Business Plans: Is it time to dump them?
Lately I have been meeting a lot of highly successful entrepreneurs and talking with them about how they achieved success. There is one element noticeably missing from their list of success drivers and that's a formal business plan. Furthermore the data from our Management Skills Test has shown 50% of businesses don't have business plans, 55% don't have marketing plans and 63% don't have exit plans. So does that mean we are all running around like blind mice and some just get lucky? The economic growth figures for small business would suggest not. Alternatively, perhaps business plans have had their day?
EWO has been doing some soul searching to revisit our beliefs and recommendations in relation to business planning. We thought we would share our latest thinking with you.
When Your Bank says Jump, ask 'How High?'
One of the primary reasons people write business plans is for financing approval. Our attitude is to give the financial institution exactly what they ask for. Each financial institution has particular requirements. Research those requirements and deliver to them. Note carefully that financial institutions have also done their research. They know how businesses typically perform in your sector. So put the appropriate effort in and back up your claims with solid, preferably empirical, evidence.
No Blue-Skying, just Facts
The primary role of a business plan is to consolidate and clarify thinking. Business plans certainly need to have a vision component but its the starting point of the plan. Business plans are most effective when treated as an opportunity to nut through how things are practically going to work and how all the pieces of the puzzle fit together. Be your own worst critic when writing your business plan. Pick the holes in your argument. Demand evidence. Be hard to convince. Unless you are completely convinced by the agrument put forward in your business plan then its not effective.
Are you Off the Planning Hook?
If you know how the pieces of the puzzle fit together for your business and you know where you're heading, then there is probably no need for a formal business plan. The successful entrepreneurs we have spoken to intrinsically understood how their business worked and how to manage success.
HOWEVER, even if you don't need a formal business plan you still need to plan. It's just done on a more informal, dynamic basis. You need to become expert at collecting management and market data and using it to drive your short, medium and long-term decision making. There some outstanding computer programs available to help you with this process. Please feel free to phone EWO on 1300 792 782 if you would like some recommendations.
Yes, it would seem its safe to dump the formal business plan if you have very clear direction in your business and don't need to talk to a bank. But that conclusion doesn't get you off the planning hook at all. Management planning is a critical part of your business success. As your business gets bigger you need to ensure your decisions are based on hard facts and data, not guess work and each decision needs to have a clear tactical purpose in driving your business toward its goal. So if you feel you no longer need a business plan the chances are you need something far more advanced.
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