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Ask, Don't Tell Leadership: Why Do I Need a Business Plan?

Layne McDonald. Ph.D.

The nobler sort of man emphasizes the good qualities in others, and does not accentuate the bad./The nobler sort of man . . . is anxious to see clearly, to hear distinctly, to be kindly, respectful in demeanor, conscientious in speech, earnest in affairs. When in doubt, he is careful to inquire; when in anger, he thinks of the consequences; when offered an opportunity for gain, he thinks only of his duty. -Confucius

Q: In last week’s column, you advised about starting a business and kept preaching about writing a business plan. I own a business, do not have a plan, and I am doing fine. What is the big deal?

A: How do you know your business is doing fine if you do not have a business plan? This is like a runner saying he is fast when asked about his running pace. Quality and success cannot be measured without having benchmarks and goals. A business plan supplies both, allowing you to compare your outcomes to your goals. It is too easy to keep moving the bar for yourself without a plan.

In the words of Alan Laken, not planning is planning to fail. Business owners may neglect planning for a variety of reasons. They may dislike making decisions or worry about how the plan will reflect their success. An owner may feel anxious about documenting (and making official) job descriptions, lines of authority, budgets, and marketing plans. An entrepreneur may dread such control measures, feeling that a business plan is like having a boss! If you build a house without a plan, however, you may live in what looks like a childish play fort. Every stage is based on a sudden inspiration, and your new home becomes curiosity run wild. A quality architect begins with their final product in mind. To build a secure business, you must plan. 

According to the Small Business Center at Bradley University, 70 to 80 percent of new businesses fail in their first year, and of those that continue past a year, only half survive for five years. Similarly, statistics from Dun & Bradstreet reflect that only 37 percent of businesses with fewer than twenty employees will survive four years, and only 9 percent will survive ten years. Considering such daunting statistics, it seems foolish to take unnecessary risks, like not planning.

You may think I cannot plan because things change too quickly. Although constant change is inevitable in any business, a good plan can be your key to dealing with change. A sailor friend said he sees a business plan like a small sailboat's centerboard. Thanks to its centerboard, the boat can continue moving forward as the winds shift direction; without its centerboard, the ship would flail around and eventually crash. A good plan keeps you moving forward, sometimes slowly, sometimes quickly, but without crashing!

While writing your business plan, you may feel frustrated. You will be writing your goals without taking immediate action to reach them. Before going anywhere, you must understand where and where you are going. Writing a plan can be exhausting, too. I guarantee your listless feelings will disappear as your business transforms from doing simply fine to doing very well.

I hope my response to your question is sufficient and gives you an understanding of why a business plan is critical. Below are some questions to consider while developing your plan:

  • Why do I want to start my own business?
  • Have I found the right company for me?
  • Who are my customers?
  • What do these customers need that the market is not currently providing?
  • How will I reach them?
  • What will it take to get them?
  • How much will it cost to support their unmet needs?
  • How much are they willing to pay to meet this need?
  • Can I make money in this business?

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