There is an emerging trend that business plans are no longer necessary. Indeed, there is something to be said in favour of this view in a fast moving world with disruptive business models.  To my mind, critics of the business plan overlook its advantages.

A business plan forces an entrepreneur (it should be them and not someone they employ) to write down what the business is going to do, how it is going to work, the consumer demand that it will satisfy, the evidence of market demand, the competitors, the market size, how it will make money, what resources it is going to require and the relationships that will need to be built.  These are not easy things to write down and require a lot of thought.  The writing of a business plan forces the entrepreneur to think.

Of course parts of it are likely be wrong, but that is not the point.  Once a business plan has been written it can easily be shared with others.  Their thoughts and perspectives can be gained and the business plan amended where appropriate.  It can then be shared again and inconsistencies and improvements identified.

Once the business plan is starting to take shape it can be used to create a series of financial projections.  Doing this will provoke further questions and the need to obtain further answers, which in turn may lead to the business plan being modified again.

It is this iterative process which gives the business plan its principal value.  By thinking through how the business will operate, how customers and competitors may respond, strategies can be developed which avoid making costly mistakes.  What is important is not to turn this into a burdensome exercise which loses its value.

The Business Model Canvas (“BMC”) is a tool which I advocate entrepresneurs using during this itterative process.  Essentially the BMC is a business model on a single page.  There is a large amount of information about the BMC available on the internet.

Once the BMC is fleshed out and the financial projections make sense, it becomes a relative easy task to write a 15-20 page business plan which can be used for raising finance and internal communication.

For a modern agile business this process never completes.  The Business Plan needs to be periodically refreshed to update it for the progress made and the evolution of the marketplace and other external factors.  The quality of the thinking is what counts at each stage.