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Paul Burri: The Business of Business Plans
Writing a business plan is all the rage now. Almost everyone you talk to about business advice is sure to ask if you have a business plan. If you don’t, you will usually be advised that you need to have one. I won’t tell you yet whether I agree with this advice, but I did have a thought about them just recently.
I wonder if the Wright brothers ever had a business plan. Or Henry Ford or Louis Chevrolet. How about Dr. Richard J. Gatling? Or the man who opened a shoe store in my neighborhood in the Bronx in 1947?
As near as I can tell, the current rage for having a business plan began in the 1950s, probably as an extension of establishing budgets for various enterprises. This was also a time of business expansion immediately after World War II. I can only assume that before then, creating a business plan was done only by major companies and only rarely by “the little guy” who wanted to start a blacksmith shop or a delicatessen.
Interestingly, my research also uncovered the fact that in 1992 in The Wall Street Journal, no less a business wizard than Peter Drucker voiced his opinion against a business plan on the grounds that the uncertainties of terrorism, global warming, increasing populations, growing shortages of natural resources, etc., made most business plans an exercise in 10 percent reality and 90 percent hopeful speculation.
On the other hand, most people would agree that one can hardly do anything without some sort of planning. Want to go on a picnic? Better do some planning first. When will we go? Who will go with us? What food should we bring? Whose car will we go in? Will it rain that day? So it’s hard to argue against making plans of some kind for any activity.
For something as important as starting a new business, I guess I have to vote in favor of writing a plan — a business plan, if you insist on calling it that.
Here’s my problem with the people who tell other people that they need a business plan before they go into business. If the person were to ask why they need a plan, the response usually would be that “no bank will give you a loan unless you have a business plan.” True enough.
So the prospective business owner goes off and spends a lot of time creating an inadequate — at best — business plan. As a friend of mine says, “Asking a person who has never been in business to write a business plan is like asking me, who is tone deaf, to write a concerto.”
The truth is, no bank will give a loan to a “newbie” businessperson without a business plan, but it won’t give the person a loan with a business plan either — because he or she lacks business experience and is too great a risk.
My advice? Write a business plan, but do it for the right reason. Write it as a reality check that, if done correctly, will force you to look at all of the possibilities and rewards, as well as all of the costs, “what-ifs,” risks, potential mistakes, money and resource requirements, ad infinitum. If after doing that you still think it’s a great idea, then start thinking about where to get some outside advice and how to finance it.
And forget about asking your mother if she thinks it’s a good idea.
— Paul Burri is an entrepreneur, inventor, columnist, engineer and iconoclast. He is not in the advertising business, but he is a small-business counselor with the Santa Barbara chapter of Counselors to America’s Small Business-SCORE. He can be reached at .(JavaScript must be enabled to view this email address).
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