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Business Plans: Should I Write One?

by lyn christian on October 13, 2009

BusinesswomanIn October 2002, Inc. Magazine’s contributing editor, Sarah Bartlett wrote an article titled Seat of the Pants. Her goal was to publish the findings to that year’s survey of Inc. 500 founders. They were asked if they had written a formal business plan before they launched their companies.

The results:  Only 40% said yes. Of those, 65% said they had strayed significantly from their original conception, adapting their plans as they went along. In a similar vein, only 12% of this year’s Inc 500 group said they’d done formal market research before starting their companies.

Sarah interviewed Amar Bhidé, a Columbia Business School professor whose research on the subject is encapsulated in his book The Origin and Evolution of New Businesses.  She asked:

“Why would people who are starting up companies not bother with business plans?”

The answer involved several factors and here they are summarized from Bhide’s responses:

“Many, if not most, successful businesses get started in fields that are characterized by high turbulence or change, change that is not being generated by the entrepreneur. It’s exogenous (originating from outside) change. And in those kinds of fields there’s very little information available with which to write a business plan.

Secondly, when things are changing rapidly the time you would spend on doing the analysis or the plan is incredibly costly because many of the opportunities are fleeting. You know the type. If you don’t seize them immediately, they’re gone. So in these highly turbulent markets the benefits of writing a plan do not out-weigh the costs.

Thirdly, most of these businesses are started without capital, there’s very little downside to being wrong.”

Use this blog as discussion material within your company, or the topic of a lunch meeting with one of your mentors. What is the status of your business plan? Do you need to change that status?

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About the Author: Lyn Christian is the founder of SoulSalt Inc. a coaching and coach training company. She is passionate about the “free-agent” worker who wants to earn their living and live their lives by doing what inspires them. Get more information  by visiting www.soulsalt.com .

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