The Debate About Business Plans – and Doing Business in the Real World

Does a small-business owner – or a potential entrepreneur – really need to go to the time and trouble of writing a formal business plan?

That’s the crux of an interesting blog item today from the Wall Street Journal.

Rosalind Resnick, a small-business owner and consultant to startups, takes on the idea that business plans are a waste of time. She addresses what she considers the five biggest misconceptions about business plans:

• They’re only necessary for people looking to raise capital from outside investors;

• Investors don’t take the numbers seriously;

• No one reads them;

• It’s impossible to predict the future of a business that hasn’t started yet; and

• Existing companies don’t need to take the time for a written plan.

Resnick makes several compelling arguments as to why a written business plan is a good idea. Not surprising, considering her job is advising people looking to start their own businesses.

But Resnick also addresses what I think is a deeper issue. She mentions numerous times that many people have irrational expectations for what it takes to start a company and how easy it is to make big money. The success of companies such as Twitter, she says, has created the illusion that all it takes to be successful is a good idea and a Web site.

I have to agree. While it’s impossible to deny the extraordinary success of Twitter, Facebook or a hundred other similar online ventures, those ventures are just that: extraordinary. They’re not the norm. Most people looking to start their own business are operating in the real world – the world, as Resnick says, of payroll, inventory and equipment.

We’ve written about so many failed startups that we know one thing: Ideas are great, but they don’t pay the bills by themselves. They have to be accompanied by hard work, dedication … and planning. A business plan shows that a new business owner has taken the time and made the effort to research the market and be aware of what could be coming in the future.

No, business owners don’t have a lot of time to write lengthy plans. And no, owners can’t magically predict what’s coming down the road – but that’s all the more reason to have a plan in place to handle whatever comes along.