The above is titled Don’t Write a Business Plan and I think it makes some very good points. I saw tons of stuff about writing a business plan when i started and how important it supposedly was. But most of that turned out to be questionable.
Contrary to most advice, I made a simple one year plan based on prices and the number of clients needed at that price to become profitable. I then made simple projections about how many clients I would need to get to that point and executed it.
Writing elaborate five year plans seems like a waste of time to me because when you’re starting out, you are forced to make too many assumptions in making the plan.
I think it depends on what type of business you are in. If you’re in a conventional bricks and mortar type business with fixed costs, then yes I’m sure it pays to have a plan on how many customers you will need and how you plan to get them, just to break even. Web businesses that have much lower costs however are harder to predict, and you pretty much have to go with the flow.
Having said that, I still recommend having some type of plan in place, even for the first 1-3 years. Where do you see this business going in your ideal world? If you think it’s feasible, then do what you can to get started immediately (especially if start-up costs are low). After that however, be prepared to listen to your customers and keep adapting where necessary. As you stray from that original plan (which you inevitably will), keep updating it with new projections. Make sure they are feasible though and that you’re not counting on too many unknowns to make a profit.
I wrote a 1-3 year plan for my website when I first started, that I haven’t come close to hitting. I’ve changed business models several times though and have switched to new technologies that weren’t even around when I first started. However I wouldn’t have been able to do so if I hadn’t gotten started to begin with. I know too many people who get stuck in the planning stage and never end up progressing beyond that.
I think the point is to get started or get some idea of your business/industry on the ground first without outlaying too much capital right off the bat. Otherwise it could be a very expensive learning experience, by the time you figure out the way to go you may run out of money.
I think a lot of the importance of a business plan, particularly in the west, is for financing, banking and the like. It may not apply so much over here.
I agree w cfi that it’s dependent on the scope of what your doing. In my experience starting a couple of small businesses, a business plan helps in two different ways: it acts as a checklist for getting the business up and running, and it helps you set out goals and methods to attain those goals over the course of the first 3 months, 6 months, year, 3 years, etc.
I have found that spending a week or two putting together a formalized list and tracking of everything that will need to be done before you spend even a dollar is 100% invaluable (though getting a tax person and a lawyer together may cost a few bucks just to get their input). Then putting that list in order, with details.
The rest of the business plan - how to handle the first few months, what the expectations and decision points are, when to objective decide on a “failure” level (where you decide enough’s enough, no more dumping good money after bad) - is next, then execute the checklist bang bang bang. Takes the horror out of emergencies a little when you’ve already thought of it and had a plan for it.
Going on 2, 3, 5 years on a small business, especially in an environment like Taiwan that seems extra-susceptible to fads and the like, seems like a waste of effort to me (more of a dream) unless it’s a core part of the program - in which case I’d suggest it’s no longer a" small business".
The problem I see with most business plans is that they are too rosy and fail to take in account for bad things. What do you do if you your business is losing money or if your business is only breaking even? What’s your exit strategy? Businesses fail enough or are stopped for any number of reasons and having an orderly plan in place can be crucial for you to get through a rough period like that. There’s also the simple fact that you can open a business without a business plan and find out real quickly that it isn’t going to work because your pricing is way off and your expenses are too high.
In the West they are pretty much critical for any sort of small business financing(if you can get it), hence why a lot of small businessmen use their credit cards as revolving lines of credit.