With the economy spiraling downward, now is the worst possible time to neglect business planning. People do it because they lose track of the fundamentals. They also fall prey to the four myths about business plans. Don't get caught by any of these lies:
- It's a big deal. It's hard to do. No it isn't. The number one biggest lie in business planning is that a business plan isn't a business plan unless it's a complex document containing a full list of components--from the executive summary, company description and management team all the way to detailed financial projections and thorough market and industry research.
A business plan doesn't have to be all of that. A business plan should be only as big as you need to run your business. Only if you need a document called a business plan to show to a banker or investor do you need to make it the full thing.
What a vast majority of companies need is business planning--not just a plan, but planning--to run their businesses well.
Planning starts with a plan, but then continues with plan review, tracking and follow-up, which makes it management. And you can have planning without market research or industry analysis, just by focusing on what your strategy is and what the specifics are that you need to do.
So what's a business plan, at its simplest? It's what you need. For some, it's as simple as a sales forecast plus regular plan vs. actual review to track the forecast and follow the implications of the difference between the plan and reality. For others it's as simple as a list of the most important strategic priorities. For most it's this list plus an expense budget plus some strategy points you can track, plus clear task assignments and ownership of tasks.
- You're not supposed to change it. Hogwash. The point of having the plan is tracking progress toward goals, noting what went right and what went wrong, and using that difference between the plan and reality to manage better.
One of the most important things you do with a business plan is to set your assumptions down in writing so you can see them later. When your assumptions change, your plan might (not necessarily, but possibly) change, too. You don't change the plan just because you want to; you change it because the world has changed. On the other hand, if you didn't have a plan to change, you wouldn't have a way to maintain your direction toward long-term goals even as your immediate assumptions change.
- Lots of successful businesses didn't have a plan. That's like saying lots of successful athletes didn't train, or saying that lots of good students didn't study.
A lot of this myth's reason for being is because of bad data. Ask successful entrepreneurs after the fact whether they had a plan and many will say they didn't because they're caught in that old myth of the big fat business plan. But in fact they did prioritize, set goals, track progress, divide the work into tasks and owners, estimate sales and expenses, and manage budgets.
Furthermore, ask successful people, after the fact, whether they worked hard in school and most of those who did will say they didn't. "I didn't have to study in school because I'm so smart." Yeah, right.
Don't be dumb about planning. It helps you manage. It reduces uncertainty. It builds tracking toward goals and accountability. Don't refuse to plan just because you don't need the big, fat, formal plan.
- Business plans are for startups. This is obviously not true. Setting goals, prioritizing, tracking progress toward goals, and developing accountability for those goals isn't just for startups. It's that myth again. Maybe only companies looking for bank loans or investors need the big, fat business plan. But everybody needs planning.
Don't deprive yourself of useful tools and methods. Develop your business plan and make that the first step toward planning, which then becomes management.
The author is an Entrepreneur contributor. The opinions expressed are those of the writer.