Do You Truly Need a Business Plan?
First, ask yourself if you're running a "hobby business" or an "entrepreneurial endeavor." Somebody looking to create a job doing what they love typically starts a hobby business – a rather informal, and loosely operated small business. Hobbyists don't approach their company like a serious business, and that's why many struggle to make it work.
When you define your business as an "entrepreneurial endeavor," you take the first step toward building a successful business. And right after that, you develop a business plan – for the following reasons: 1) Accountability; 2) Vetting; 3) Save time and money; and 4) To communicate your business model.
1. Accountability – Most people are so afraid to be wrong about their big idea that they won't actually put it down on paper. Only when you record your thoughts and ideas in a written plan do you truly become accountable for them. By writing a business plan, you become accountable to yourself and to those with whom you share your ideas. Like an entrepreneur, it helps if you're an optimist. An optimist will have no problem – and little or no fear – in becoming accountable for a good business plan.
2. Vetting – This is just a fancy business word for "working the wrinkles out of your concept." As you become accountable for your thoughts by putting them on paper, you'll realize you don't want to be wrong, so you learn to back up every claim you make in your business plan. In the process of vetting your ideas, you may find the business can't work. And it's best to realize this now, not after you've invested (wasted?) time and money on bad business ideas.
3. Save Time and Money – Writing a business plan will save you the time and money you would have lost trying to save a failing business launched without proper planning. A venture capitalist once told me: "If you don't have capital you don't have a company." In other words, when you run out of money you go out of business.
4. Tangible Means of Communicating Your Model – Your completed business plan will be a strong document that can easily be shared with anybody who needs to become familiar with your business. They could be a new employee, a partner, an investor, or a consultant. Without that document, you may spend hours trying to explain every aspect of your business to somebody, and you will struggle to do it consistently and professionally.
A business plan is a "living document." That means it's never finished – don't name your business plan document "Final." It's not. Your business plan should be in a constant state of revision. I have one that's going on its 30th revision. That's extreme, but it illustrates an important point: A true entrepreneur works on their business. A hobbyist works in their business. And entrepreneurs always seek the help of talented experts; don't be afraid to reach out for help.