Everyone Wants You to Write a Business Plan
Banks, business coaches, and books will tell you that the first step in running a business is to create a business plan. The plan contains detailed information about
- what you sell
- who you sell to
- processes and production
- where you will sell
- how you will market the company and sell its services
- financial goals for 6 months, 1 year and 5 years
- growth expectations for the next 5 years
- the company structure including an organizational chart
In my experience, this just doesn’t work. In fact, it can be counter-productive. You can spend so much time planning your business and feeling proud of the work you’re putting into planning, that you never launch.
Further, you can spend all that time and never realize that you are planning the wrong business, one that isn’t suited to you or your personal goals.
Procrastination
If there’s one thing that is true of most start-ups, it’s that their owners have lots of time for planning because they have so few customers. It’s demoralizing to go into an office where the phone doesn’t ring, the email is spam, and the costs are racking up. It makes us feel better to “do something” like attend a business meeting, plan a sales campaign, or design a poster. At least you are working on your business. Some books advise that this is the best use of your time!
Here are a few other things you can do that are of equal value: Dust the furniture, wash the bathroom mirror, or write a detailed business plan that analyses the competition, researches your target market, and generates a lot of nifty forecasts.
- What you should be doing is getting customers.
Why Too Much Time Spent Planning is a Waste of Time
Writing a detailed plan keeps you at your desk thinking about the business you are going to have when your business gets off the ground but realistically, the average start up needs more experience before they can write a usefulplanning document.
- How can you research your target market until you speak to some possible customers to gauge their reaction?
- How can you make informative forecasts based solely on your competitors and industry averages?
- How can you rate your competition when you aren’t clear about the value your own business offers clients?
Why Detailed Business Plans Don’t Work for Start-Ups
Yes you need a plan. Your plan should be optimistic, short and very, very flexible. And you should be willing to ditch it within the first month of business if it proves impractical at which time you write another tentative plan because until you learn more, you are just guessing how the market will react to your presence.
- Your product may sell in places you had no idea existed and get used in ways you never expected.
- Your competitors may command $300/hour, but have 20 years experience or strong ties to the community where they sell.
- You may not have competition because your product or service is unique
For example, you may be a freshly minted lawyer and know that your in your community the going rate is $200/hour. The market looks saturated, but you specialized in privacy law for digital media and there is no-one else in your town who specializes in this area. Besides, your brother is a web designer and you have contacts throughout the multimedia and software apps community, not to mention the people you know from playing lead guitar in a band. How much can you charge artists and students? Do they care about privacy issues? Are they interested in your service? And if they aren’t what should you do?
But….
The obvious problem is that you need to finance your start-up and make choices about what supplies you need and whether or not to hire staff.
The response has to be: until you have more experience, you can’t afford to invest heavily in your proposed company so before you launch, take a few months to try a few dry runs.
You are starting down a path where you will find obstacles and opportunities that you didn’t know existed and couldn’t have researched. Some of those obstacles will be your own limitations. Most people set out on a journey with a skewed notion about their capabilities and endurance.
- You may find that you don’t have the skills you need, and that you aren’t interested in acquiring them
- Your desired location is perfect for some other type of business
- You hate delegating tasks and don’t like managing employees
- Your spouse’s absolute support didn’t include covering for you every time you wanted to attend a trade show
- You have nowhere near enough money, time and energy to do everything you thought you could do.
- No-one in your town is interested. Really.
Business Plans that Do Work
As your company and your self-esteem take a bit of a battering, you are building self-awareness and an understanding of your services and your market. Your business plan should have enough room to accommodate what you have learned.
Your business plan should be agile: a light-weight working model that helps you make decisions. It should help you think about your business in response to your growing experience. It should generate ideas, not restrictions.
You may want to look at the plan every day so it should be short and inspiring. If it’s going to inspire you, it needs to reflect your dreams at a personal level.
Example
Let’s say you want to be a great artist shown in galleries around the world and commanding huge commissions. You want to be on the front cover of every future art history book for the next 7 generations. Practically minded coaches, with an eye to the financial statements that every good business plan contains, may suggest you open an art gallery where you will soon find yourself framing cheap prints and talking to customers who buy their art by the yard. You may be highly successful as a gallery owner, but you probably won’t have time to produce and market your own great art. More likely you will hate being a gallery owner because it takes up too much time. You’ll snarl at your customers, driving them away and edging your company towards bankruptcy.
The problem is that most business plans are written for the wrong reasons. They are written to design a business whose ultimate purpose is tied to cultural norms of success defined by acquisition, a.k.a profits. Simply put, coaches and banks demand that every business make a profit. Profits allow you (and your company) to consume great quantities of stuff while employing staff at wages that allow them to consume lots of stuff as well. With all this demand for consumption, production rises around the world; more and more people can be hired until everyone is working either making, marketing or selling stuff. Which is great in theory, but doesn’t seem to work in fact.
