Are Business Plans still Relevant Today?
Business plans are the ABCs of business schools. However, fewer and fewer entrepreneurs are creating one today and it seems as though its relevance is dissipating from the business world.
A study in 2006 by William Bygrave, a professor emeritus at Babson College and longtime entrepreneurship researcher, studied whether formal, written business plans had an effect on businesses by gathering data from Babson graduates. “We can’t find any difference,” he said. The study revealed that having a business plans wasn’t a guarantee of success for entrepreneurs and that it didn’t matter whether you had one or not to be successful.
To get to the crux of whether or not potential entrepreneurs should make a business plan today, we spoke to three distinguished CEO’s on the Cerius Business Today podcast for their thoughts on the subject.
Focus on Planning Over Plans
Dwight D. Eisenhower once said, ”In preparing for battle I have always found that plans are useless, but planning is indispensable.” The same thought is shared by Jeff Greenberg, a serial entrepreneur with 25 years of experience in the high-tech community and with technology based startups.
He says, “Everybody knows whatever plan you come out with in the beginning is going to be wrong. The point is to have done your homework and understand the environment into which you’re launching the business, and that way you can pivot to whatever changes in the environment.”
Plans demand rigidness, businesses do not. When you run a business, the first rule to success is being flexible. Business plans do not allow for that, and instead keep your vision myopic. You’ve got to be aware of what’s happening outside your business. Jeff adds, “Writing a plan, the old business plan like you’d do in an MBA thesis of an 80 page document, is wasted busy work. By the time you finish a business plan, it’s obsolete. So don’t waste your time.”
Make Notes of Information Instead
Instead of creating a business plan, demonstrate that you understand everything about the potential business and incorporate that into an initial strategy. Jeff advises new entrepreneurs to create a repository of information only, rather than writing a big lengthy document. Dump all the information you have into a note taking app like Evernote, a notebook, or slides in a PowerPoint presentation — whatever is easiest for you to edit on the go and access at a glance.
“Periodically go back and look at the notes, and see is it all up to date. Are we executing a strategy that’s consistent with all those observations about what’s happening? Just stay aware of what’s out in that market, so you can compete as effectively as possible,” says Jeff.
This is great advice for capturing market and competitor information. Every email, every website, every piece of information should be kept in one place.
Don’t Rely on Plans for the Long-term
Ken Hubbard is an advisor at ACH Ventures holding investments in 60 companies, as well as, sitting on the board of directors for multiple technology and consumer product companies. He quotes Mike Tyson who said, “Everyone has a plan ’till they get punched in the mouth.”
His advice to every CEO is: your plan’s worthless the day you start to execute because you realize how many things are not what you thought they were. Ken looks to work with CEO’s who are flexible and agile.
“Whenever I find a CEO who says this plan is going to work, this is how we’re going to do it, and they don’t bend, then I tend to shy away from working with them. Coach-ability is one of the key attributes you have to look for in startup CEOs,” he says.
If You Must, Focus on Presentation
If you still do think business plans are relevant and you want to make one, make sure you focus on presentation. Kevin Gibbs has been with four startups from angel funding to the final sale of the company and has worked with turnaround companies. He says one of the biggest changes he’s seen over the last 15- 20 years in business plans is the presentation format.
The presentation must be as good as the business plan. He says, “The plan will change as soon as you start working, but the biggest change now in the presentation is that it has to be visually effective and arresting because often you’re going to be dealing with an associate [investor] who is looking at maybe 20, 30,40 plans a day.”
Take into account how you will accommodate for the changes and how you plan to evolve it as the marketplace and environment evolves. Think of it as a living and breathing document that is as flexible as you need it to be.