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Why a startup doesn’t need a Business Plan

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Although it became like a traditional norm for any formal Entrepreneur to have a well-documented plan in form of a business plan, its relevance and irrelevance in this 21st century has become a topic of discussion. This article intends to explore why having a business plan could be largely irrelevant for a startup.

It is generally agreeable that a business plan helps an entrepreneur with majorly three things; to help him in the articulation of his vision for the business, to document how he plans to solve key challenges and finally, to help him pitch his business idea to potential investors. However, the validity of these arguments majorly focuses on the positive side while ignoring the other side of the story, which this article intends to present;

Preparing a business Plan is time-wasting

21st century startup entrepreneurs are people who come up with ideas that could be new, innovative and really disruptive to the market. In most cases, the entrepreneurs don’t want to waste any of their precious time. And writing a business plan is so time consuming.  In fact, it takes much time to prepare and overly compile a business plan, as to some extent it requires a certain level of mainstream business expertise. Yet the strength of most startups is that they leverage on a newly founded new niche, which they make a priority to dominate before any word spread out to potential competitors. Following the formal guidelines of a business plan can cause unnecessary jargons, hence compromising the company’s competitive lead position in the newly-founded niche.

The actual vision of the Business is the Founder

In most cases, the founders of a startup hold the vision of a company on their hearts because it is practically something they deeply care about so much. For this reason, there isn’t any need for formal document like a business plan, that outlines the founders’ vision for the business. For example, the approach of Mark Zuckerberg; the founder of Facebook was to primarily focus on growing the Platform’s userbase. So, Facebook’s unprecedented growth of userbase attracted attention and potential investors appeared with suitcases of big money without even asking for a business plan to read.

Potential investors don’t waste their precious time reading it

One of the reasons why business plans aren’t necessary is because investors don’t even read them because they don’t have time to waste. Investors are people loaded with their money. And if you need their attention, they prefer someone who can explain everything regarding a business opportunity in the smallest time possible. When pitching to investors, precision and articulation matter to them.  So, when you present them a 40-paged business plan document, they aren’t going to read it because they don’t have time to waste. This is why an investor pitch deck is the perfect alternative to a business plan. With a pitch deck, the founder of a startup gets an opportunity to present a business idea or product in front of prospective investors. Typically, a couple of PowerPoint slides are used to showcase the company’s products, technology, and team to the investor. This is works more efficiently than presenting a multi-page document, which nobody is willing spend their precious time reading.

Mostly offer static and rigid perspective of the business!

The business climate keeps changing due to unpredictable economic and political circumstances.  And business plans are known for an authoritarian and totally optimistic perspective that convinces the reader that there is no room for uncertainties in business. For example, business plans mostly look at the future with a rigidly optimistic perspective, neglecting the fact that anything can happen any time that could change consumer behaviours in the target market. This lack of flexibility leads to miscalculations if uncertainties like the change in the economic and political environment occurs. In other words, business plans tend to focus mostly on the good side of the business opportunity, while sidelining the fact that things like inflation could occur at any time. Even the political atmosphere can change, something that would be unfavourable for the business.

Centered on one-man’s approach

The other reason why a startup doesn’t need a Business Plan is because of building a business approach based on one man’s understanding. Startups are businesses with potential to grow into big companies. This means that as the business grow, the company stops relying on the sole wisdom and guidance of the founder; who might also be the sole architect of the business plan. When a startup adopts a business plan, almost 80% of the content are formulated based on the sole understanding of the founder. This overestimation of the founders’ potential to solely guide the company result into serious managerial or even technical miscalculations. A company is a place that comprises of a diverse community of people with potential to contribute different ideas, essential to the success of the business. And yet formulating a business plan as an official guiding document eliminates the possibility of leveraging on this wealth of diversified ideas from different people in the company.

Effective business planning should not eliminate or even undermine any useful input from various players, whether internal or external. Views of other staff members and those of potential customers are equally important in influencing the process. A broad range of input can ensure that important blind spots are not overlooked, and can also ensure buy-in and support from key constituencies essential to the success of the business.

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