3% of all business owners make 84% of all private biz income. Why? They’re not covering for unknown weaknesseses.
A Business Plan Will Not Make You More Successful
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This article was published on June 26, 2010. So far, 4 people have left their thoughts. Share your own thoughts.
Palo Alto Software, which makes business planning software, just did a survey to their own users to show that those who completed business plans that they started with Palo Alto were nearly twice as likely to successfully grow their businesses or obtain capital as those who didn’t finish.
This research is a classic example of “there are lies, damnable lies, and statistics” (stolen from Twain who got it from someone else). An even more reasonable conclusion – people who DO SOMETHING and follow through on it are twice as likely to successfully grow their business.
My second book (to be published in December 2010) is titled “Bad Plans Carried Out Violently” and promotes the idea that DOING SOMETHING trumps pre-planning almost without exception. I’ve talked with hundreds of successful business owners and asked them two questions:
- Did you do a business plan before you started your business?
- If you did, how well did it project what actually happened over 1 yr, 3 yrs and 5 yrs?
The number of successful business owners who do a business plan before starting their business is statistically insignificant – well less than 1%. The only reason the small minority gave for doing one is because they had to in order to get money from a bank or investor (almost no one does one just for themselves). That should tell you something about the classic “pre-planning” Business Plan we’re all taught is so important.
Of those very few that did do a Business Plan before starting, virtually none of them say their Business Plan projected accurately what actually happened in the next 12 months, or 3yrs or 5 yrs. To the contrary most said their Business Plan was wildly off from what actually happened in the real world.
The conclusion is that successful business owners don’t do a classic Business Plan unless banks or investors are involved, and that they never look at it after that. So it has real value for getting a loan, but not for running a business.
Stop planning and get moving! Do a simple 2-page Strategic Plan and revise it every month with the input your business gives you – you’ll be better off.
“Committed Movement in a Purposeful Direction” and “Implement Now. Perfect as You Go.” – two concepts from my next book – are much more instructive to success than pre-planning. Knowing the end goal is extremely important – knowing beforehand the path for how you will get there is fortune-telling.
See the new book from 37Signals called Rework for others affirming this as well.
Add Your Own
Thoughts
John Wren
06/28/10
I agree, Chuck. Successful startups almost never do formal market research or do formal strategic planning. This has been confirmed by the research of Dr. Amar Bhide whose book The Origin and Evolution of New Businesses has been called the most important book ever written about startup. I have yet to meet anyone with the Small Business Administration who has read it.
Chuck
06/29/10
LOL – If you look at the SBA site for recommendations on what a startup should do first, there is plenty of advice on how to develop a business plan, but virtually nothing on how to actually get moving.
Chuck Bartok
07/01/10
Good points..
I have always been a SMALL business person….
But have found, over past 50 years, success was easier with a Plan of Action, Immediate Massive Action.
Of course each new project was easier than the previous.
And stayed away from Borrowed Capital.
Good plans, reasonable Projections, and modest lifestyles made that VERY doable.
Investing in self offers great reward
Chuck
07/02/10
Chuck, great comments, especially your commitment on “Immediate Massive Action.” There is such a strong pull to ignore that in our business culture and all the traditional sources of “wisdom” on business are all in their pitching their “think, research, plan, contemplate, plan again, research some more” modes of business. Those who have been successful know it doesn’t work, unfortunately there are hundreds of thousands of new business owners every year who are pulled in by the apparent “logic” of it all who end up in the paralysis of analysis.
But if experienced business owners like you keep sharing their stories, we’ll be more successful at saving new owners from sitting around and dreaming about what could be.
Lennie Rose
08/11/10
The most confusing time of my biz life came after I planned for my second company! I just fell into my first biz..no plans and it grew just fine. During that time I identified a need in the market, started the planning, the saving, the building and it all seemed perfectly sane…..until it hit reality!!
Here’s the CHAOS MODEL.
You get a biz idea – light bulb! (left hand open)
You see it as a fully operational biz (right hand fist)
In the distance between them you begin your linear, planned journey, which lasts for two seconds until you hit the Spaghetti Bowl.
If you make it through the chaos you relize you need to go back to ideation, stay operantional AND navigate more Spaghetti similtaneously.
This is a journey I think we can improve on!
Chuck
08/11/10
Lennie,
Great comments – might want to interview you for my new book. :)
I believe we really only need to know three things to put together a great plan.
1) Where I am (a sane assessment of where I and my company are right now)
2) Where I want to go (including time when I expect the company to be there)
3) The next few steps
It’s how a stream gets to the ocean, how Frodo got to Mordor, and apparently how you were successful at your first business. The problem with the planning that you did for your second business is exactly what I want to address in this book. All that planning in an Ivory Tower simply leads us in a direction that has no basis in reality until we finally stop planning and let our plan intersect with the real world. Instead we should do a little planning, start moving, get some feedback and change directions, move some more, get some more feedback, move some more, etc. “Planning” as we go is so much more effective.
Thanks for sharing your story here!