I was recently interviewed by Sean Wise for an article for the Toronto Globe and Mail about whether or not entrepreneurs still need to write business plans.   His conclusion is yes - and he makes some good points - that while the business plan should be considered fungible, the process of writing a plan is what creates value, because

  • The process creates a common starting point for the entire team
  • The process sets the goals and vision for the team
  • The process sets the path and identifies required resources
  • Writing the plan forces analysis
  • The process can help the team feel more confident about their ideas and strategy

From my perspective, 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. 

 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. 

Sean’s specific question to me was, “But I heard investors don’t read plans, so what is the point?”

Sean writes, “While it is true that some investors, might not spend as much time reading full plans as you would like them to, all investors do read the executive summary, which is of course based on the financial and entire business plan.”

My comment was -”VCs absolutely pay attention to the executive summary…Writing a full business plan helps you conceptualize all of the nuances of your business and this understanding is crucial in helping you succinctly articulate your startup’s unfair advantage.”

But ultimately, the purpose of writing a business plan is not to please some VCs, but to really build a deep understanding of your business and build team consensus around what the vision is.  I’d like to hear your thoughts about how this may or may not have worked for you. 

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