Business plans have been around for a long time, helping companies set strategic goals and find qualified investors. While the format and purpose of business plans have undergone continuous changes over the years, they are nonetheless crucial for all businesses.
However, many entrepreneurs often question the need and usefulness of business plans, leading many to forego them completely.
Today we’ll take a look at the seven most common myths entrepreneurs have about business plans and why you should avoid those fallacies.
Myth #1: You don’t need a business plan
One of the most harmful myths about business plans is that you don’t need one at all. This is usually related to the idea that business plans are only a means to get investment. The thinking goes that if your business doesn’t require investment, you don’t need to make a business plan.
That cannot be further from the truth.
Business plans are also for investment, but not primarily so. Its primary purpose is to help you strategically determine the goals and missions of your new business. Having one in place will also help to align employees into one comprehensive unit.
Yes, you need a business plan, and with so many business plan guides available, there’s no reason not to have one that is comprehensive, succinct and effective.
Myth #2: All you need is a well-written plan
This particular myth is based on the idea that the aesthetics of a business plan are enough to make it valuable. While it’s important that your business plan has impeccable grammar and spelling, a business plan that rests primarily on its beauty rather than its substance will be worthless (i.e. badly-determined goals, a lack of a cohesive strategy and weak numbers) and surely tank.
Your business plan should find that balance of great research, numbers and presentation.
Related: How to Write a Business Plan
Myth #3: Business plans are only for investors’ eyes
This particular myth is connected to the first one: that the only people who read your business plan are investors.
This idea has no real ground to stand on. The main purpose of a business plan is to put your company’s strategic goals all in one place, including the steps necessary to achieve those goals. It also states your company’s missions, management, structure, financial status and forecast, amongst other things.
Looking at it from this perspective, the business plan is first and foremost for the primary stakeholders of the business: the owner and its employees.
Myth #4: Create your business plan and forget about it
Oftentimes, entrepreneurs take a long time and put in great effort to create their perfect business plans. They crunch the numbers, spend their time and energy on presentation and then completely forget about it. This is a major mistake. Your business plan, like a constitution, is a living document and should be adapted and reviewed frequently. If you expect your business to change in many ways, your business plan should change along with it.
Myth #5: No one will actually read your business plan
This myth comes from a common belief that most investors won’t read your business plan at all, or if they do, they don’t spend a lot of time on it. This is another big mistake.
Typically, investors won’t bother to read the entire business plan if the executive summary doesn’t pique their interest. However, if you’ve worked hard on your business plan as a whole and have created a compelling executive summary, potential investors will do their due diligence by examining the business plan in great detail and ensuring that the company is worthy of investment.
Myth #6: Your business plan should be long—or short
This is a particularly ridiculous myth that values formality over the actual function of a business plan. It comes in two particular versions.
Version one states that in order for any investor or future partner to take your business plan seriously, it should be long-form, wordy and full of data. Not only will the length alone show that you’ve done an adequate amount of research, organizing and planning, but that you are professional and therefore worthy of investment.
The second version states exactly the opposite: that the longer, traditional version is actually outdated, and that modern entrepreneurs prefer to cut to the chase and look at just the facts without a lot of frills.
Of course, both of these versions are misguided. Their core assumption is that business plans come in a one-size-fits-all variety. If there is no single form for businesses, why would there be a single form for business plans?
Depending on your company, your business plan will either be short or long, or somewhere in between. The only important thing is that the plan has the correct information and structure.
Myth #7: The most important thing is the presentation
Although similar to myth number two, this myth is actually more egregious in that it assumes that your actual business plan doesn’t count for much at all. In fact, the most important thing here is the presentation about the business plan, rather than the actual business plan.
The proponents of this myth are so focused on creating an attractive, eye-catching, exciting presentation that they forego the actual building of a great business plan.
If you can avoid making the above mistakes, you’re more likely to have an excellent business plan. And with that, your business will stand a greater chance of not only surviving, but succeeding.