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Arment Dietrich

Business Plan Paradox: It’s About the Planning, Not the Plan

By: Arment Dietrich | August 9, 2010 | 
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Guest post by Tim Berry, founder and president of Palo Alto Software, founder of bplans.com, and co-founder of Borland International.

I got an interesting email the other day from Daniel Hindin, community manager here at Spin Sucks, challenging some contradictions he’d found in some of my work. Sometimes I’m listing the reasons you want a business plan, and sometimes I’m saying the plan doesn’t matter by itself nearly as much as it does as part of a planning process.

My first response to that is, with a wide grin: “Yep. Now I want to do that guest post you’re suggesting.” Challenging me like that works. You got my interest.

The second response is to take my hat off to the wonderful magic of paradox. Seriously.

For example, both these statements are true:

  1. Better a mediocre strategy consistently applied over years than a series of brilliant strategies, each contradicting the other, that don’t last.
  2. There is no merit whatsoever to following a plan just because you’re following a plan. That’s no better than running your head into a brick wall, over and over again, just because you once said you would.

See? The one contradicts the other, but they’re both true. That’s paradox. And there is a lot of paradox in business planning.

I do believe in business plans and business planning, but I don’t believe in the big formal business plan document except in very specific and relatively rare circumstances. More about those rare circumstances in a minute.

Instead, after more than 30 years in business planning, I am every day more convinced that what really works in business planning is to work on what I call planning process. That means you start with a plan that is no bigger than what you need to manage and steer your business, and then, as life goes on, you feed and grow and nurture that plan so it reflects the constant change that happens in business.

Planning is about managing change, not avoiding change. What works is to start with a plan and then review and revise it regularly. Look at what really happened, and explore how and why it was different from what you planned (and it will be). Think about what that difference between planned and actual results means for the future. And then revise the plan.

Steering isn’t setting your steering wheel once and holding it still; it’s setting your planned route and direction and then managing a long series of small changes. So is business planning.

And the special circumstances that I mentioned above? Thanks for asking. It’s a damn shame that people who could use planning regularly to run their own business better dismiss it because they have in their mind that unpleasant image of the big formal business plan that is a daunting task.

That’s not for everybody. That’s for a few thousand businesses seeking outside investment. You write the real plan first, then bring the ideas in it to investors in a streamlined (probably PowerPoint and in person) way, and you prepare the big plan so they can see it before they invest.

For the rest of us, it’s a short, simple, management-oriented, regularly reviewed and refreshed business plan. It lives on your computer. You review it every month. And you change it as quickly as your assumptions change. And you do it because it helps you manage and steer your business better.

Tim Berry is founder and president of Palo Alto Software, founder of bplans.com, and co-founder of Borland International. He is a Stanford MBA, author of The Plan-As-You-Go Business Plan and principal author of Business Plan Pro. He blogs at Planning Startups Stories. He is on twitter as @TimBerry.

10 comments
FourwardThought
FourwardThought

Enjoyed reading the post. When we started our business we knew we wanted to do it debt-free so we wouldn't need to satisfy a bank business plan requirement but we also knew we needed some direction. We came up with the Business Outline concept. It allows us to have a cohesive plan for the realization of our vision but it's also easy to change we as get further into the business. Thanks for the great information!

PRWeekend
PRWeekend

Tim, thank you for the great post. Such business paradox exists, although "flexibility" is one of the most popular business values, it's easier said than done in practice. Well said "Planning is about managing change, not avoiding change."

Lauren Golanty
Lauren Golanty

It's good to hear (and re-hear and repeat) that effective business planning is "managing a long series of small changes." I started a little company at 22, so I made a lot of mistakes. If back then, someone had explained to me that you don't lose brand identity by allowing tiny changes and slow evolution, I think life would have involved more sleep. Well said.

Katie Fassl
Katie Fassl

Tim, thanks for a great post. Your quote, "Planning is about managing change, not avoiding change," really resonated with me. It also makes me think of one of my favorite quotes (and one that lives on our website): "Remember that the six most expensive words in business are: 'We've always done it that way.'" -Catherine DeVrye.

Your post reaffirmed that our growing business is doing things the right way. Like Gini said, what a relief!

Thanks again.

Roger Wohlner
Roger Wohlner

Tim great post. I found everything you said to be true based upon my experience in a former professional life in the corporate world. I find the benefits of the planning process to be even more pronounced having migrated to being a financial planner/investment advisor. Clients who have gone through the planning process feel a sense of ownership of their plan. Their plan serves as a foundation during rough economic periods. Their ownership of the process makes discussions about their situaiton and potential changes in course easier and more productive for all.

Laura Scholz
Laura Scholz

Thanks so much for this post. Planning is essential, but 99.9% the plan changes. But I think knowing where you're going but being adept enough to change when needed is the key to "planning."

Gini Dietrich
Gini Dietrich

Tim, I think you already know what a huge fan I am of yours...and my respect and admiration just doubled!

As an entrepreneur and leader of a growing business, everyone wants me to have a business plan. Sure, we know what the vision is and what we do to have to get there, but if I had to sit down and write a 90 page document, it'd take me all year and we'd never accomplish anything. The idea that what we are doing for business planning is right is such a relief.

And thanks for guest blogging here! You definitely bring the caliber up a notch.

Karen Swim
Karen Swim

Thank you so much for sharing your wisdom! You are spot on about plans and the planning process, and many new or desiring to be entrepreneurs spend an inordinate amount of time on a formal, stuffy document that does little to actually put them in business.

Daniel Hindin
Daniel Hindin

Well, Tim, let me first say I'm very happy that I was able to induce a guest post out of you. We're honored to have you gracing our pages!

While I've never started my own business, the case you make here really resonates with me. I think you could take what you say about business planning and apply it to life in general.

I feel strongly about constant re-evaluation and embracing change. This reminds me of a bio I recently came across written by all-around smart guy Len Kendall (that I wish I had written myself):

"(Len) enjoys revising his bio every few months as the lack of necessity to do so indicates a slow-down in his growth and experimentation."

Jan Beery
Jan Beery

Tim,
Thanks for sharing and saying what so many of us have felt but haven't put into words.
Most of us are very creative and the looming obligation if you will, of writing that long business plan is daunting.
I much prefer the creative approach and visit that plan routinely to see where we need to tweak.

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