Do you really need a business plan before starting out as an entrepreneur?

Soon Min On strategy 9 Comments

Photo credit: JohannesLundberg / Foter / CC BY-NC

Before I started Pitch Confident, I was trying to prepare myself as best possible, and one thing that kept popping up was the need to write some form of business plan. There are a few services out there that help provide a template, and I toyed around with a few to see what they were about. I didn’t find that any of the templates helped, and instead relied on cobbling together my own simplified version of it. It didn’t help that there were also conflicting schools of thought when it came to the need to do so.

“You NEED to write a business plan”

It helps you review everything at once

It gives you a birds eye view that allows you to spot things that you might not have considered before. Eg; You’ve got a business goal of achieving X amount of customers, but have no clear idea of marketing or staffing that’s going to help you do that.

The plan helps you organise 

With the many moving parts involved in business, a plan helps you keep track of what matters. This doesn’t only apply to yourself, but it helps to have everyone aware and working towards those milestones.

Helps you raise money

Investors and sources of money will usually require you to have the necessary components ready. It helps you communicate your vision, as well as cover the bases as to what to expect when the questions inevitably come. Asides from your mom, no one dishes out money without wanting to know a few key details.

“Don’t waste your time”

Things will change

This author was thinking about writing a book and asked successful entrepreneurs to see their original business plans in order to extract some learnings. The key takeaway was that each of those businesses ended up doing something completely different. From my own experience, this definitely happened as well.

Not every investor is looking for it

While it’s true that there are players out there that still require a formal detailed business plan during the process of raising money, it’s also true that it’s not a ‘rule’. This entrepreneur believes that with your pitch deck, and good knowledge of your numbers, it’s enough and would satisfy the majority of requests from any interested parties.

It can make you rigid

When you’re just starting out, the fog of war is thick. There’s very little clarity in the months ahead, and to believe that things can or must go according to your business plan can result in you missing opportunities. It’s a fine line to walk between distractions and being nimble, but I believe that when you’re starting out, it’s better to err on the side of being open.

A practical guide for a newbie

Disclaimer: I didn’t create a full on business plan when I started out. However, only later did I realize that there were some core components that I still had in my head, but perhaps not put down in a formal manner. These include things like my revenue model, go-to-market plan, and market opportunity.

As a starting point, you’ll need the core pillars

The best resource that I’ve seen for this is to look at what the guys at Lean Canvas have created. It’s a simple template that you’re able to spend a couple of hours on to fill up, but gives you a one pager that immediately checks off the core components of a start up. Just remember that it’s not the template that matters, but the details that you need to be clear about.

The Lean Canvas

When you get bigger, add on details

If or when you’re looking to raise funds, a good friend of mine who’s in the angel investing scene here in Kuala Lumpur feels that these will eventually be the key criteria you’ll need ready. If you observe these key points, they’re just expanding upon the details within the Lean Canvas.

As covered in the Lean Canvas

Market opportunity – What’s the Problem your business is address, for whom and what the size of that market is.

Solution – What is the Solution you bring to the table, your revenue model, and an assessment of how you fare against the competition.

Go to market plan – What are the Channels you have in mind to reach the customer, and your strategic plan to succeed there, including marketing.

Extra details

Team – Who are the founding team and management, key hires and their responsibilities.

Financial cashflow forecast – According to research, bad cashflow management is amongst the top 7 reasons why a startup fails. 

Goals – What are your targets, and how do your activities help in achieving them?

It’s important to remember the purpose behind the business plan. Instead of looking at it purely as a tool for investment, understanding the key elements behind it help you evaluate your own business and whether you have your bases covered. So, while you might not yet need a written plan, it could make sense to consider the key elements within one. 

Soon MinDo you really need a business plan before starting out as an entrepreneur?