Which business plan do you need?

Most small businesses are operating without a useful business plan.

Yeah, I know: you’re absolutely shocked by this revelation. There’s a good reason for this, though.

Many businesses started because the founder was passionate about an idea, tapped some resources and found a willing customer base. A company was born, and things grew incrementally from there.

If you think about it, that’s a bit of a plan. It may fit on a bar napkin, but it can be incredibly powerful because it’s simple.

After you get more successful, you realize that there are many parts of your business model you didn’t address. To sustain your early success and grow, you’ll probably have to create a real business plan.

That’s where your anxiety sets in.

All the experts tend to point to a real business plan that reflects tons of research, and is probably 30 to 50 pages. When you finally get through all the work, you realize that it’s already obsolete because the market has changed and you’ve had to adjust on the fly.

This is a “fragile” business plan, because any of a thousand occurrences can make it obsolete.

You might need to get to that kind of depth if you’re looking for external funding or want to sell the company. That’s not a problem, as long as you realize that it’s not a great tool for making effective decisions going forward.

Usually I take a much more practical approach with my clients. We have a one-page strategic plan which is centered around taking focused, useful action – and, yes, it really fits on a single page. That’s because it’s about prioritizing action and progress, not about describing the business.

Another succinct format, often used by startups, is the business-model canvas initially proposed by Alexander Osterwalder. This is much more of a one-page summary of the business, and can be incredibly useful for rapidly iterating through changing proposals.

The depth you put behind it depends on how you’re going to use it. During the early stages, when you’re trying to flesh out and compare ideas, a business-model canvas may only reflect a few days’ worth of work. As you focus in on one idea, though, the canvas becomes a summarization of weeks and months worth of investigation, evaluation and decisions. It’s backed up by a range of other documents, spreadsheets and reports.

When you’re looking to make proposals targeted at business investment, you’ll find many examples of formats which coalesce a full business plan into 5 to 10 slides. The TV show “Shark Tank” doesn’t like to use PowerPoint because it’s not as entertaining as verbal jousting and product demonstration, but you can see that they cover the same topics usually conveyed through a slide deck. Realize, too, that the 10 minutes you see on the show is condensed from a discussion which may extend for a couple of hours.

When you grow your business to have departments and layers of management, it will be useful to develop multiple documents reflecting that structure. There can be product-line business plans and function business plans.

Your most important activity is to reconcile these with each other and the overall company plan. That’s a lot of work, but is the only way you’ll find critical gaps between the various groups.

The way to avoid developing a “fragile” structure – one which is obsolete as soon as it’s written – is to focus primarily on the larger goals, priorities and culture. Within that structure, people will be more free to use common sense and experience to make their day-to-day decisions.

You’ll also identify the core enduring processes of your company. When it’s important to keep a process stable and predictable, it’s worthwhile to spend the effort needed to create it and gain buy-in from all the affected parties.

Of course, a process is only stable when the goals and priorities driving it don’t change. When that foundation shifts, it’s time to re-examine your core business processes.

Are you reluctant to start your business planning activities? Don’t be. Just know how much of a plan will be truly useful for you and make practical tradeoffs. Even one page can be tremendously useful.

Carl Dierschow is a Small Fish Business Coach based in Fort Collins. His website is www.smallfish.us.

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