I often get asked what’s the real value of ‘theoretical’ type business planning for a nascent start-up. The question that usually pops up is: why would anyone want to spend time painstakingly planning when circumstances are so uncertain?

Questioning planning is only natural. After all planning takes time, the output is ‘soft’ and generally slows down building the business. I find entrepreneurs to be passionate and impatient and generally more focused on getting things done – I speak from experience because I built, ran and sold two online businesses and neither of them had a business plan!

Nonetheless, I now know that planning is an essential component of a successful business. Planning forces one to clarify three key points:

Extracting many ideas out of our minds is valuable, and so is structuring them under some type of business logic. It forces us to structure our thinking and doing so provides clarity, purpose and focus all of which save time and money. After all, why bother running if you are heading in the wrong direction?

How much business planning needs to be done?

It depends! It depends on how much uncertainty your startup faces. Eric Ries, in his Lean Startup presentation, discussed the different problem, opportunity and solution scenarios a startup may face. These include:

This is a great starting point to identifying the degrees of certainty/uncertainty your business may face and the flexible/ focused approach your business may require. Perhaps the table below can assist.

If a startup knows the problem it is addressing and its solution, business planning should be comprehensive enough to articulate the strategy of getting from A to B followed by a clear plan of action.

However, if the level of uncertainty is High or Very High, planning might be limited to providing direction and clarifying overall intent. There is no point in planning in excruciating level of detail when we just don’t know. This is where Steve Blank’s focus on customer development is key.

In any case, the table above is not an exact science. Nonetheless, it does point out that different circumstances (high uncertainty/ low uncertainty) will require different approaches to planning, methodology and measuring progress.

What if you don’t plan?

Planning does not guarantee success, nor does not-planning guarantee failure. Without planning your business can succeed, however, fortune will play a bigger role than required. Most importantly, lack of foresight and business planning doesn’t guarantee failure, but could lead to missing valuable opportunities – which is just as bad.

So to conclude, plan ahead to manage risk and uncertainty, plan ahead to foresee and avoid unnecessary challenges and most importantly plan not for the plan, but for the exercise of planning.

What do you think?

I’m happy to include some planning resources in a next post if there is interest.

Eduardo

Note from Mick -> Eduardo joined Pollenizer in November as a contractor jumping straight into Blurb and Live In Australia. He did an amazing job picking them up quickly and running them so well for three months. Eduardo helps businesses grow by providing sales and marketing activities. He is part of the Pollenizer family and can be contacted via his blog: www.eduardochavez.com