Business Plans – A History
According to antiventurecapital.com, only 40% of Inc 500 founders had written formal business plans before they launched their companies.[1] Of that 40%, “65% said they had strayed significantly from their original conception, adapting their plans as they went along. In a similar vein, only 12% of this year's Inc 500 group said they'd done formal market research before starting their companies.”[2] In an interview with Amar Bhide, a Columbia Business School professor - whose research on the subject is encapsulated in his book ‘The Origin and Evolution of New Businesses’ – he stated that the recent data about Inc 500 companies was not surprising and is consistent with what he found in his survey of Inc 500 founders way back in 1989. “According to that research, 41% of the founders had no business plan at all, 26% had a rudimentary plan, and only 28% had a formal business plan.”[3]
To plan or not to plan
Since writing a business plan seems like common sense why do so many successful companies not write one? According to Dr. Bhide, “There are several factors. Many, if not most, successful businesses get started in fields that are characterized by high turbulence or change, change that is not being generated by the entrepreneur.”[4] In these kinds of fields there can be very little information available with which to write a business plan. Secondly, “when things are changing rapidly, the time you would spend on doing the analysis or the plan is incredibly costly because many of the opportunities are fleeting, and if you don't seize them immediately, they're gone. So in these highly turbulent markets, the costs of doing the analysis or writing a plan exceed the benefits.”[5]
Is Developing a Business Plan Useful?
Some might ask “Given the difficulty in accurately predicting the future, is creating a business plan still useful?” Considering the data, one could assume that simply having a good product/service would be enough, and for some it might be, I am not of that opinion. While every company needs to be aware that the business plan is at best a guide and at worst a reference for the future success of the organization, I still believe there is merit in examining the potential direction the company wants to go in. The future will always be an unknown because it simply has not happened yet, having said that, the companies, organization and individuals that can anticipate and prepare for future events and changing dynamics are the ones that succeed in the global marketplace. To this end, the business plan should account for the variable reality of implementation and not be overly concerned if the business plan is not carried out to the letter. Due diligence and preventative assessment, especially with the rising costs of starting a company, are not only prudent but an indication that the management team is committed to the vision for which they sought investment.
How does a marketing plan differ from a business plan?
www.merriam-webster.com defines marketing as “the process or technique of promoting, selling, and distributing a product or service”.[6] Therefore the marketing plan is the document that the marketing department will use as a framework to make the promotion, sale, distribution a success. A Marketing Plan is a “document that supplements your business plan and brings together all your market research so that you can work out exactly where your business is going and how it is going to get there.”[7] Your business plan, or vision statement, in contrast spells out “what your business is about--what you do and don't do, and what your ultimate goals are.”[8] The company business plan encompasses more than marketing. It includes “"the vision thing," the resounding words that spell out the glorious purpose of your company in stirring language. … Your company's business plan provides the environment in which your marketing plan must flourish. The two documents must be consistent.” [9] Some examples of things that might appear in a business plan: mission statement, a description of your business, short-term and long-term goals, potential customers, competition analysis, financial analysis, marketing, etc.[10] Some things that might be included in a marketing plan: marketing objectives, market research and details of the current market, a full analysis of your strengths, weaknesses, opportunities and threats (SWOT Analysis.), your plans for achieving your marketing objectives.[11]
Which is more important, the marketing plan or the Business Plan?
While both the Marketing and Business Plans are useful if not integral aspects for a start-up company, the Marketing and Business Plans are not equal in scope and relative importance. Since the Marketing Plan is a part of the larger Business Plan, and because an entire company would have a significantly harder time operating and finding investors strictly off a Marketing Plan, it seems clear that the Business Plan is more ‘important’ than the Marketing Plan.
[1] http://www.antiventurecapital.com/plans_bhide.html[2] Ibid[3] Ibid.[4] Ibid.[5] Ibid.[6] http://www.merriam-webster.com/dictionary/marketing[7] http://ezinearticles.com/?The-Benefits-of-a-Marketing-Plan&id=57036[8]http://www.entrepreneur.com/marketing/marketingbasics/marketingplan/article43018.html[9] Ibid.[10] http://top7business.com/?Top-7-Things-to-Include-in-Your-Business-Plan&id=3163[11] http://ezinearticles.com/?The-Benefits-of-a-Marketing-Plan&id=57036
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