Jul 15, 2022 | Starting a Business

I want to start my business now. Do I really need a business plan?

Q. Dear Zenagos, I’m ready to start my business, but everything I read says I need to write a business plan first. I want to start my business now. Do I really need a business plan?
–Sophie

No, you don’t need a business plan per se, especially not if you have all the money you need. You do need some type of plan, but we’ll get to that below. The primary purpose of a business plan is to convince someone else that you know what you are doing, so they can decide whether to gamble their money on you. If you don’t need to pursue investors, then you don’t need to spend hundreds of hours creating a gorgeous, 60-page document that will gather dust on your shelf (or take up valuable space on your hard drive).

If you do need someone else’s money, then a business plan still might not be the answer. There are lots of ways of convincing a potential investor that you know what you are doing. Most angel investors – and even the fancy venture capitalists on Sand Hill Road – don’t have the time to read narrative business plans. If they give you a meeting, they will expect you to arrive with a slide presentation (called a “pitch deck”) of no more than 10 slides. Your meeting may not last more than 10-15 minutes, and you probably won’t even get to show all of your slides. How annoyed would you be if you had spent 6-9 months crafting the perfect business plan, only to discover that nobody would take the time to read it?

So, before you invest a ton of energy creating a document in any particular format, you should get to know your audience. Banks often do require written business plans, but the format can vary a great deal. So, go talk to some potential bankers and ask them what they expect to see in a loan application. They may give you a template to complete, which will save you a whole lot of time.

Why does everyone say I need a business plan?
Saying that you need a business plan is code for saying that you need to learn to speak the language of business with confidence. What you don’t need is a fancy, formatted document. What you do need is to be able to explain what you want to do, using words that money people understand and respect. You need to be able to present financial projections, to discuss the key operational and financial numbers (“metrics”) for your business, and describe the key milestones you expect on the way to success. You need to be able to explain who your target customers are and how you plan to reach them. You need to be able to differentiate your product or service from the competition. The process of creating a formal business plan is pedantic, but it will force you to learn some business lingo and describe your idea using that language. Without that training, you may not be able to get any investor’s attention.

How do I get what I really need?
What you need is a bona fide business expert whom you trust, who will give you time and help you translate your business idea into actionable steps. There are many ways to find such a mentor. If you have friends who are successful entrepreneurs and will take an interest in you, that is a great place to start. If you don’t, you can get free advice from business experts at SCORE. You can also take a class or hire a business consultant. Definitely read everything you can find from credible sources.

Since you already know your field, It may be tempting to just jump into serving customers and learn as you go. However, being an expert in your field does not make you an expert in business. Take a little extra time now to vet your idea with some experts. It may save you some woe, and it will almost certainly give you some great new ideas.

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