The general narrative is that every entrepreneur needs a business plan. As much as that somehow primes most entrepreneurs to come up with business plans (which is a good thing) it is not entirely true. There are obviously those who need business plans but there are also those who do not need them. To get rid of confusion we shall delineate this subject by laying out those two sets. We shall not only classify but we shall also explain i.e. why a particular set either needs or does not need a business plan.
Who Needs A Business Plan?
So many people actually think that business plans are solely meant for startup entrepreneurs. The reason it is like that is because business plans are mostly drafted by startup entrepreneurs. Startup entrepreneurs usually have great business ideas and yet lack sufficient funding. Thus they draft business plans that they will use to approach prospective investors or financiers. Though the landscape is evolving and some no longer require business plans in particular, most still require a well written business plan. If you happen to be an entrepreneur who is starting out or looking to start out you need a business plan. It is best to be prepared regardless of the fact that in some cases it might not be requested.
There is a risk factor in bankrolling any business idea. Startup entrepreneurs are subjected to rigorous assessments because of that risk factor. No wonder why the business plan is requested for in that it can be used as an avenue to ascertain the potency of a business idea.
Entrepreneurs Scaling Or Pivoting Their Businesses
We are in the thick of the industrial revolution – things are fast-paced and there is rapid change. It is because of such an operating environment that pivoting or scaling is commonplace. Scaling has to do with increasing production levels or product range – anything that constitutes an increase in business operations. Pivoting entails tweaking a business in a way that enhances it – it can be in terms of revenue, profits and the like. This can be done through various approaches depending on what is being leveraged on. Pivoting is often necessitated by developments in the operating environment or the business itself.
The ‘pivoting’ simply means you make adjustments but still ensuring you remain firmly positioned. For example, pivoting can involve introducing a new product or new products. When scaling or pivoting occur, certain things that initially held true from the onset might change. Both scenarios also would require capital injection in order to see the light of day. It is for that reason that entrepreneurs dealing with either scaling or pivoting might need a business plan. This is because they would want to seek funding from prospective investors or financiers. This would not be surprising because scaling or pivoting can be in essence seem like starting all over again.
Who Does Not Need A Business Plan?
Financially Self-sufficient Entrepreneurs
If ever there is someone who does not need a business plan, it is the financially self-sufficient entrepreneur. This stems from the fact that business plans are primarily meant for fund-seeking initiatives. Such an entrepreneur can draft a business if they want to – but it will not really be a need or necessity. A financially self-sufficient entrepreneur can come up with a business plan that they would use as a reference document. That seldom happens though because drafting a business plan is hectic as it is so not having to draft one is most welcome to many.
The One-Man Band Very Small Scale Entrepreneurs
There are entrepreneurs who start or run very small businesses. The businesses will be so small that the owner will literally be running the business solo. There are so many businesses like these all over the world. In most cases the entrepreneurs in question will not even be well-versed or even aware of the technical dynamics of running a business professionally. Such entrepreneurs are all over especially in countries that are experiencing economic challenges.
There are countries where the informal sector is most active than the formal sector. It is in countries like that where you will find most of these one-man band small businesses. Aside from some of the aspects we have mentioned, one other reason can be lack of access to business financing. This is for a number of reasons some which are lack of structure in the business, high risks involved and lack of collateral. Due to that lack of access to financing these types of entrepreneurs never get to a point where they need to draft a business plan.
One From Which None Is Requested
This might sound obvious but it is important to discuss some things on this. The general assumption most entrepreneurs make is that a business plan is a must-have. Such an assumption might be wholly wrong but the truth is there are times when a business plan is unnecessary. Since they can be unnecessary it would be good to know when it is not needed. This calls on entrepreneurs to ensure they check with the people or institutions they wish to approach. Supposing an entrepreneur has identified a prospective financier they think could fund them they must find out what they would want. They could be surprised to find them just wanting a one-minute pitch to make their decision. Due to this possibility it becomes apparent that there are times you might not be requested to present a business plan. It is good to know this beforehand so that you do not waste time preparing one.
Surveys have shown that there is broadly no significantly attributable difference between the success level of businesses based on whether or not they had or have business plans. You do well to have a well-written business plan; that is noble. However, you have to weigh the merits of your context since you might not even need one. That is why we did this article to guide you in noting who needs one and who does not.