Business plan... necessary or not?

**adshah** · February 17th, 2011, 06:10 PM

I was reading WSJ this morning and came across this article.

Interesting idea - but what I clued in on was this:

Q. Did you write a business plan?

Ms. Hyman: Jenny and I had a rule from the very beginning to never write a business plan, because we think that's a waste of time. Starting a business is a series of iterative tests. Each test eliminates some of the risks of starting a business.

What's everyones take on whether or not a business plan is a waste of time or not?

**Clinton** · February 18th, 2011, 03:29 AM

had a rule from the very beginning to never write a business plan, because we think that's a waste of time. Starting a business is a series of iterative tests

LOL, that is so dot com style where you

Start activity
Invest lots of money
Think/talk about whether this can be run with revenue > cost rather than the other way around
Find out that's not going to happen, try something else
Find out that's not going to happen, try something else
Find out that's not going to happen, try something else
Find out that's not going to happen, try something else
.
.
.
Either get lucky or go bust.

We do need the nut cases as well in this world as they come up with new and innovative things and sometimes strike lucky on the money as well, but would you invest your pension fund with someone who starts a business without a firm plan?

In this case they built a successful business. Did they have a written plan? You bet your bottom dollar they did!! (despite what they said at the WSJ interview). They wouldn't have gotten the funds they raised without a very sound looking business plan, profit projections and a strong pitch.

**grynge** · February 18th, 2011, 04:10 AM

The thing with a business plan is if its done extremely well, it can give you an incredible look into the business and pinpoint any problems ahead of time. I have done quite a few in my day and 2 of them before I even finished the business plan I could see the business idea would not work. They might take time to complete properly but in both of those circumstances they saved me many 1000s of hours and an untold amount of money.

**Bebop Beru** · February 21st, 2011, 07:18 AM

Really can't understand why you wouldn't. Helps focus ideas and give a clearer picture about the feasibility of what you're looking to do.

And as Clinton said, Bain Capital aren't about to hand over 1.7 million spondulicks without one.

**akirk** · February 22nd, 2011, 11:19 AM

You need a strategy / aim / market / product / etc. - don't necessarily need a trad. business plan written to suit accountants - but you need to have been through the components...

Alasdair

**crabfoot** · February 22nd, 2011, 12:13 PM

There's three kinds of business plan -
An honest one you write for yourself, one that glosses over potential pitfalls and is optimistic about profits for the bank/finance house, and a similar one that overestimates all the running costs if it is for a "business angel".

Business Angels will always try to keep you short of money, so they have to inject more. Every time that happens, they get a bigger slice of the business - if you're not careful, you end up running it for them.

**Bebop Beru** · February 22nd, 2011, 06:00 PM

Originally Posted by akirk

You need a strategy / aim / market / product / etc. - don't necessarily need a trad. business plan written to suit accountants - but you need to have been through the components...

Alasdair

Isn't that still a business plan? Not trying to be a pedant here but the impression from the interview was that of a laisseiz-faire attitude that they'd not fall into the the evil clutches of capitalism and the corporate world by doing a business plan.

I don't really see why people would dislike the format. It's a fairly tried and tested way to ascertain whether an idea has any mileage in a format that's understood by most people.

**adshah** · February 22nd, 2011, 08:55 PM

I think it's prudent to write a business plan - that seems to be the consensus here. Even though a business can do well without one, you can definitely avoid having to learn some of the lessons the hard way.

I will say that I've had a few great ideas, that I left by the wayside because after writing up a business plan - it seemed there were bigger barriers that I assumed, and to me - not worth the work. What I'm trying to say here is that I feel like sometimes, business plans can take away from the zeal you may have.

**akirk** · February 23rd, 2011, 05:31 AM

Originally Posted by Bebop Beru

Isn't that still a business plan? Not trying to be a pedant here but the impression from the interview was that of a laisseiz-faire attitude that they'd not fall into the the evil clutches of capitalism and the corporate world by doing a business plan.

I don't really see why people would dislike the format. It's a fairly tried and tested way to ascertain whether an idea has any mileage in a format that's understood by most people.

No

you have to know where you are taking a business or the business will not work.
but that is a long way from writing business plans...

the 'anti business plans' mob view is that you can be flexible / dynamic / active in building a business if you can adapt continually - they would argue that if you have a business plan you are stuck following it and are less flexible... however that only works if you know and are focussed on where you are going as a business...

i.e. a plan for the business, not a business plan

Alasdair

**Clinton** · February 23rd, 2011, 08:13 AM

adshah, I'm very good friends with an charming elderly guy in the area. He's always full of enthusiasm and keeps coming up with what he believes are brilliant ideas. The problem is that he then just charges in and spends money setting up his "fantastic" business without much thought.

His last project was a new slimming system he discovered somewhere on his travels. He imported the technology, spent around £100K on that, setting up a beauty parlour, hiring staff etc. It flopped. My own research showed that the area he was in wasn't the right demographic - a lot of council housing etc. He didn't do his research.

He's now figured that there needs to be a system for comparing prices of white goods and that people would use his system to find the cheapest price. He figures that the best way to do it is to have a price comparison website and he came to me to ask about how to set it up. I was sorry to puncture his enthusiasm and point out that it's an old idea and several price comparison sites already exist. But people like him don't listen to advice, they don't work logically, they are driven by passion. I have no doubt this guy is going to proceed with his plan for a price comparison site without knowing anything about the market, his competitors, the technology ... or anything! He'll speak to a developer who'll tell him what a fantastic idea this is ... and he'll end up spending a lot of money and likely fail.

Having a business plan forces you to do the research and, importantly, put all the estimates, figures etc., down on paper. If your business fails you'll see where you went wrong. That lesson alone is worth the effort.