Don´t confuse a plan with a document. I´ve seen a lot of confusion lately between plans, planning, and the plan document.Several mistakes are common:
- Not all businesses need “formal” business plans presentable as documents of the kind taught in business schools and revered in the lore of entrepreneurship and venture capital.
- There´s a common misunderstanding, a would-be contrarian view, that confuses not needing a formal business plan document with not needing a plan.
- Some people confuse the plan with the business, as if having a good business plan is the ultimate goal, not having a good business. You can catch this misguided view when you see would-be entrepreneurs resenting investors for turning down their plan. Investors will sometimes invest in a good management team without a plan, but will not invest in a good plan without a management team.
- Some people discount the need for a business plan because key gatekeepers might not read it. Investors these days use a summary memo to evaluate businesses, and if that goes well then a presentation (the pitch), and only then, if things are still going well, comes pouring over a plan. The investors themselves rarely go over the plan, they have analysts to do that.
The danger of these three errors, taken together, is that we end up confusing the need for a formal business plan document with the need for planning in all businesses. This is something like deciding that healthy diet and regular exercise are bad because some people abuse them.
People do get lost in the plan and waste their time. Some spend way too much time developing a plan in too much detail, fixating on document issues instead of content. “Developing a plan” becomes a rationalization for not moving forward, not taking steps. Some people develop business plans that are too general, lacking the important substance content of dates, deadlines, responsibility assignments. Some people develop business plans to overcome a specific hurdle — such as “getting the money” and then drop them and forget them.
The key is that a plan is not always a document. It is not necessarily a document. A plan is a collection of thoughts, future activities, dates, deadlines, projections, and commitments. A business plan might be a formal document, but it might also be a collection of informal documents, spreadsheets, lists, and so forth. You might summarize the plan with a presentation instead of a longer text-oriented document. Ir could be a collection of items, including some text, some budgets, presentations, etc.
And always remember that the measure of planning is implementation, results, not the perceived quality of the document, and not the lack of a document.