Do You Really Need a Business Plan?

Some members of the business and academic communities challenge whether an entrepreneur really needs a business plan. They claim that preparing one is a waste of time because the marketplace moves so rapidly. This is like asking a pilot to fly without navigation equipment, or a ship’s captain to set sail without a nautical map—it’s a bad idea. Business plans provide vision and accountability and can be tools for recruitment, motivation, and the benchmarking of performance. There are many reasons to prepare a business plan, including,

• To explain—to yourself and others—why a viable opportunity exists

• To provide a road map for the future direction of the business

• To hold the founders accountable for performance goals and to demonstrate that you have put together a capable and balanced management team that is able to execute the strategy and implement the business plan

• To provide a schedule and a time frame for meeting key milestones

• To identify what resources will be needed to accomplish objectives and when they will be needed
  

• To mitigate the risks of future business failure by identifying potential bottlenecks and problems that will affect the growth of the company and offering possible solutions
  

• To provide internal financial controls and direction

• To provide a channel for communication between you and the outside investors
• To provide an analysis of what your company does “faster, better, and cheaper” than its competitors
  
• To provide an analysis to demonstrate that you have both a sustainable revenue model and a sustainable competitive advantage
  
• To educate and motivate key employees as well as reward their performance and serve as a recruitment tool for new employees
  
• To prevent litigation with investors by providing disclosures on potential risks and challenges faced by the company
  
• To determine the feasibility and viability of the business and to identify the “fatal flaws” in the assumptions underlying your business model (don’t wear rose-colored glasses—deal with the problems head on!)
  
• To analyze the marketplace to determine what extent you enjoy the advantage of being first with your idea (“first mover advantage” analysis)
  
• For technology or netcentric businesses, to identify how and why your technology or application of the Internet solves problems or cures market inefficiencies