When you’re starting a business, there’s often an assumption that you should have a business plan. But in my experience working with startups and small business owners, more people don’t have a formal business plan than do. That’s backed up by research by Barclays which found that only 47% of SMEs have a formal plan in place. So what is it that stops people writing one? And if less than half of small businesses have one, do you really need one anyway?
What gets in the way?
There are some key themes I hear from business owners who don’t have a business plan – see if you recognise yourself in any of these!
‘I don’t know how to write one’ If you’ve never set up a business before the format itself can be daunting and off-putting. If you’ve done a business degree or worked in consulting then fine, but if you are a specialist in a specific area and have never run a business before then it can feel overwhelming and confusing. As one client said to me ‘I didn’t know where to start so I just felt like I couldn’t do it at all’
‘I keep meaning to do it, I just haven’t got around to it’ In the midst of starting up, there are so many things that have to be done and so many hats to be worn, it’s easy to let slip anything that doesn’t seem immediately necessary and useful. Because a business plan might not feel like it’s essential, and can need a decent chunk of a day to do it justice, procrastination can get in the way of getting started with it.
‘I’m a startup – how do I know what’s realistic?!’ When you’re just starting up you don’t know what you don’t know. How can you tell what is a realistic financial projection? Or what marketing you need to do to bring customers in? When you’ve never done something before your own learning and development is such a key part of building a successful business and gaining that knowledge is often partly directed learning on topics you need to know, and partly trial and error.
This can be worse if you use one of the many online templates provided. If there are more questions you can’t answer than information you can complete, it is easy to throw the baby out with the bathwater and consider the whole thing is just not suitable for your business.
‘I don’t need investment so I don’t need a business plan’ It’s certainly true that any business looking for investment needs to tailor a business plan to give potential investors the information they need. But that’s not the same as saying that the only purpose of writing it is to get the investment. The reason investors want to see a plan is that they want reassurance that their investment is likely to be a good one. Don’t you want the same reassurance for your own investment of time and money?!
Do you really need one anyway?
I’ve worked in a number of different businesses, and seen lots of different approaches to planning. My answer to this would be that a business plan can be a really helpful tool, but (especially in startup phase) you need something that is both simple and flexible. Forget the multi-page online templates and strip it back; trying to put too much detail into a plan when you’re brand new is genuinely impossible and will just frustrate you.
Business planning is a good discipline to get into and it forces you to consider aspects of your business that could well get missed otherwise. My own business plan is now condensed onto one page. I’ve done away with the weighty templates and created something that works for me. I refer to it regularly, and update it at least quarterly. Now that I’ve found a format that suits me and my business, it really does help – for two big reasons.
It creates focus. By having a ‘live’ business plan, I have a clear focus which in turn means that the action I am taking within my business has a definite purpose. There is a reason for everything I am doing – and if ever I am unsure whether something is worth my time and energy, it acts as a filter. If something I am considering helps with what I am trying to achieve then it’s worth doing, if not then I forget it. It also informs my choice about what to do first or invest most in. I ask myself the question ‘what will (or is likely to) make the biggest difference to whether I achieve this’?
It allows me to measure progress and figure out what’s working. I’ll freely admit that I’m a recovering perfectionist. I have a natural tendency to measure final results rather than progress which is not always helpful. Building a business is slow and it needs commitment and tenacity to stick with it. Seeing the incremental progress is important – small wins add up.
On the other hand, if I am consistent and don’t see results then I need a way to know that what I am doing is not working so that I can change or ditch it. Like many new business owners, I’ve come to running my own business from having a successful career as an employee. In my old job I had the expertise and knowledge to be able to know what would make an impact whereas now I’m back at the stage of learning what will allow my business to grow.
Overall, the most compelling reason for me to have a business plan is the thinking it forces me to do. It makes me step out of being busy and helps me make choices about what to do and what order to do it in. Now I just need to do it!
I’ll be adding to this and creating a mini-series on business planning for startups, so if you’d like to hear more just fill in the signup box below.