Is the Traditional Business Plan on the Way Out?
For generations, business experts have expressed the supreme importance of having a well-written business plan prior to actually getting the business off the ground.
The business plan was always considered the de facto document required in order to start a new business, and for the longest time, business owners were told to not even think about speaking with lenders or investors if they did not have one of these documents in hand.
But times are changing, and more and more investors are looking to other factors instead of the traditional business plan when considering a business’s potential. So why is this shift happening?
Here are the three main reasons business plans do not hold the weight they once did, and why choosing to build your business without one might be the right thing for you.
#1 – Business Plans Are Static
Because today’s business landscape is constantly changing, it is becoming more important to investors to know how a company can build and adapt their concepts on the fly, rather than reading a static document that focuses on a snapshot in time.
A savvy investor will look at how a business has evolved from Point A to Point B, and in most cases, how the business got there has little to do with the route outlined in its business plan.
#2 – The Financial Data in the Business Plan Is Usually Useless
Business owners spend hours and hours researching and devising financial formulas for their business plans, but these formulas ultimately mean very little to the investor. If anything, all that the investor is being told by the compiled financial data is that the business owner has a basic understanding of business finance.
It tells the investor nothing about how the business will actually make their money. Instead, some investors would rather discuss income generating methodologies with the business owner, so they can get to the heart of the matter as to how the business owner plans to handle certain obstacles and challenges.
#3 – Investors Would Rather See Than Read
Is it easier to learn how something works by reading about it, or actually being shown how the thing works? Because most people prefer visual learning over reading, a demo is often much more informative to an investor, than reading a business plan that describes what the demo actually shows.
If the investor cannot grasp the idea or the potential after seeing it, then how do you expect them to understand it by reading about it?
Owning your own business is not easy, and often obstacles you never anticipated can rear their heads and throw a kink in your plans. Adhering to a static business plan may not give you the flexibility you need to avoid these obstacles.
It is the business owners who are always looking one step ahead, and who have a Plan B at the ready should they need it — these are often the ones attracting the investors these days.