The Business Plan Debate - Are They Always Necessary?

Before researching experts in the field of business plan writing and reviewing, I had not considered that any business concept could be brought to market without one. Everything I’ve learned along my journey has reinforced that having a plan is a must. No expert would say a plan guarantees success, not even the best plan, but they might go so far as to say that a business is doomed without one. It’s intriguing to consider another point of view though; that a business plan is not critical and that it could even be a hindrance. Inc. magazine interviewed business plan development experts, David F. McShea and Will Hsu to discuss their opposing views.

David McShea is a partner in the Seattle based Perkins Coie Law Firm. He specializes in initial public offerings, mergers and acquisitions ranging into the billions of dollars, public equity and debt financings, venture capital financings, and leading companies through high-growth stages. His clients include Amazon, Zillow, and Microsoft, among others (Perkins Coie, 2014).

McShea’s position is that you absolutely must have a business plan. They are essential to clarifying and strengthening the concept and act as a map and compass for when circumstances change, thus forcing the plan to be reevaluated. He argues that all the research, analysis, and thinking that go into writing a plan will help you to make wiser and more efficiently executed business decisions. A plan builds credibility as it enables you to more accurately convey your vision and persuade investors, business partners, customers and employees. It’s best to keep the plan clear and simple, avoid jargon and inflated hype. Use language that helps the average reader clearly understand the overall concept, value, use, and market opportunity (Zetlin, 2013).

Will Hsu is the co-founder and managing partner at MuckerLab, a Los Angeles based start-up accelerator. He served as SVP and Chief Product Officer for AT&T Interactive where, in three years, he doubled revenue to over $1 billion and helped establish them as the 9th largest digital media company (ahead of Facebook)(ecorner, 2014).

Hsu’s positions is that entrepreneurs would be better off skipping the plan and working directly on solving the biggest start-up risk; “product market fit risk.” Instead of spending all the time and energy researching and writing the plan, spend the time dealing directly with the problem. Go talk to as many customers as possible and keep refining the product and pricing. This will get your product/service to market faster, which also creates a competitive strategy as it helps identify customer needs faster. This increases the probability of success sooner. Use a few large whiteboards and jot down all the typical business plan components and rank them according to risk. Start building and selling to your presumed customers and use customer feedback for data on the risks. Go back to the whiteboards, evaluate, and adjust strategies accordingly. The whiteboard becomes a living road map (Zetlin, 2013).

One thing they both agree on is that you must have something in writing if you want investors to take you seriously. This need only be a 10-15 page summary of the business opportunity, including data showing product-market risk mitigation.

I can see the benefits of both approaches but for my concept, I am leaning more towards Will Hsu’s advice. It feels more organic and tangible to me. I would rather spend my time interacting with potential customers and business partners, gathering important data that way, than spending time on industry analysis and writing. It has been much easier for me to convey my concept in conversation than it has in writing. It’s extremely important to excel at both though, and it is what I came to grad school to develop, so I am likely to do a hybrid approach.

Resources:

Eorner. (2014). Stanford's Entrepreneurship Corner: William Hsu, MuckerLab. Retrieved February 6, 2014, from http://ecorner.stanford.edu/author/william_hsu

Perkins Coie. (2014). Perkins Coie - David F. McShea. Retrieved January 6, 2014, from http://www.perkinscoie.com/en/professionals/david-f-mcshea.html

Zetlin, M. (2013, January 21). Write a Business Plan or Not? 2 Experts Debate | Inc.com. Retrieved February 6, 2014, from http://www.inc.com/minda-zetlin/should-you-write-a-business-plan-2-experts-debate.htm