Business is Similar to a game of Chess – Planning ahead WILL and DOES Help with your Performance.
Planning can help your Business grow 30% faster
Research on business growth found that planning improved business performance.
However this study still doesn’t answer the question it raises:
Why would planning help a business that has a few years of history more than one that is just starting up?
The answer most likely lies in the fact that existing businesses know a bit more about their customers and what their needs are than a new start-up does. For an existing business, planning involves fewer guesses or assumptions that need to be proven, so the strategies they develop are based on more information.
Action: Carve out some time to set goals and build a plan for your business. More importantly, re-visit your plan as you grow and revise it as you learn more about your business and your customers.
Business planning is not an activity you undertake only when you’re getting your business up and running or for finance. It should be something you return to, time and time again, to revise and improve upon based on new knowledge.
The Quality of the Plan Matters
But, it’s not as simple as it might appear. Just having a plan doesn’t guarantee faster growth. It’s the kind of plan you have and how you use it that really matters.
It is suggested that start-ups, especially ones building highly innovative businesses, should create shorter, less detailed plans4. That’s because these innovative start-ups are learning new things about their product and customers at a very fast pace and their strategies change more frequently. Simpler plans—lean plans that can fit on a single page—get updated more frequently and are more helpful to these companies because they can review their strategy at a glance.
Meanwhile, more established companies know a lot more about their products and customers and can craft more detailed strategies that are less likely to change as quickly. For these companies, more detailed planning is generally more helpful.
And it’s not just the size of the plan that matters. What you include in your plan is important as well.
These researchers also found that having a plan is less about accurately predicting the future, and more about setting regular goals and making changes to your business as you learn more about your customers and the social and economic environment. Silicon Valley businesses like to call this “pivoting.” All it really means is that you need to stay nimble, keep your eyes open, and be willing to make changes in your business as you gather customer feedback and industry and environmental feedback.
Action: Skip the 40-page business plan and instead focus on a simpler plan that defines your goals and documents your customers’ needs. Adjust your plan frequently as you learn more about your business.
Being prepared matters when you’re seeking funding
Entrepreneurs need to have done some planning, in some form, so that they can be prepared to talk intelligently about their idea, their target market, their sales and marketing strategies, and so on.
Not only will business planning help you be more prepared, it will actually improve your chances of getting funded.
Not only will business planning help you be more prepared, it will actually improve your chances of getting funded.
Action: Know your business inside and out. Document your strategy in an internal document, all the time and effort creating a well-crafted business plan document – will come into place.
When you Start Planning is Important—the Earlier the Better
So, if business planning increases your likelihood of success, and in fact helps you grow faster, when should you start working on a business plan?
Starting the planning process before starting marketing efforts and before talking to customers reduces the likelihood that a business will fail.
That said, planning should never take the place of talking to customers. An ongoing planning process—one in which the plan is constantly revised as new information is gathered—requires that you talk to your potential customers so that you can learn more about what they need, what they are willing to pay, and how you can best reach them.
Action: Start the planning process early. Even if all you do is build out a simple pitch to try your idea on for size, it will help you begin the conversation with potential customers and kick-start your business.
You’re less likely to fail if you have a plan
Nothing can absolutely prevent your company from failing, but it turns out that having a plan can help reduce your risks.
Having a plan and updating it regularly means that you are tracking your performance and making adjustments as you go. If things aren’t working, you know it. And, if things are going well, you know what to do more of.
Action: Build a plan, but don’t just stick it in a drawer. Track your performance as you go so you can see if you’re reaching your goals. Your plan will help you discover what’s working and what’s not so you can build your business.
Your success depends on the type of planning you do
In the end, creating a business plan seems like common sense. You wouldn’t set out on a trip without a destination and a map, would you?
It’s not a question of whether you should plan or not plan—it’s what kind of planning you do. The best planning is ongoing – it’s kept alive and it adapts. It’s focused and flexible.
A business plan is a tool that you use to refine and adapt your strategy as you go, continuing to understand your market as it changes and refining your business to the ever-changing needs of your customers.
I recommend starting by documenting your business concept on a single page – from there, iterate, gather feedback, and adjust your plan as needed. If you are asked to produce a business plan document you can do that – even if it is just one page.
- What has your experience with business planning been like?
- Will you approach the planning process differently in the future?
- Tell us in a quick email of your experience with business planning – the good and the bad.
