4 Lies People Tell You About a Business Plan

It’s disturbing to see some of the information that’s out there telling entrepreneurs one of the first things they should do is write a business plan.  In reality, it’s probably one of the last things you should for your business.  So today I’m writing some common lies told about writing a business plan, and where they come from…purely to debunk some of the myths that are out there.  First, let’s figure out where this comes from…

I suspect the lies and myths about writing a business plan are caused by a few things:

a) Professors misinterpreting trends and reasons why things are done as they study “entrepreneurship” (without ever actually being entrepreneurs or business owners themselves).  Then, attempting to incorporate the art of starting a business into a structured curriculum.  When in reality, starting a business cannot fit into one single formula, or a right or wrong answer.  Amanda and I had a similar problem with educators when I started to explore recruiting for Plan to Start.  Educators seemed to have an idea that Entrepreneurs should be funneled down a right or wrong path to starting a business.  That they needed to be made “right”.  That a business plan was about past facts and statistics, spelling and grammar…and not innovation, creativeness, or strategy development.

b) Writers.  Writers have an enormous amount of influence on how information is spread.  Why?  Just think about how we receive information today…it’s via Google.  Kids in school now even use the phrase “ask Google” when they are encountered with a problem.  Google is driven by content, which is made by writers.  If you look at most of “business planning sites”, their information is driven by interviews, or articles are rewritten based on a 50 year old understanding of “that’s just the way it is”.  Interviews are rarely an accurate way to co-create information on starting a business, mostly because the majority of business owners, founders, and entrepreneurs will not say what they are thinking…especially not to the press.  We tend to be more private individuals.  Not only that, but writers still have plenty of room to misinterpret the {already diluted & filtered} information in interviews.

1. Why You are Writing a Business Plan in the First Place

Educators back in the 50′s saw venture capitalists asking for business plans, and formed their own conclusions as to why a business plan needed to be written.  Without understanding the real reason why, yet they started building this into their educational curriculum.  So what is the real reason why business plans were asked for?  It’s purely to gauge your level of understanding about your business, market, and competitors.

What people aren’t telling you, is that this level of understanding cannot be achieved by observing or reading.  It can only be achieved by doing.  In order to be doing, you must be in the market, testing, failing, making mistakes, and learning from mistakes.

2. When a Business Plan Is Written

If you have ever had an idea, and sat down to write a business plan…then you know what I’m talking about.  You sit down to write it, and it sounds very confusing.  So you Google everything you can about a business plan outline, executive summary, target market, etc.  Only to realize…you still can’t figure out what this means.  Or, you have nothing but a blank piece of paper because there is no proof of your market trends, there is no proof of how much your customers will pay.  That’s because… writing a business plan is NOT your first step to starting a business.  What a business plan should be used for, is to communicate this information and set measurable strategic goals for the company as a whole.  Rarely a need for a business with less 10 employees.

But…if you are looking to scale to more than 10 employees soon, then by all means…write a business plan.

3. If You Need to Write a Business Plan at All

Honestly, consider whether you even need a business plan in the first place.  Over 50% of the most successful entrepreneurs still do not have a business plan…even though they can clearly afford to pay a team to research it and write it.  This is no coincidence, and it’s obviously not a money or time issue.

99% of the time we make up the rules as we go along.  Sure, there is a certain level of strategy development, but all this will change anyway.  Why spend the time writing it down?  Like I said in the last statement too, if you don’t plan on scaling to more than 10 employees, you probably don’t need a business plan because you probably won’t have to raise money.  There are also a large number of very profitable companies, that don’t need a large team or lots of employees to grow.

4.  Writing a Business Plan VS Proving a Business Model

In the first phase of a company, you are out to prove a business model, not write a business plan.  You sit down, you come up with a strategy that you map out on a napkin.  From there, you test.  Fail.  Test.  Fail.  Test.  Fail.  Succeed.  This is what’s called the “research and development” phase, but honestly they should be renaming it to something more appropriate like the “fail, and fail again phase”.  Research is technically a term for past data that has already been discovered and documented by someone else, this is what writers do whenever they write an article.  Innovation, failure, and testing is figuring out something on your own.  This is what entrepreneurs do.  They create the conclusions themselves, and set out to test them.

Once you have found an ROI & business model you are happy with, then you scale it.  Now you can accurately predict how many employees you need, etc.  Whereas in a business plan, you would be highlighting your plan to scale a proven business model.

I have a feeling I’m not going to be liked after writing this anti writing business plan article.  Oh well.  As @dharmesh (founder of Hubspot) says:

“To be understood, write a blog.  To be ignored, write a business plan”.

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