventures entail. The naivete makes it harder, not easier, to raise the money that’s needed. Worse, such a positive slant risks blinding the entrepreneur to the very real risks that may lie in wait in one or more of the seven domain (even though a risk section in the typical plan identifies what might go wrong and explains why it won’t.
  • Third, most business plans are focused on the entrepreneur, their idea, and why the idea is wonderful. They are me-focused or my-idea-focused rather that customer-focused. People do matter – true – but investors don’t really care very much about you and your idea, at least not at the beginning. What investors care about is solving significant customer problems or needs that offer significant profit and growth potential. If you have a solution that can deliver results in solving this kind of problem, then  you’ll have their undivided attention. Thus, the importance of people lies in the the context in which they operate. Set the context first. Let the people story – of you and your entrepreneurial team – close your sale.”

John W. Mullins 

 

I hope you enjoyed this piece. Much love 🙂

 

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Three Reasons Why Most Business Plans Not Raise Money 1

 

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Three Reasons Why Most Business Plans Not Raise Money 2

 

 

 

 

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