Founder Jessica Oman explains why business plans are still vital if your startup is to succeed. By Jessica Oman (Founder, Write Ahead Inc)
Are business plans dead? Many experts are saying yes. Sure, the days of the 50-page tome are certainly over. But last I checked, things like knowing your competition, understanding your market, articulating your value proposition and – oh, that small exercise called financial projections – were all still pretty important, especially for tech startups looking for funding. I believe Dileep Rao is right when he writes that "no one gives you money just because you have put words on paper". But did business plans ever work this way? Was there ever a time that you could type whatever flashy language you wanted on the roll of your electric typewriter and use fancy words to convince people you were worth funding?
Starting a Business
Perhaps there was a time like that, and I'm too young to remember. While gone are the days of the jargon-filled, data-heavy rectangular paperweights business plans, the plan itself will never be obsolete. It can't go away – we can give it a different name, dress it up in a PowerPoint presentation, or call it a "value proposition" (even though I shudder as I type that phrase) – but starting a business works like this:
1) Get a business idea and clearly define it 2) Create a plan for launching and growing the business 3) Launch and grow the business
Rinse and repeat steps 2 and 3 as your business grows, and you'll always have a business vision and a way to get there. That's called business planning. It's called getting your business from Idea to Open.
Three Reasons Why Your Startup Needs a Business Plan
To me, the most logical way to support business planning is to write a business plan. And your tech startup needs one. Here are three reasons why:
To Make Your Exit Strategy Look Viable
If you have dreams of your tech startup being acquired or even going public, your company has to meet certain criteria to make your exit strategy possible. The process of writing a business plan helps you envision the path to meeting that criteria. It creates a GPS to guide your entrepreneurial journey, so you don't drive this thing off the edge of a cliff before you have a chance to see it all the way through.
To Show Investors How They'll Get Their Return on Investment
Those hockey stick growth projections better have some solid assumptions behind them. And if your assumptions are wrong, you need a Plan B. You can use the business plan to detail those assumptions (even use them as presentation notes!) and identify the risks that might force you to move on to Plan B. Or C. Or D. Investors like that. It minimizes risk, and demonstrates that you've done your homework and you can explain why you think your projected ROI is achievable.
To Benchmark Your Startup's Progress and Achievements
If you create a business plan that includes a clear vision for your business, a means of reaching that vision, and a definition of what success looks like 6 months, 2 years, and 5 years down the road, it becomes pretty easy to measure your accomplishments. We all know your business won't evolve the way you expect it to, but you can also use the business plan to look back and figure out why the direction shifted, or what mistaken assumptions you might have made (so you don't make them again).
A Business Plan as an Information Vessel
Plans are often overlooked in favour of pitch decks and flashier documents. But a plan by any other name… is still a plan. Right? Whether you call it a pitch deck or an acquisition strategy, it's a plan in its own right - and without something in place to guide your growth, you're less likely to reach your entrepreneurial goals. No, we don't have to write works of fiction to launch a business anymore. But it sure helps to have a vessel in which to house all the essential information that VCs and Angels need to assess before they invest in you.
What's your vessel?
About the guest blogger: Jessica Oman is the founder of Write Ahead Inc., a team of consultants, writers and trainers who help entrepreneurs launch and grow companies that support their lives and passions. Grab their free report, 5 Critical Steps for Taking Your Business from Idea to Open, and learn to plan a business that attracts funding and guides your growth.