We are so enraptured by this cultural perspective that it sounds crazy to suggest that profit is not the best reason to start a company. But if you think about it, there are some huge not-for-profits in the world: organizations that hire hundreds of people and provide them with a comfortable living wage.
- Before you can write a successful business plan, you need to define success.
My First Business Plan
My first business plan was premised around one thing: paying my mortgage while maximizing the time I had for painting. It was a half page long and consisted of something like this.
- Goals: Become a web designer. Work 20 hours a week.
- Financials: I need to make $1000 a week
- Charge $50 an hour
- Marketing: Join some kind of networking group and find a client. Get referrals.
That plan worked really well for a few years until competition geared up. While I thought the web would take off, I didn’t anticipate the prominence it would receive and no plan that I wrote in 1994 would have prepared my company for the internet bubble of the late 1990s. With everything in flux, the only change I made to my plan over the next few years was this:
- learn to program
When I found that I didn’t really enjoy programming, I had to write a new plan because potential clients were looking for application based websites that I couldn’t create as easily as some of my competitors.
From my perspective the company has been successful through all the years of its operation because it provided me with everything I asked of it: interesting work, flexible hours and sufficient income to live comfortably.
- Before you can define success, you need to know what you value
Business Decisions are Guided by Business Principles
‘Principles’ is another word for values. All businesses run according to a set of values. These are often summed up in a mission statement set alongside a set of goals. If your corporate values aren’t explicit, you and your staff will find it difficult to make decisions because you don’t really know why you are in business or what you are trying to achieve. If there is a big gap between the values you set for your company and your personal values, you will repeatedly find yourself trying to choose between a decision that is “good for business” and one that “feels right”.
Values form the frame through which we view the world. They frame our analysis of the activities around us. While businesses are incapable of analysis, the people who run them need to know what is expected of them without having to ask for direction at every turn. This means they need to understand what the company, if it were a person, would claim as moral imperatives.
Example: During a financial crisis does the company expect you to save the stockholders or the employees?
Your Business Holds the Values You Choose for It
If you believe the world is “dog-eat-dog” in a competitive marketplace with limited resources, then you frame business as a winner-takes-all activity in which only the ruthless entrepreneur prevails.
If you believe business is transacted between a series of partners, then it becomes a win-win game where no-one gains unless everyone in the community succeeds. These business people spend time connecting suppliers and clients without expecting financial compensation, but their community is strengthened by their activity.
The frame you choose affects the vision you have for your company. It molds the goals and mission statements and eventually all decisions made throughout the organization by all its employees.
- For your corporate vision to be clear it should be based on strong ethical foundations.
By ethical foundations, I don’t mean to impose a sentimental morality on your choices. I mean merely that the foundations are a set of ethical premises or values. At this stage it is irrelevant that some people may denounce your values as “unethical” if you believe them to be valid. Later, when you’ve investigated your options, and the markets where you want to sell, you can re-evaluate whether or not they serve.
There is no reason why business cannot run like a not-for-profit. Not-for-profit organizations and charities are expected to be transparent and to do good for their community. They are a terrific model for building any company.
From Values Come Goals
The world is full of successful business people, many of whom are willing to mentor entrepreneurs through the start-up phase. If your profits are growing, you can probably find someone to guide you through the process of stepping up the business. Every mentor and coach you encounter will have a vision of success. It’s easy to get caught up in the exciting future they foster. especially if it sounds comfy: wealth, early retirement, the money to take on new projects, talking engagements, deals, partnerships….
It’s all heady stuff but it’s not necessarily your stuff.
In fact, one could say that today’s business model suggests that there are many paths, but only one goal. The “secret” draws abundance to you. MBA programs teach you how to create a company that can be sold for a bundle. However you look at it, their goal is
- lots and lot.
In 20 years of doing business, I don’t think any coach ever suggested that the goal of my company should be to make my community strong, provide knowledge, or make me a better human being. It’s as if those goals were relegated to the non-business world; as if I should break my life into 2 components: my personal life where I seek to become a better person, and a business life where I throw my values aside and ruthlessly seek profit. Community action and personal growth are secondary to a business according to the maxim that a company that doesn’t make money will go bankrupt along with all its hopes and dreams.
Set Your Own Goals
Before you engage a mentor, you need to step back and think about why you are starting this business now.
- why
- this
- you
- now
Consider the Effect of Your Actions
You are about to have an impact on the world. Real people will buy your products or services expecting them to fulfill their promise. You will be asking friends, family, bankers, strangers, and suppliers to indulge you and be patient when money is tight and hours are long.
All of these people are buying into a vision that you are promoting, intentionally or not.
- Maybe you should treat everyone as family
When you treat clients, suppliers, staff and business contacts as family you develop a concern for their well-being. Even if you don’t like them all, you recognize that they belong to a single community with ties that cross back and forth amongst them.
If you have a mercenary turn of mind then consider the long-term effects of treating people like gulls. Suppliers who go out of business interrupt your production. Staff can sabotage you in a thousand ways. Clients walk away. Business contacts spread rumours. A single bad incident can spread rapidly, even without social media.