Is a business plan only required if I need financing?
At the moment, I'm not looking for any outside investment. When I started to put together a business plan, I felt like it was geared mostly towards getting financed. Is it necessary to still put together a business plan then?
Every business can benefit from a business plan -- the exercise of doing a business plan really helps you to focus on your strategy and test your business model. The key to doing an effective plan is to not put it on the shelf when you are done. It is a living document and should be updated annually to keep your business on track. In effect, it becomes your plan for the year. If you are not going for financing, don't be restricted by the formats that are commonly used. A business plan can be informal and still cover all the critical elements to grow your business. It is a road map if done properly. As the old adage goes, you would not begin a road trip without a map -- same for a business. The more you think about how your business should be built, the faster the process can be. Good luck!
If you're not looking for outside investment then you don't have to necessarily complete a formal business plan. The purpose of the plan shifts from trying to convince others about the potential of your business to a mechanism to motivate yourself and help you think through all the aspects of your business.
Because of this you need to think about what approach will be most effective in doing this. For some people they might find it easier to plan using post it notes on an office wall, for others it might be an annotated mind map online and for some it might be a more traditional written plan. So find a method that works for you, remember the end result is not to produce a well written plan it to have a successful business.
Whatever method you choose it's worth looking at a standard business plan to get a framework for the different elements that you might need to consider. Then as Ed says once you worked out what you are going to do, you can sort out an order and when things need to be completed by.
Personally I like the Post It note method as you can move things around and easily add things in and take things out as you business develops. It also makes it very visual which can be great for keeping you on track.
If you are seeking financing a business plan is essential and will necessarily have to be of considerable depth and scope. Without financing I still believe that you need a plan but I think the confusion enters when you define "business plan." From a practical perspective a business plan should serve as a guide that describes 1) what needs to be done, 2) the order in which it needs to be done (think co-dependencies) and 3) an approximation of when things need to get done. Think of the business plan as a road map for you as well as an accountability tool. Many folks do without because they feel it has to be over the top. I truly believe you have to devise it to be an asset, not a weight around your neck.
If you don't plan your business, your diving in the dark.
Your business plan should show you how viable your idea is, including market potentials (assumptions), levels of required effort and financial risk involved.
Someone is investing... always... if you are creating a business. It's a mistake to view your efforts as "free," as any money you spend as "internal capital" (i.e., "free"). Rather, view yourself as the investor... paying you for your efforts and covering expenses. When the time comes for outside investment, you'll then have a real solid basis for valuation, fair division of equity, etc. at least... and you may be driven to different sorts of investors or instruments as a result. In fact, you should (for many reasons, including taxes) be setting up a legal entity (corp, LLC, etc.) for the business and then keeping your accounts separate.
So, do you need a business plan? You're the investor - shouldn't you be demanding one?
The key is to find appropriate levels of formality and detail. You're you - you are probably are OK with a cogent set of notes and/or a good Excel sheet with forecasts/budgets. No need for the formal, bound deck with pretty graphics and carefully edited text! And, in terms of detail, don't stress. I see a lot of very early companies that spend way too much time planning, forecasting, and budgeting when they are not even sure what their products, channels, pricing, etc. will or should be.
The key is to get *something* down on paper - it's a working hypothesis. It *will* change as you learn more about your market and customers, but as an investor, you should demand that your company has some sort of basis for their activity.
In my experience a financial requirement process is successful if it is properly sold. The same as when you try to sell something on the phone, or when you want to sell something in person, or you want to get good rapport with someone, the first seconds are vital.
So in my case, when I need to work in a plan for investors, I always present a word document for the business plan, an excel file for financial figures, and a power point to present the plan for investors. The power point is the first thing I should try to show to investors if I were you, then when they meet to business plan, you have more chances to make them see this they way you want. You have sown them the main things you want they focus on with the power point, and with your strategy stied to seduce them with the "first impression".
The business plan is vital, but the seduction and the strategy to try to engage the investor should go beyond the business plan as a simple document
Every business needs a written plan. You may not need to refine every sentence in the Narrative for internal use. But, DO NOT skip creating a detailed Cash Flow forecast by the month for a year, and then at least a second year. They are magical in predicting what your company checkbook will look like. Too many business start with too little money or deposit less than needed to pay bills. Forecasting Cash Flow and comparing actual numbers to forecast lets you be a better entrepreneur.
There are two types of business plans, one to seek financing and one to keep you on track to run and grow your business. The most effective part of a business plan is to keep referring back to it in order not to get caught up in being like a employee. You as the business owner need to work more ON YOUR BUSINESS not In your business and a good working business plan help tremendously
I imagine you're asking this question because somebody told you that business plans are a waste of time. I wrote an article a while back that dispels the five most common reasons people say business plans are dead: 1) Investors no longer read business plans; 2) Things change too fast; 3) It's impossible to predict the future; 4) It's futile to plan in isolation; and 5) You don't need investors. Read the article for my thoughts on why each of these five reasons fall short. https://www.caycon.com/blog/2012/06/is-the-business-plan-really-dead/
Of course you should have a business plan, regardless of the need for financing. Any business without a WRITTEN business plan is flying by the seat of its pants, and certainly inviting failure. Suggest you "get it on" ASAP, and manage the business for success.