Business plans are old school thinking

Business plans were once the most important tool in the small business repertoire. It was the go-to document for investors and Bank managers alike. It signalled that you were serious about your venture, and you were to be taken seriously. Today, they’re barely worth the paper they’re written on. Bob Dylan was right about the times a-changin’.

In an era not so long ago, a few years perhaps, business plans were cobbled together by budding entrepreneurs eager to unveil their recipe for making their company successful to skeptical Bank managers or investors. The plan would show step by step how the entrepreneur would provide a return on any money loaned along with how they intend on structuring the company and leapfrogging the competition, among other things. Quite simply: no business plan, no moolah.

Bank managers, investors and entrepreneurs have learned over the years though that no matter how good a business plan may seem on paper, there doesn’t appear to be any correlation between a well-written plan and a successful business. In fact, there are many examples of successful businesses that were started without any evidence of a business plan.

Let’s examine this further. The core of any business is to create something customers want and are willing to pay for. It really is that simple — at least to start with.

So when starting a business, it actually makes better sense not to start a business at all.

It makes better sense to build the smallest possible thing you can build that delivers customer value and get it into the market as soon as practically possible — a minimum viable product. It’s the best way to validate your concept and determine whether the market will actually pay for what you’re endeavouring to build before you pour more of your own money (or investors’ money) into the venture.

If all goes well, you’ll have your first paying customers and the added bonus of soliciting feedback from real customers early on before you take your offering to the broader market. If you approach Banks or investors for money, this would significantly improve your chances. You’ll be able to demonstrate that customers actually want what you’re offering instead of just being able to talk about it.

The ultimate currency in negotiation these days for entrepreneurs is traction; proven demand for a product. It’s hard for anyone to doubt your ability to be successful if you can already show evidence that you’re well on your way.

While the business plan itself may not set the scene for success, the process of devising a plan is still valuable for entrepreneurs as it allows them to think through all the core aspects of their business. Having said that, more efficient ways of accomplishing this task have emerged in recent times. LeanStack’s Lean Canvas is one of the more popular methods. Carrying out this exercise in parallel with your minimum viable product would yield the best results.

Focussing on what’s important (building a product that solves a real problem that customers are willing to pay for) and measuring results (based on degree of traction), soliciting feedback and continuously improving your product (until traction peaks) is a much more reliable strategy for achieving success than starting with only a document that captures your hopes and dreams.