Everybody has a plan until they get punched in the face ~ Old Boxing Quote
Is the business plan you created before you started your business something you constantly refer to, or like most people, is it something you get a good chuckle from every now and again when you’re cleaning out your filing cabinet.
A good business plan should serve as a roadmap for your business, but most of the time it becomes a (sometimes sad) reminder of the never ending optimism we once had for our business.
Why do business plans often become useless? For one, when they are created, they are “guesstimates” on what we think (or hope) our business will become one day. Many times those original plans aren’t even close to what happens once the business is actually launched. The second, is that the plan is never updated or revised to reflect reality, thus becoming useless.
Why should we create a business plan?
I’m a firm believer in that the process of creating a business plan is much more important than the actual plan itself. Going through the process of creating a business plan allows you to ask yourself some hard questions and do some critical thinking that you may not have done otherwise. Poor planning often leads to poor results.
The second reason is that if you will be seeking any kind of formal financing for your business, a business plan is a prerequisite.
Creating a plan you know won’t work
In the military, Generals spend months or years planning a mission, devising strategies, tactics and envisioning every possible scenario they can conceive of. They do all of this knowing that once the mission actually begins, all of those plans will most likely go out the window and they will have to create totally new plans on the fly.
Why would they do this?
Because the planning process itself helps you to develop a deeper understanding of the situation and helps prepare you to make future decisions. Without all of those months planning, those generals would most likely make poor decisions once the battle has started and the pressure is on. It’s all in the preparation, not the plan iteself.
A business plan cannot be too rigid
Notice that the stiffest tree is most easily cracked, while the bamboo or willow survives by bending with the wind. ~Bruce Lee
If you create an overly detailed plan, and you’re not ready to revise or scrap it if needed, you’re setting yourself up for failure. At least as far as business plans go. A plan only works if you go into it knowing that you’re going to have to change it, alot. If you don’t update your business plan as the gap widens between your plan and reality, it will quickly become useless and you’ll abandon it. Create your business plan knowing you’ll be doing alot of editing and re-forecasting as time goes on. Don’t stash a printed copy of it away in your filing cabinet, keep an online copy of it on your desktop, ready to review and edit it as often as needed.
How do you know your business plan is useless?
If your in business and you haven’t looked at it in several months, it’s safe to say it’s useless.
Create 2 business plans
You should have 2 business plans created. One for the bank and one for yourself. The plan you create for the bank (or other investor) will look like a mini-novel, full of financial projections looking 5 years into the future and a (very) creative story on how you intend to turn your soon to be business into a Beast by capturing X% of the market place in your industry over the next 5 years.
The other plan is a 1-2 page document that is just for you. It’s not a 5 year growth plan or an overly optimistic projection on what you hope will happen. It’s an honest conversation with yourself. It’s going to make you answer some simple questions and do some simple math. If it doesn’t make sense, go back and think things through again. Once this plan is in place and you start implementing the steps, you can add more detail as time goes on.
What – What am I offering
Why – Why am I doing this, what value am I bringing to others
Who – Who am I offering this to
How – How will I get what i’m offering to my customers.
How Much – How much will I charge.
Math – After all of my costs to get a product to a customer, what is left over for me
Steps – What I steps I will need to take to make this happen.
Some good advice that I received once was to cut your projected revenue in half and increase your expenses by a quarter, and then see if the plan still makes sense. This doesn’t mean to scrap the plan, it’s just a reality check.
Don’t be a professional planner
Well done is better than well said ~ Ben Franklin
Planning is great, it’s a must actually. Just don’t get so lost in the process of planning that it keeps you from actually implementing your plan. Create your plan knowing it will change, be honest with yourself, and keep your plan in front of you so you can review/change it often.
Did you create a business plan for your business? I’d love to hear what you think about business plans, leave a comment below.