I am a business consultant, day job, some nights, and weekends on occasion. I like theology and the arts. These are the topics that interest me personally, but today I thought that it was time to share a topic that I know well.
And one aspect of business that cannot in overlooked is the importance of a business plan when going into business.
So what is it? This plan? And what can it do for your?
The business plan is the structured systematic overview of the planned start-up project in written form with a planed horizon of usually three to five years.
It includes, in a holistic way, the idea of the foundation and thus forms the basis for the implementation of the business idea.
In other words, the business plan is this, a document that maps out the company's strategy for success.
Can you see why they are important?
It is understood that future development is only a possibility, thus anticipation of, and actual development, is therefore not a guarantee but a goal. There can be not only deliberative, i.e. deliberate, strategies, but also emergent strategies, that is, those that condense due to unintentional insights. This waste of potential such as emergent strategies cannot therefore be foreseen or planned. They can be neglected, however when we regard the business plan as the only planning instrument that can take into account all possible developments is therefore extremely detrimental.
For this purpose, the planning would have to be supplemented with the scenario analysis, but this is also not possible to take into account strategies that arise over time and due to the compression of unintentional orders.
To get the benefit from a plan while remaining flexible you need to focus on several different functions of business. It is easy to focus solely on planning – this would not make sense when planning the company – there must also be room for exploration and learning curves. A well-founded business plan is the basis for a systematic consideration of the company and thus of continuous control.
This focus is not correct.
Not entirely at least.
The following advantages are often mentioned in literature when shaping a plan:
- Partial or full review of the business concept, meetings for all Deal/No Deal decisions
- Improve the range of services in the start-up stage
- Find other, better market opportunities or founding ideas
- Anticipate requirements/needs that need a certain lead time
- Anticipate potential problems of the founding process
- Preparation and thus accelerating future decisions
- Inclusion of external suggestions for improvement/feedback
- Better understanding of common tasks
- Think about the foundation – how it promotes the learning process
These advantages are juxtaposed with another set, one which is also often mentioned:
- Opportunity cost of time to gather information
- Changing environment conditions make existing information obsolete and require planning to be adjusted
- Danger of reinforcing misconceptions about the future and making bad decisions as a result
- Risk of being discouraged by emerging complexity/difficulties
- Labor-intensive activity without real feedback whose effect becomes visible only later
- Discouragement from external criticism or exposing weaknesses
The important distinction between the business plan and the business model is to recognize that, during the development of the business model, the benefits are put first, while the business plan only serves to help others convince the business model.
So, and this is the crucial thing, the business plan is basically just an instrument for convincing others of the validity of your idea. This is also understandable because the business plan is the document that is handed over. While the founding team should be more convinced of the business model than the actual plan, others need to be more convinced of the business plan. The fact that the business plan is therefore a record of earnings of the business model should therefore be taken for granted.
When professionals collaborate it is the the opinion of the company founders themselves, the knowledge of the industry which is a key factor in the success of the business: When asked which factor they consider is particularly important for the success of the company, industry knowledge weighed the highest on the list. A competent management team came next, followed by innovation, financing, business plan and placement in the market.
Weigh the following considerations following hypotheses that the importance of a business plan determine future business success:
The hypothesis that: An above-average business plan indicates an above-average successful business.
- The number of analyses during formation is related to the company's success.
- If the competition analysis had a positive influence on the foundation, there are likely to be fewer discrepancies later.
- The more intensive the planning, the more successful the company.
- The more realistic the planning, the more successful the company.
- The more diverse the targets of the business plan, the more successful the company.
All of these have been rejected. And the last has actually proven to create a negative connection. Meaning that the more diversity will lead to a deterioration in the relationship between the plan and success.
The importance of detailed planning of the business results in certain periods where it should be considered less significant than the founders attempt to create a successful business model in the market.
Thus, it is less to follow the approach in order to merely increase access. A business plan should therefore be used as a tool to persuade and strengthen the assumptions of the model since they are subject to a continuous review.