Are traditional business plans worth the paper on which they’re written?

 Back in the day, if you were thinking about launching a business of any kind and you wanted your bank manager to take you seriously, you needed to write a fully comprehensive business plan. Today, the start-up landscape has changed dramatically, so much so that traditional business plans are now likely to be out of date before you have even printed them. This is because business plans, as we know them, take a long time to create, so they may find themselves left on the proverbial shelf.

Systems dynamics, some may argue, is a very ‘geeky’ subject right now but it is something people are talking about and I believe it will become the future of business planning. People are less patient today and everything in business is about real-time and immediacy. For example, the future for business plans is in real time forecasting and what is important is the business model itself, and the associated forecast.

Creating a ‘fluid’ plan
Having a robust business model in place along with a watertight forecast helps the start-up to see the risks to its cash flow and can also help them avoid an early dry up of cash and shutdown scenario. Today’s business plan is all about creating a very fluid ‘plan’ around a very detailed model and forecast.

For 2017 and beyond, a business model, supported with a really simple plan that can then link back to systems dynamics will become the tool of choice. When it comes to a focus, for a start-up it’s all about growing sales income, cash protection, and overhead policing. If these aspects are badly managed, it can result in failure for your business.

Where to begin
A contemporary business model is best driven by the finance specialist in the team, something that all startups need if they are to achieve the target of a robust model and forecast. 

Although I’ve launched several businesses over the years, I never really wrote a business plan. I always start with an idea first, conceptualise that idea, break it down into multiple ideas, and then focus on identifying the markets that might be receptive to these ideas, and why they needed my product or service. Following this, I look at business modelling, my ideas, products and services, and customer segments. 

Additionally, I have always analysed my estimations against a standard P&L calculation.  Cash is king and doing this ensures I have solid numbers to work with. The details also tell me what level of capital and operational risk I am getting myself into. Understanding useful things like break-even points and margins of safety are also invaluable before you start to look at building a team and committing to cash absorbing costs – but they rarely come from a traditional written business plan.

Making it relevant
There is an assumption that banks and lenders put too much emphasis on business plans, but they are also very good financial engineers, so if the idea is right and they can see potential in the sector, they might just find a way to justify the capital needed. 

The world, and entrepreneurs are changing, and the way businesses operate is very different to what it was 20 years ago. Just as people adapt and evolve, your business tools and approaches must evolve too. What your business model looks like, and what your business needs to allow it to get off the ground and stand the best chances of survival might need a complete overhaul.

By Jerry Brand, founder of The Brand Foundation

About The Brand Foundation –

The Brand Foundation is a registered charity (no. 1165700) that is providing a free to use, secure online app, to give all budding entrepreneurs with a great business idea, the chance to succeed; regardless of personal circumstances.  Members can register online and model their business idea/s for free using BizKit, a specialist tool that will allow them to forecast their first three years’ trading figures with no future commitment.  The Foundation aims to help individuals avoid the common mistakes that so often lead to start up failure.  

The Brand Foundation is a not for profit organisation funded through sponsorship and upgrade fees to BizTik (an advanced application that provides full funding analytics and offers access to potential funders).