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Why you don’t need a business plan



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Why you don’t need a business plan

actionThe small business has always faced a high risk of failure. On average, only one in ten new businesses survives beyond five years. Reasons for failure vary widely: from poor planning to inadequate resources, heavy competition, unwanted products and even pure bad luck.
Most of the time failure occurs after a substantial investment of time and money into the business. Even entrepreneurs with the most meticulously prepared business plans or those with loads of startup capital have been seen failing.
The flaw of the conventional startup process arises from its focus on predicting the future. Traditional business plans will show you the entrepreneur’s assumptions based on desk research and guesswork. With so many unknowns, a business plan rarely turns out as predicted. The first contact with a customer usually shows that one’s assumptions were wrong. Boxer Mike Tyson once said about his opponents’ prefight strategies, “Everybody has a plan until they get punched in the mouth.”
No-one can predict what is going to happen tomorrow, let alone five years from now. Yet we prepare business plans predicting cash flows for up to five years. The way things unfold is rarely according to the plan. Unexpected things happen all the time. Many businesses that succeed in the end do so after numerous failures, course corrections and product or service adjustments along the way.
Instead of spending too much time writing a business plan, go out to the market and test your ideas. You try your business model by taking an early version of your product to the market before even completely developing it.
By asking potential users, purchasers and partners for feedback on all aspects of your business model, including product features, pricing and distribution channels, you test your business model theory. The feedback will allow you to revise your assumptions, modify your product and your business model numerous times until you come up with the one that works and is scalable for rapid growth. The emphasis is on customer feedback, which is more important than the development of a product you assume customers will love. You will only need a business plan when you need to approach investors and financiers to raise money to expand your project, when it has proven to be viable.
This article is an excerpt “Creating an Entrepreneurial, Innovation Based Economy is Key to Jobs Creation and Growth”, the feature article in the April issue of BusinessLink magazine.

By Phillip Chichoni

Email: chichonip@smebusinesslink.com

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