Business Planning: What are the Common Misconceptions?
Go to a business class or education seminar on how to get started with a new product for sale, and everyone will say the startup needs business planning. However, along with that, there are a lot of pitfalls to avoid as well. Some folks learn these the hard way through trial and error. Others learn them from mentors and advice. This column covers some of the more common startup myths that folks should be aware of and avoid per the advice of Utah business law experts, possibly saving valuable time, money and energy doing so.
A Business Plan is a Waste of Time
In a nutshell, a business plan is essential. It spells out what your business does, how it will work, what is needed, who the customer is, what is expected, and where your business will be in five and ten years. That kind of planning forces an owner and startup to really put nuts and bolts together on how to make things happen. It avoids the problem of “winging it,” which often comes with a lot of mistakes and avoidable costs. Additionally, a formal business plan will be needed to get any kind of investment, even private support. People want to know what they are investing in. Without details, they aren’t likely to provide their money.
You Only Need a Good Plan and Nothing Else
Again, not quite true. While very good business planning is definitely an advantage, it is not the only necessity for the success of a startup. Obviously, capital funding is a critical element as well; you can’t make money without investment put in first. That means there needs to be a plan, a product or service to offer, plenty of research and data to support the proposal that the market is ready for such an offering, the personnel and resources to make it a reality. While business planning brings together the concepts with clarity, funding and people make the concept a reality.
Business Plans are Only Needed for Getting Investment
While a business plan is a fundamental expectation from any investor in a startup, the document provides a lot more than just a pitch for funding. The structure of a business plan forces the owner and startup team to fully explain every key component of a business and how it will work. From the marketing strategy that will generate demand and customers to the pro forma statements showing exactly how initial financing will ultimately turn into a revenue-producing operation, business planning requires specificity. It also reminds a startup team about all the components they need to have in place to truly make a business happen correctly. No surprise, good business plans are drafted and rewritten a number of times, testing assumptions and filtering out ideas not ready for prime time. The end product becomes a functional map the business can use to pursue its goals.
A Business Plan Only Happens Once
As noted above, business plans are drafted and rewritten regularly as the business grows, learns, and gains experience. What worked as a business plan when just getting started obviously won’t be the plan for the company when it reaches middle size, and it definitely won’t work when the business decides to become a corporation (Business laws in Utah require a copy for incorporation). Every organizational change is ideally a perfect time for a business rewrite. So, intelligent and savvy company leadership teams regularly rewrite their business plan every few years if not annually.
No One Will Read the Business Plan, So Make it Short
Not only do investors take the time to read the details of a startup’s business plan, nowadays so do the customers. Long gone are the days when a company could get away with just an About Us page on the Internet or a simple company history. In fact, many startups are expected to provide both a copy of their business plan as well as a white paper laying out their operation plan going forward for customers to get on board with their product, especially tech-oriented companies. Information is key, and well thought-out planning is essential, both for marketing as well as galvanizing customer support for growth. There is no perfect size, small or large, for a good business plan but it should have enough detail to properly explain all the critical facets of a business.
Working with an experienced business law group that can help with planning, employment law for startups and even corporate attorney Utah expertise can be a great advantage for a business. The internal guidance provided easily prevents big headaches down the road, and lays out a viable road map as well. Weber Law Group can help with starting a small business in Utah the right way from step one. So, if your startup needs a business law expert in Utah, give us a call and let’s get started making your dream a reality.