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Are Business Plans Obsolete?

By: Eric Giltner, Senior Area Manager
Grand Forks Area Office
North Dakota District Office

There is a recent trend to downplay the value of a written business plan and the reasons vary.  The plans are too long and no one reads them. Planning is inactive, busy work and time spent planning would be better spent on actions helping the business.   Plans also fail to survive the first contact with customers, so it is a huge waste of time.  This is because some traditional business plan outlines fail to fully describe how a business is going create a profit by solving a customer’s problem – otherwise known as the “business model”.  The business model emphasizes the “operational” aspect of designing a business to create, deliver, and capture value in the marketplace.  Some experts are advising the use of one-page grids providing focus on developing the business model, instead of a business plan.  While successful businesses have used these tools, there is still a need for a well written business plan for today’s entrepreneur. This is especially true if the business model is fully developed in the narrative of the business plan.

A well written business plan is concise and to the point. It will have four main sections: 1) business model description; 2) financial status with three-year projections; 3) market information on potential customers, competitors, and a communication strategy; and 4) personal information of the owner(s) and key employees.  Here are five reasons why you need a business plan.

  1. To Sell Yourself on the Idea.  Writing a business plan will help you to consider all the details needed to create the business model.  This will help you identify potential problem areas so that you can take steps to minimize their impact on the success of your business.  There are many instances where an overly optimistic owner experienced failure that could have been avoided if a business plan had been written.
  2. To Obtain Funding.  If you need a loan or outside investment, it is imperative to have a well written business plan that shows the full story of the opportunity.  Investors and/or lenders want to review the financial projections and assumptions for the profitability of the new business before they provide funding.
  3. To Secure Key Suppliers, Workers, or Contracts.  Your business may need the backing or support of others to achieve success, whether it is a key employee who has valuable skills or a critical vendor to provide exclusive products.  A business plan will help sell them on the venture.
  4. The Creation of a Unique Selling Point (USP).  The marketing section of the business plan will help define a USP or “brand” that customers will be drawn to as a solution for their problem.  A thorough review of the competition and the target customer base will help you to position the business to succeed.
  5. Managing the Details!  Writing a business plan will help you identify all the start-up costs and monthly expenses required to run the business.  In doing so, there is less chance of unexpected and significant costs arising that could hurt your business.  In researching the business plan, you will also identify important items such as licenses, supportive vendors, and staffing requirements.  A prospective business owner, with no business plan, once signed a lease for retail space offering a featured product line from company ABC. The owner had assumed ABC would be eager to have an outlet, but ABC later turned down a request from the business to sell its products and opted to supply an established competitor in the area.

No matter how promising an opportunity may be, there will always be snags and problem areas associated getting the business off the ground.  A good business plan will allow you to anticipate these issues and take the needed steps to prepare and budget accordingly.  For help with a business plan, contact your local SBA (www.sba.gov), SCORE office (www.score.org) or Small Business Development Center (https://americassbdc.org).


Eric Giltner, SBA Senior Area ManagerEric Giltner has been a Business Development Specialist and the Grand Forks area manager for the U.S. Small Business Administration since 1998, having formerly been assistant to the dean of the UND College of Business and Public Administration.  He received his B.S. Degree in Geological Engineering and his Master's Degree in Business Administration from the University of North Dakota. Eric can be reached at eric.giltner@sba.gov.