Dispelling Business Plan Myths (It Ain't Just for Raising Money)…And It's All About Execution!
Over the years, I’ve written a lot about business plans, especially for early-stage companies trying to raise capital. But, the mistake many entrepreneurs make is that the rationale for its existence is ONLY to raise money. In actuality, for small business owners, a business plan is essential for any long-term success.
But it’s more than just the plan that’s important, the key to any plan is that it gives the reader a blueprint for success.
But there is a lot of just plain wrong ideas out there about business plans. So let’s start by dispelling three myths that have evolved regarding plans, in general, and business plans, specifically. And since, it’s all about the execution, rather than just the plan we’ll give you three “must do’s” to help with execution and in so doing, show you how to drive your small business’ success.
And most important is the actual execution!
Plan Myth #1 – Business plans are only necessary for start-ups (and becoming less so).This is wrong on both counts. “I don’t need a business plan” seems to be the “fashionable thing” to believe, especially, with entrepreneurs in the technology sector on the West Coast. For the venture community, who always have far more deals available for review than they would ever have capital to fund, it helps them more easily separate the wheat from the chaff. However, it does a disservice to young companies who might take less time to determine how they will make their business both scalable and profitable over time. In fact, a business plan becomes more relevant the longer your business exists.
Plan Myth #2 - A plan for raising capital is the same plan as for operating a business.Whether you’re an early-stage entrepreneur or a small business owner, there is a very distinct difference between a plan for raising capital and a plan to operate your business. The capital raising plan should be more of a selling document focused on the audience – the investor community - than an operating plan that is needed to run the business on a day-to-day basis. An operating plan (which I like to call a “battle plan”) is one that is created to be executed and achieve the business’ objectives and long-term success.
Plan Myth #3 – You need special software and lots of time to put together.You don’t need a slick 30 or 40-page affair with lots of charts and at least a 6 page set of detailed financials. And, of course, you don’t need writing that is worthy of a Pulitzer Prize. And it doesn’t have to take months and require professional advice. It’s not about creating a plan that looks good. It’s about creating a plan that you can execute. It’s a very logical process that just requires you to determine some basics about what you’re trying to accomplish, by when. And whatever you do, document it. But that could be a Google Docs, Word or even a whiteboard. Just get it formalized…somewhere, but don’t waste a lot of time and money on that formality.
Execution “Must Do” #1 – Set objectives; strategies/tactics to meet them for your “battle plan.”Establish objectives around what you’re trying to accomplish by when. You know who your targeted customer set is and the problem you’re solving or the need you’re meeting for them and niche in that market where you best fit (see my previous blog post for some help). Then determine how you will do that. That is, what are the key strategies and tactics for making that happen, over a specific period and with whatever resources you need to make that work (e.g. new product packaging, a new distributor, etc.)? This is your business plan – your “battle plan” for operating your business!
Execution “Must Do” #2 – Determine responsibility for specific tasks/track progress.The essence of a plan’s success is its ability to be executed. For that, the small business owner has to create a set of tasks that need to be accomplished to implement the strategies and tactics determined. Then responsibility has to be assigned for specific tasks, along with the authority and the tools (or resources) to carry those tasks out and them, the owner needs to hold people’s “feet to the fire,” to complete those tasks. And it can’t be done without all three: responsibility assignment, providing authority/resources, and accountability.
Assign (and get agreement on) completion dates for all tasks and track the progress on these tasks, periodically, as well as how you are meeting overall plan objectives. If task completion is falling behind, remedial action has to be taken, or the task or associated timeframes may need to be modified (see next one).
Execution “Must Do” #3 – Don’t be afraid to modify your plan (pivot).A business plan should be a “living” document that is part of how you’re operating and growing your business. You can never hold anything static for very long, whether that be market conditions or company conditions. As conditions change either positive or negative, if they affect strategies and tactics you have developed in your plan, you need to modify those as soon as you are aware of the changes. That’s what pivoting is all about. Staying agile and being ready to change direction, as necessary.
A business plan is your “battle plan” for operating your business. It is essential for a small business to achieve long-term success. And that success is the difference between creating a plan and executing the plan.
"The Entrepreneur's Yoda" knows these things. He's been there. May success be with you!
Do you have a business plan? Do you use it to operate your business? When’s the last time you referred to it or modified it? Please share your thoughts in your comments. It can help another entrepreneur or small business owner.
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