Here are 5 common mistakes with business plans … But before we go any further, let’s get one thing straight: you do not need a Business Plan.
Yes, I know every else will tell you different.
They’ll say it’s essential to have a business plan.
Can they all be wrong? Isn’t it just “good advice” to have a Business Plan?
Let’s be clear – I’m not saying “you don’t need TO plan” (that’d be just daft).
I’m saying you do not need “A BUSINESS PLAN”.
Because in nearly all cases they’re a complete waste of time.
A formal document, complete with SWOT analysis, product description, management team bios, marketing strategy and financial forecasts are usually (not always, but usually) pointless, disconnected from reality and an act of self-delusion.
There’s a world of difference between a “business with a plan” and a “successful business”.
Which would you rather have?
“Hang on a minute, Chris – don’t successful businesses have plans?”
Of course they do.
And there are also successful businesses who didn’t have “a Business Plan”.
As Mike Tyson famously put it: “Everyone has a plan until they get punched in the mouth.”
Your success won’t be decided by what you’ve written in a Business Plan – it will be determined by how you respond when reality is DIFFERENT from what you expected.
Your “financial forecasts” aren’t forecasts – they’re not “predictions”. They can’t be because reality is far too complex to forecast. (You’ll see why below).
So now the truth is out there: having “a Business Plan” is NOT necessary.
That said, the thinking that goes into a Business Plan can be VERY helpful.
So, let’s avoid the mistakes that make Business Plans unhelpful, misleading and delusional.
How can we do that?
Let’s start by avoiding the following 5 common mistakes (and use the better alternatives suggested for each one).
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Five Common Mistakes with Business Plans
1. Written “because you should have one”
When you hear the advice “you need a Business Plan”, ask for what purpose?
And to be clear, “because it’s important” is not a good purpose.
It’s not the plan that’s important, it’s the planning.
Your planning is for you, and does not need to be in a formal “business plan” document
There is NO value in having a business plan “because you should have one”
Being clear on your goal, the timescale, the main milestones and the next step is ENOUGH for your plan to be meaningful and useful.
Let me repeat that last point: knowing the NEXT step is enough for your plan to be useful.
A long-term detailed plan is a waste of time because pretty soon it’s going to get punched in the mouth.
Action: Think. Ask questions of your own business. Do your planning. That’s what’s important. (Choose whether it’s useful to you to create a formal “business plan” document – it’s not a “mandatory” requirement.)
2. Written for the wrong person
“The bank manager will want to see your plan.”
Possibly … if you want to borrow money – but the plan will NOT be enough for your bank manager … they’ll want security and to reduce THEIR risk.
What will the bank want to know?
How safe your business is going to be. What level of revenues and profit you’ll need so they’ll get their money back. The information that allows them to tick the compliance boxes in THEIR systems.
Are those important and useful to you? Maybe – but what’s always important is what you will DO and how you will RESPOND while you’re trading.
If you need support from the bank manager, and that bank manager wants a plan from you, of course you’re going to create the Business Plan.
But don’t fool yourself – what’s important in that Plan is unlikely to make a difference to your future success.
What the bank manager might want to see will be different from what’s useful for YOU.
What questions do YOU want to answer for yourself?
Answer those questions and you’ll have a meaningful and useful plan.
Action: Write your plan FOR YOU. Answer YOUR questions. If someone else requires a plan from you, write one that answers THEIR questions.
3. Written and forgotten
“It’s not the plan that’s important, it’s the planning.”
Too often, a Business Plan is created as a document to describe what you hope the future will look like, rather than as guide of what to do next.
Having a “proper Business Plan” document can feel good – you can be impressed with yourself.
It now looks like you have a viable business.
In reality? – nothing has changed. All you’ve done is create a document, and have a sense of excitement over what you hope will happen.
Nothing changes until you take action based on what’s in the plan. And when you’re in motion, you’ll want to know “how’s progress?”
“How’s progress?” is a great question because it encourages us to think, learn AND RESPOND. This is what determines your business success.
So, you’ll need to refer back to your planning thoughts!
If a Business Plan sits on a shelf, having once made you feel satisfied / important / accomplished … you’ve wasted your time.
Action: USE your plan as you ACT in your business
4. Written to a template
Search for “how to write a business plan” and you’ll find there are almost as many “templates” proposed as there are types of business – which template is “right” for you?
Those templates will typically include a selection from the following:
Business objective; goals; key people; competitor analysis; SWOT; PESTE; financial forecast; marketing strategy; pricing strategy; distribution; infrastructure; insurance; intellectual property; trademarks; barriers to entry; … the list goes on and on … and on.
“Which template should I use?”
Let’s go back to numbers 1 and 2 above – who is the plan for and what’s its purpose?
In all likelihood none of the templates available are likely to exactly match your personal, specific situation.
A plan needs to be meaningful and useful to YOU (see above) – a template is not designed for that – it’s designed to cover the typical areas and questions that other people consider important
A template can be useful as a catalyst for questions you may want to answer for you. Yet writing TO a template enslaves you to someone else’s opinion.
Action: Use questions to guide the relevance of your plan. Consider templates as CATALYST (not an instruction) for what questions might be relevant and useful for YOUR business.
5. Written as a forecast
Once you’ve created a “proper” financial forecast it can be seductive to think “this is what will now happen.”
Spoiler alert: (with almost 100% probability) your business will NOT turn out like that.
Forecasts (especially “clever” and complex ones factoring multiple and varied assumptions) create “spurious accuracy”.
The thinking behind such forecasts is probably “smart” … so it seems reasonable to assume that the output of smart thinking is also smart.
But it’s not.
Forecasts are wrong.
No one can forecast accurately!
The best paid and highest ranking economists can’t – and neither can you.
(A Wall Street sage once quipped: “The reason God made economists is to make astrologers look good!”)
So the BEST you can do is “set out the map” … then start the journey.
And because your “forecast” IS wrong, you’ll need to adjust the plan as you go.
Learning from your experience is WAY more valuable than relying on your “forecast”.
Action: Use a forecast as a map of “what’s required” and “how you’ll know you’re on track”. Never use it as a “forecast” of what WILL happen.
You DON’T need a Business Plan in order for your business to be successful.
You DO need to plan what you’re going to DO.
Your business is for YOU. So is your planning.
A forecast is not a plan – and there’s a danger it will be self-delusional.
A plan is a description of decisions to act.
So think. Get clear on what’s important.
Then check your results against what you expected.
Reflect. Learn. Respond.
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