To be honest, the title may be a bit misleading. It should actually say:
“4 Reasons Why Startups Need to Stop Writing Plan Documents They’ll Never Use Again After Finishing Them, and Why They Should Start Using Cheap Online Tools that Enable an Ongoing Process of Constant Planning That’s More Suitable for Their Growth and Pivoting Needs and Takes Couple of Minutes a Week to Maintain” but I thought that might be too long, so I used the shorter version.
I recently came across an article by Geoffrey James, business journalist, author and teacher. It’s a fairly short read and you should definitely check it out. In the article, James argues that startups shouldn’t waste time on creating a 90 page business plan that no one wants to read.
He claims that:
- creating a business plan is too expensive,
- investors don’t want it,
- startups often have to pivot, so they can’t stick to the original plan,
- it can be used as an excuse for inaction
- it can limit their creativity.
The funny thing is: I actually agree with Mr. James. If you’re looking up at the title and trying to figure out what’s happening here, don’t worry, I’ll explain.
Startups definitely don’t need business plans, but are in constant need of business planning.
A business plan is a document comprised of ideas, hypotheses, projections, and probably a lot of wishful thinking.
Business planning is the process of creating a plan, and then iterating upon it, constantly making adjustments in order to anticipate and reflect the chaotic conditions of the real world.
So, what happens when you start planning on a regular basis? Geoffrey James came up with 5 reasons not to create plans, and by doing so, he inspired me to sum up the reasons why you should start planning and continue doing so as you develop your business venture.
1. Startups live in the future, business planning connects them to the now
In business terms, it’s all about the value a company can deliver to their customers. And I think that this goes for the majority of startups out there: the value they can deliver in their initial phases is mostly reduced to potential. Customers and investors are aware of that, and it’s the way it’s supposed to be, at least in the beginning. But all the potential in the world won’t save your company if you don’t play with the numbers and deal in some cold-hard facts from time to time. Ever heard of WebVan, Pets.com, Color? Exactly! You need to work on your vision, and you need to adjust it often to increase your chance of success.
2. Confronting what you want with what you can do helps you stay grounded
It’s not just about making plans. That’s the easy part. Or, at least, it’s easier than comparing your target numbers to your actual numbers on a regular basis. Aside from giving you the big picture, doing so on a weekly basis will keep you and your team in check. You should project and make assumptions for your next month’s sales numbers, base them on the last month’s numbers. You’ll often be wrong, but as time progresses, you’ll be less wrong, and eventually you’ll be able to make some decent conclusions. It’s going to be worth your while in the long run.
3. Continuous business planning enables you to pivot if the need arises
One thing is for sure, most successful startups pivot at some point. And in its early stages, your (and every other, for that matter) startup needs to be prepared for a complete paradigm shift. Slack, Yelp, PayPal, Starbucks… All of these companies share a common trait: the founders’ initial idea was radically different than what the companies eventually became. The ability to pivot can make all the difference for a young company. If you blindly stick to the plan you created before you had any real-world experience, you’re going to fail. If you don’t update your target numbers with every new relevant discovery, you’re going to fail. If you use tools that don’t save your time, you’re going to fail. It’s simple.
4. Business planning keeps you in motion and creative
20 minutes of light cardio every day can save you from heart disease, just like continuous planning can keep your business healthy. If you take a glance at your numbers regularly, it’s easier to stay in touch with your original vision. By spending an hour a week planning, you’ll be able to react to whatever happens and it’s going to be much harder to be blindsided by an unexpected turn of events. Also, it’ll be easier to come up with new ideas, or improve some of the old ones. Continuous business planning saves you effort, time, and money in the long run.