Starting a Small Home Business

Do You Really Need a Business Plan?

July 10th, 2007 Filed under: Uncategorized — Small Home Business Author

I stumbled onto an online donnybrook at one of those entrepreneurs online discussion boards yesterday. And I just had to smile. People were going just nuts about whether a business plan is needed, what a business plan even is, who should write the plan, and other assorted topics.

But before I repeat the comments I shared, let me just say that as a CPA with many business clients in the Seattle area I’ve done a bunch of business planning, have covered the subjects in the best-selling books I’ve written QuickBooks, and also covered the subject rather extensively in my book MBA’s Guide to Microsoft Excel (which was used at several big business schools.)

With that as background, let me share a handful of thoughts.

Not All Business Plans Are Equal

So heres a first thought. People often mean different things when they use the phrase business plan. Sometimes they just mean a strategy (which could just as well be described in a sentence). Sometimes they mean a 20-25pp document that “sells” a business to new investors or lenders.

And sometimes they mean a long document–a sort of white paper–that describes in massive detail a new venture opportunity, an approach to exploiting that opportunity, and then detailed workplans for getting from here to there.

And thats the first thing I told the people squabbling online. People use the phrase to mean different thingsand thats confusing. And part of the fight I witnessed stemmed from this miscommunication.

New Venture Plans Arent Necessarily Unless Funders Require It

Here was my next point for the flame warriors I encountered.

Obviously, if you’re not raising money or you’re raising money from people who aren’t traditional new venture investors and orthodox lenders, you don’t need a business plan that sells the business to funding sourcesthe sort of plan Ive often called a new venture plan.

If your father or rich uncle is planning to invest in you business, for example, you may not need a business plan that sells the investment. Right or wrong, you dad or rich uncle Joe may write you a check just because you are who you are.

What about a White-paper Style Business Plan?

Does what Ive just said mean that you dont need a business plan at all? Well, sort of. Sort of not.

I have personally started, oh, lets say 5 businesses over the last 25 years. Four succeeded rather nicely. One basically failed (ironically, the one profiled in a glowing Wall Street Journal feature!)

I didnt really create a formal, white-paper-style business plan for any of these ventures.

But even though I didnt have a formal written document, I truly had done all the research that feeds a white-paper-style business plan… I just hadnt documented and published my research results.

So I guess I would say that you dont necessarily need a formal, printed-and-bound white-paper business plan document. But you really should have done all the research that goes into such a document.

Enough said.