Is Business Planning a Waste of Time for Early Stage Businesses?

I’ve been hearing a lot lately about whether start-up or early stage businesses should waste their efforts on a business plan.  After all, their plans are very likely to change as they get a better understanding of market needs.  And financial projections are unlikely to be accurate.  So why bother?

I see four reasons for going through the exercise of creating a business plan early in the life of a business:

  1. Lack of planning quickly leads to lack of focus.  And lack of focus can be a killer for any business, small or large.
  2. Planning eliminates many of the options being considered.  It’s much cheaper to plan on paper rather than spend scarce funds later.
  3. Planning accelerates the learning curve of the entrepreneur.  Many entrepreneurs do not have formal training in business, much less in starting their own business.  Being an employee of a business is not the same as being an entrepreneur.
  4. Planning brings to light areas where you need additional expertise.  For example, if it is a challenge to put together a basic marketing/sales plan, then maybe the team needs to add this expertise.

It is critical that both the team and the business plan stay flexible but disciplined during the early stages of a business.  The initial business plan does not need to be a 50 page document that becomes obsolete the moment that it’s finished.  The full document should be less than 10 pages, with a one page executive summary that becomes the working document. (See my prior blogs for more on the elements of a compact business plan.) You then get the benefits of business planning, without the downsides of quick obsolescence and inflexibility.

One thought on “Is Business Planning a Waste of Time for Early Stage Businesses?

  1. Great points and I especially appreciate #4. I find that the act of writing a business plan forces entrepreneurs to answer the hard questions that are easy to avoid if you’re just building a business by the seat of the pants. The act of writing things down forces entrepreneurs to think through, in detail, their strategies and their assumptions.

    Anyone can make a business look good in a short pitch deck or executive summary. It’s the details that matter and being prepared to answer the hard questions that investors always ask that’s critical. While an entrepreneur may never print or distribute their plan, the process of developing a plan is a critical step to getting a business up and running.

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