Do I really need a business plan? NPBusiness.ORG

Do I Really Need A Business Plan?

I know that business planning is not a sexy topic, not by a long shot!

And it seems that today a fair number of budding entrepreneurs dislike planning for their new business altogether.

Some even think it’s an outdated concept and don’t see the value it provides. Others feel that most business planning is too detailed and a waste of their time.

Here are some arguments against traditional business planning that I’ve come across:

  • You don’t need a business plan to get started in business.
  • You don’t need a full-length business plan; it’s just overkill.
  • You do need some business planning, but a short one-page plan will do.
  • Both, your business idea and plan should fit on a paper napkin.

So what do you think?

  • Do you have a business plan?
  • If you do, is it a sketch on a napkin or do you have a regular full-length plan?
  • Do you find value in planning for your business?

For myself, I believe there is tremendous value in putting together a written plan for your business.

But full disclosure here, I’m the creator of “Smart Business Planning for Clinicians,” and of course I would think that business planning is necessary and beneficial.

Why It’s Important

But let me tell you why I think it is so important:

  • Business planning gives you clarity.
  • Planning reveals your motivation for wanting to go into business in the first place.
  • It requires you to think before you act.
  • It allows to you create “What If” scenarios for your new venture.
  • When you do proper business planning, you’ll know if and when you can expect to break even.
  • You’ll know if and when you can expect to make a profit.
  • If forces you to be clear on the product or service you want to offer.
  • It’ll tell you if your numbers are going to work, or what you need to change to make them work.
  • You will know what you’re giving up (opportunity cost) and what you’ll likely get in return.
  • And most importantly, once you have the facts, you can do a final evaluation before committing any more time and money.

Which means the following…

  • If your business plan reveals an unprofitable business idea, you can either forget the whole thing or go back to the drawing board.
  • If your plan uncovers that your numbers simply can’t work, you can either forget the whole thing or make the necessary adjustments so that the numbers will work.
  • If your business plan shows your opportunity cost would be too high for too long before break even or profit, you can now make an informed decision about moving forward at this time or not.

You may think “I’ve gone through all this trouble to create this plan and would hate to walk away from it all.”

I understand but think of it as having a second chance to make sure this business is the right thing for you.

Another Kind of Blueprint

Compare the business planning process to working with the blueprint for your new house.

Yes, people do use a blueprint when building a house. Puzzles me that some think they can build a business without one…

So you’ve picked out, or you designed this blueprint for your dream house. And before anyone starts digging up the ground, you’ll know exactly:

  • How big each room will be.
  • How many rooms there will be
  • The orientation of the house, so that you’ll know which rooms will get morning sun or evening sun.
  • The location of your brand new kitchen.
  • Wiring and location of electrical outlets.
  • Flooring and appliances.
  • The roof of the house: flat or slope.
  • How much money it will cost you.
  • And so much more.

You design the entire structure from the bottom up! You try to think of every single last detail.

So why do you use a blueprint to build your house? Of course, there are many reasons, but the most important ones would have to be:

  • You’re investing a substantial amount of your time and money.
  • Often someone else, aka “The Bank,” initially provides the money to build.
  • It’s difficult to make major changes to the house once finished.
  • Most likely you will occupy this house for some years to come.
  • By choosing to build this house you forgo the opportunity to live in a different house, perhaps in a better location.

That’s why it pays off to think about what you want in your house. Pick the right blueprint and stick to it before you ever start breaking ground.

There are many similarities between building a house and building a business. So why do some think they don’t need a blueprint for building their business?

Granted, building a house requires different planning over building a business. And it takes a different level of planning depending on the type of business. But the common denominator is “Planning.”

Different Levels of Planning

But let’s take a look at two different businesses and their need for planning.

Did you ever run a lemonade stand? I never did myself.

But let’s assume your kids want to open a lemonade stand on weekends. Here’s some of what they need to know:

  • Where to set up shop.
  • How much lemonade they’ll need.
  • How much to charge for the lemonade.
  • How to display their product.
  • What type of advertising to use: signage, flag or megaphone to gain attention.
  • They need to give some thought to the equipment they’ll need: table, chairs, cups for lemonade, napkins, etc.
  • Operating hours: how many hours they’ll sell lemonade.
  • Staffing: who will be at the lemonade stand and when?

And you thought running a lemonade stand was a simple business?

But let’s get serious now. Does the lemonade stand need a business plan? I don’t think so.

However, it does require some level of planning. Of course, some kids will sit down and write out what they’ll do; others won’t.

So if you’re starting a simple business, perhaps you don’t need a formal business plan even though you still need to do some planning.

However, any time you’re starting a more complex business, requiring the input of time, money and other resources, consider writing a formal business plan.

As you can see, just running a simple lemonade stand demands a good deal of planning from a ten or twelve-year-old.

Now think about a medical clinic. All the things that need to happen to start one and keep it running.

Lots of spinning plates, too many things to track, and way too much that could go wrong; unless you’re prepared and know what you’re getting into.

I say, there is huge value in writing a traditional, full-length business plan; because there is just too much at stake not to.

Leave us a comment and tell us what you think… Do you have a business plan? Do you find it a valuable tool?

 

By Johanna Hofmann, MBA; regular contributor to the NPBusiness blog and author of “Smart Business Planning for Clinicians.”

Comments 2

  1. I have been back to the drawing board many times because the numbers don’t work. Disappointing, yes, but I am confident I’ll find a way, and the structure of my plan allows creativity within the scope of my vision.
    I also want to comment that a plan should include an exit strategy. As providers, we can’t just “close the shop” if our business can’t sustain itself. . . we have patients to whom we are making a commitment.

  2. Terri, you are absolutely correct. The “Exit Plan” is one of those foundational pieces that I often talk about. We need to explore this option before we get started as it can make a difference in how you set up your business. Thanks for bringing this up.

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