There are mixed views on whether it is necessary to write a business plan when starting a new enterprise. However, any business owner who is looking to raise funds, be it a bank loan, angel dollars or venture capital, knows that it is a given. You will need to present a business plan to lenders or investors. Despite the obvious, there are other good reasons to create a business plan. BlackEnterprise.com polled members of the Young Entrepreneur Council to find out, “Do you still need a business plan for a startup? Here are their responses:
1. Always Lead With a Business Plan
Even if your business plan is more or less an outline — you need to have something to jump off from in order to accomplish anything. You can’t just exist with your ideas swirling around in your head, and putting pen to paper can not only be therapeutic, but effective in the long run so you don’t burn out.
2. Create a Plan Over Time
You should have a clear plan on how the business will function and where revenue will come from — even if it’s not written into a formal outline. Or even written at all. As time passes you’ll start writing and editing a plan on how the business works. As you keep doing that, you’ll eventually have a complete business plan.
3. Create a Basic Draft
You need a basic plan for how you’ll run the business — for the short, mid and long term. In the day of the slidedeck, it’s tempting not to have a long-form plan; some can get away with that due to freakishly good operational teams or organizational skills. Most would benefit from a basic, living plan that is constantly tweaked and allows you to benchmark/ensure your goals are being met.
4. Start With an Idea
At the start, you need a solid, core idea. It’s best if this idea solves a problem in some way. As you launch and grow, you’ll validate (or debunk) the idea. Then when it’s time to scale, you can complete a full plan. But don’t let a detailed plan get in the way of a great idea when it’s simply time to start.
– Sam Davidson, Batch
5. Use a Detailed Outline
A business plan is a very misunderstood document. Business plans do not have to be 100-plus page wordy documents predicting the future of the company. Every business needs a solid vision and value prop, grounded sales/marketing hypothesis and a robust outline of financials/cash flow. A business plan gives an opportunity to outline all of these key elements and forces an entrepreneur to commit.
6. Look to the Prototype
Prototypes are the new business plan. For my money, a tightly edited investor pitch and functioning prototype are far more valuable than a business plan. A business plan proves that you can write. A prototype proves that you can do it. I’ll let you guess which one savvy investors find more compelling.
7. Don’t Write Up a Formal Business Plan
It’s important to think through and put on paper your initial plan for how you are going to go from idea to product to commercialization, and how you intend to grow and sustain your business. However, you don’t need a formal business plan. It’s critical that you approach your startup with an open mind. Your initial idea and plan is likely to change many times early on.
8. Have a Loose Plan
You definitely need a business plan, but don’t make the mistake of believing that plan is set in stone. You will learn more than you ever thought possible when getting a startup off the ground. Leave room to deviate, explore or branch out. What looked like the best path before you started the journey will change drastically when in the thick of it.
9. Tell a Compelling Story
More important than a business plan is validating a new idea and then telling a compelling story around it. Most ideas never work out as you first plan, so first figure out if your idea actually works. Make a prototype, get it out in the world and see if it really solves the problem. Then, in lieu of a business plan, show your investors the working prototype, a few solid customers and a vision of how this idea can scale.
10. Show That You Have Purpose
Since drafting a plan requires putting the goals, growth plans and marketing strategies of the business down on paper, it forces the entrepreneur to think through the real vision and purpose for the company. Having one will prove to outsiders — namely potential investors and partners — that the business is more than just a grain-of-sand idea.
11. Start With a Vision
The standard rule is to write a business plan before starting a business. Unfortunately, that plan is useless the moment it’s written because as soon as you get started, the real world happens. Start with a clear vision. How you accomplish that vision can change quickly, but your vision shouldn’t. Your playbook will grow as your business gains experience and that playbook becomes your plan.
12. Decide What Works Best for You
Does everyone need instructions for cooking? Do sports players need a trainer outlining every work out? Different personality types require different types of motivation, instruction and vision. While some entrepreneurs may thrive with a business plan, others may do better with a loose outline and a ton of drive. When it comes to business plans there is no one-size-fits-all model.
13. Provide Focus
It can take many forms, but a formalized document that expresses what problem you are trying to solve, who you solve it for, why you are different than the competition, how you plan on being the only solution to your customer’s problem, how you make money and the market you are tackling is critical. You need the focus, plus the process of formalizing on those issues is indispensable.
Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program.