Daily, we read and hear on the importance of business plans. It is drummed into the potential entrepreneur that a business plan can be compared to a road map.
It shows you where you are, where you want to go, and what resources you will need to get there. The purpose of a business plan is twofold, we are told;
Firstly, it can help you obtain finance, and, secondly, it explains to you and to the financiers what, why, when, where and how you intend to run your business. It will also help clarify why you believe the business venture is viable, and is a guide to achieving your goals.
If all this is true why do so many businesses fail?
A commonly accepted theory is that for a business to survive, prosper and expand it must be adaptable and agile. It must be able to turn on a dime as conditions warrant. How can having a three or five-year written business plan be part of this picture? In fact, trying to follow a long-term plan during rampant change is not logical.
It just does not work.
There are a number of key reasons business plans don’t work:
- They are not always a pragmatic view of what can really be achieved.
- They are not followed up with consistent action.
- They are not updated and reviewed.
- They apply one-dimensional thinking to a non-linear situation.
- They practise long-term strategies during rampant change.
Today, the biggest offenders are business plan software programs that churn out cookie-cutting documents. Business people, consultants, lawyers, marketing specialists and students have all become a copy, cut and paste nation, all believing that they have discovered the ultimate business plan.
- Vision vs mission
Nowadays, business plans are more in tune to what we would like the outcome of our business to be, a vision and mission of how to accomplish what we plan to do.
A business plan, like a vision statement, defines what it wants to be, where the organisation wants to be in the future, reflects the optimistic view of the organisation’s future, making it a source of inspiration to all stakeholders. In essences, it concentrates on the future of the business.
A mission statement defines where the organisation is going now, primarily describing the purpose and why your particular organisation exists. It concentrates on the present; it defines the customer(s), critical processes and it informs you about the desired level of performance.
A study by Babson College’s alumni, who graduated between 1985 and 2003, found that “…there is no compelling reason to write a detailed business plan before opening a new business.”
The analysis also uncovered that there was no disparity or notable distinction between “the performance of new businesses launched with or without written business plans.”
The world of entrepreneurship is flooded with information on business plans. A Google search for ‘business plans,’ and ‘business plan’ recently revealed over 2.8 million and over 23.6 million pages respectively, from free business plans templates to sophisticated software packages that will help one design the ultimate business plan.
Today, writing a business plan is undoubtedly the most extensively used teaching tool in entrepreneurship learning and preparation. With so many plans available, surely the success rate of the business should be higher than the 15% that succeed. Unfortunately, a good template will neither make for good content, nor automatically make a workable or successful business.
The technology crash in Silicon Valley can attest to this, great business plans, but little else except greed.
Article compiled by Vincent Marino, CEO of the Aerotropolis Chamber of Commerce and Industry.
