Do You Need to Write a Business Plan?

If you’re thinking of starting a business, virtual or otherwise, what’s the first thing you’ll do? Conventional wisdom says you should write a business plan. But Tom Stemberg, co-founder and former CEO of Staples advises you not get too hung up on them:

“Whatever the plan says, the company will end up looking different,” Stemberg says, explaining that Staples’ original business plan proclaimed the store would never deliver. But competitors began offering delivery and Staples discovered such a service would draw in larger customers. “So we changed course, as all successful companies change course — over and over again.”

However, even though rapid change is a given in business these days, there are still good reasons to write a business plan. Don’t get hung up on them but don’t dismiss the idea of writing one too quickly either.

Venture capitalist Susan Wu thinks that business plans are useful, not because they allow you to fully specify your business up front but because the business planning and writing process itself is valuable:

[Even] though the business you’re pursuing is almost always likely to change and morph into something unanticipated (and in fact, many of the most successful businesses end up nothing like what they started as,) the process of writing a business plan creates a lot of value. I’ve written a couple of business plans for startups that went on to receive venture funding, generate revenue, and have a public offering/be acquired. Writing the business plan was an extremely grueling process that forced me to think clearly about how all the dots of the business connect, and illuminated some of my assumptions that simply did not hold up under scrutiny.

Susan also disputes the idea that the web changes everything so radically that we no longer need business plans:

Yes, it’s particularly true that in this day and age, with the greatly reduced costs of launching and iterating a Web-based consumer business, that writing a business plan may seem old-fashioned. “Why bother, when I can just get a product out there and iterate constantly until I hit upon something that works?” It’s a fair point, but I think the primary benefit that results from writing a business plan isn’t that you get a document in hand that charts the future course of your business – but rather the primary benefit comes from the discipline that the process imparts onto you and the team building that happens along the way.

VC Sean Wise offers five reasons why you need to write a business plan:

  1. Creates a common starting point.
  2. Sets the goals and shares your vision.
  3. Sets the path and identifies required resources.
  4. Forces analysis.
  5. Creates confidence.

… all of which could benefit anyone striking out on their own, not just those with visions of becoming the next YouTube-type wunderkinds. Even freelancing soloists might find it helpful to work through potential problems up front and identify what sort of monetary and other resources could help them to succeed.

What do you think, startup founders and future startup founders, soloists and boss wannabes? Business plan or no?

[In recognition of Entrepreneurship Week USA]