A recent article posted on Bloomberg Businessweek commented on a new vein of entrepreneurship on the rise. Steve Blank teaches at UC Berkeley’s Haas School of Business, and has developed a unique “learn from failure” course format whereby his students set up businesses and learn from their practical experience. The course looks to be groundbreaking.
The title of the article really peaked my interest. I’m not convinced Mr Blank is saying that a business plan is useless in this “Facebook Age”. But it seems that the premise of the article is that you don’t need to write a business plan before you start a business. That’s my take from it anyway.
If you think about it, this view is not new. Most entrepreneurs hit the ground running hard with a new idea. In my experience, entrepreneurs are “doers” so they get out there and “do”, rather than wait to write a business plan before embarking on their venture. Often this approach works and often it doesn’t.
The Real Value Of Writing A Business Plan
But the real value of writing a business plan comes in when that business venture needs external funding. That’s when the entrepreneur is going to have to buckle down like everyone else, and put their dreams and actions into words and figures. No matter how good they are at building a business, it’s at this point that they need to convince a third party of this very thing. And the only way to do that is with a good old-fashioned business plan.
Now it may be argued that Mark Zuckerberg never wrote a business plan for facebook. But if he had to get a bank loan, he sure would have had to. And take it from me, when he listed his company he would have paid a small fortune to advisers for the preparation of an Information Memorandum…. Ahem… Excuse me, but that’s just finance talk for a business plan for retail equity investors!
There’s always a place for the business plan
In a traditional sense, I am of the firm view that all businesses need a business plan if they are going to seek funding externally. They are a great idea too, for formulating the forward strategy of a business. While they are not critical if there is no funding being sought, they still have a place. I’m not saying don’t start a business until you’ve written a business plan. I’m just saying that at some point a business plan can add real value by providing a platform for assessing each and every part of the business and the external environment, and using that assessment to enhance and grow your business.
Nothing takes away from the value of practical experience. But there is always a place for the humble business plan. Not least of which is how it can guide your thought process beyond what’s just in front of your nose. Maybe that’s something that today’s business students should bear in mind.