Saturday, August 5, 2017

6 Situations Where A Business Plan Does Not Add Value

startup-business-plan-creationWriting a business plan is hard work, so I get lots of pushback from prospective new venture founders that it’s just a waste of their valuable time in this rapidly changing environment. They all claim to have the plan in their head, and writing it down will only slow down their success. In my experience to the contrary, first-time entrepreneurs without a written plan almost always fail.

On the other hand, if you just sold your last business for $800 million, no investor or advisor is going to ask you for a detailed plan on your next one. A good executive summary, backed up by a few PowerPoint slides should be more than adequate. Yet it’s interesting to note that most serial entrepreneurs don’t hesitate to create or ask for detailed business plans on every new venture.

They realize that a written business plan really has the most value to them as the founder, since most mere humans can’t build a complete plan in their head, and the real-time costs for items overlooked or forgotten can be huge and time consuming. The written plan also is extremely valuable in communicating all the required elements to your team and strategic partners.

For the rest of you who might still be skeptics, or are not quite sure where to start, I will outline the situations where I believe a written business plan makes the least sense:

  1. You are a solo entrepreneur and your solution is still evolving. It may be too early to even know for sure that you have a product to sell, or you are still experimenting with different business models. Since you are the team, and you are not expecting any investors soon, don’t bother with a business plan. Investors classify these as hobbyists.

  2. This is not your first rodeo, and your investors know you well. If you have a proven track record, your previous investors don’t have to see a written plan to believe you can do the job again. In fact, they probably don’t want you to write down the plan or distribute it to other investors, for fear of losing their opportunity or negotiating down their share.

  3. You need money, but plan to get it from friends and family. These people are investing in you, and they probably don’t have any experience evaluating business plans anyway. I wouldn’t do one, unless your rich uncle is an accountant, or has his own business. For your friends, all the issues in a good plan may actually scare them away.

  4. You plan to use crowdfunding for validation and funding. Like attracting friends and family, crowdfunding requires a marketing focus, and work on a business plan could be distracting. In fact, all the project preparation, promotion, and feedback from your results will be great input for the more detailed execution plan (business plan) you need later.

  5. You intend to license your technology to a major player. In this case, you really are not starting your own business, but you are negotiating a single big transaction to one or more “customers,” who will in turn integrate your solution into their existing business. To the extent it is possible, you should focus on their costs, timeframes, and benefits.

  6. You know little about business and intend to find a CEO soon. Spending time on a business plan at this stage may indeed be a waste, since you don’t have the experience to know what to put in it. I also don’t recommend buying any of the cheap freelance plans you find on the Internet. Bring in the business partner first and task them with the plan.

Of course, building a plan is not a substitute for first interacting with customers, investors, and industry experts. There is always value in getting to know your customers directly, iterating on a minimum viable product, and experimenting with different business models to find the most attractive business. Writing down a plan before you know the basics, benefits no one.

My sense is that not writing a business plan is more often an excuse rather than a time saver. Building a business is a long-term non-trivial task, like building a house. Would you commit results or start spending, without a detailed plan, to build a house for your family? In my view, you should treat your new business with the same respect.

Marty Zwilling

*** First published on on 07/19/2017 ***




  1. As a business consultant, I can't think of any venture that in some form doesn't require a documented plan. Nothing happens without a plan... except what happens TO you because you have no control. I've climbed high mountains, kayaked far into the wilderness and ridden long bike rides. I've designed critical parts for automobiles and raised large sums for charities.... but none of this happened without a good plan with all the right elements... a business plan. I have a comprehensive template for my clients' business plans and that serves as a great checklist for the key things you need to have in order to make your business successful... or the corollary - without which it will fail. I have worked with clients to obtain financing from government programs who did not have business plans, and in the end we had to create and write it. The plan makes sure you have researched your market, developed a rational pricing strategy, know your competition, know your bottom line (a proforma that meets your financial goals), have thought about who you need on the team and what they do, etc. Furthermore, a living business plan operates as a point of reference for your team - it links their activities into the overall plans and goals of the enterprise. It needs to be specific enough that the true nature of the company is described which this ensures that any weaknesses are dealt with and any strengths are capitalized on. Business plans don't need to be lengthy, they just need to be right. The executive summary is a great document to use for investor solicitation, and part of being investor-ready is having all the elements of the business plan current - a valuable on-going task.

  2. Marty: How about 1 page business plan according to the Lean Canvas process?

    1. It's a good place to start for your own thinking, but not a substitute for a full plan where investors expect it.

  3. Thank for a very smart post. I am not the one who knows a lot about money, that’s why it is great to read someone’s opinion on how to handle money issues. I really thought that the business plan would benefit the development of any type of small business. However, if you put it this way, you really don’t need to plan the business plan if it doesn’t add value. With the tips like this, I won’t need to apply for the OnlineLoanService but will be able to handle all my business ideas alone.