Does Every Company Need a Business Plan?

Every business needs a planning process. You are probably confusing the external formalities of the classic business plan -- carefully prepared and bound, describing your company to outsiders -- with the nuts-and-bolts planning process every business should have.

Form follows function in business. You do things for their business purpose, not for show. If you are using a business plan for internal purposes only, then it's silly to formalize it by carefully writing about things you all know -- the company description, for example, and backgrounds of the management team. Skip that part of it. Limit the plan to what you need for managing your company. You might not need text at all; numbers and PowerPoint slides may get the job done. Cover the main points, including lists of dates and deadlines, responsibilities, and detailed financial projections.

Your business needs an annual business plan and monthly reviews. Use planning to proactively determine your business future and determine, and then follow, the steps from where you are now to where you want to be. Planning helps you focus your efforts strategically to maximize results.

But planning is much more important than the plan itself. The process of planning becomes a management tool. Each year you develop a plan, and each month you compare your actual results to the plan, noting the difference between plan and actual performance. Good managers use the process to regularly revise and review assumptions, check trends, and gauge progress towards strategic goals.

Planning fails when you develop a business plan and then forget about it. Yes, it makes you think and research as you develop the plan, but plans left in drawers are mostly a waste. Planning becomes management when the plan is a living tool that marks your company's path from what it is now to what you want it to become. Fill the plan with specific dates, deadlines, and milestones you can track, then assign responsibilities and focus on priorities.

Thanks for pointing out what is probably the biggest myth in business planning. People do associate business plans with startups. That might be because starting a new company is more romantic than running an existing company well. It might be because startups are today's business heroes. But it certainly isn't because existing companies don't need planning.