Dr Jeff Cornwall

When an aspiring business owner decides to move ahead and start a new
venture, conventional wisdom says the first thing he or she needs to do
is write a business plan. But research on how to plan and my own
experience suggests this isn’t usually very effective.

In fact, writing a formal business plan should be the final step in a
three-step business planning process.

Step one is to assess your idea to determine if it is
actually a viable business opportunity. Is there a large enough market?
Can I charge this market enough to make a profit?

Is the concept something I can personally pull off?
Do I have the experience, knowledge and access to the necessary
resources to make this business successful?

This first step should not involve that much detail.
It should be a quick-and-dirty first assessment of the concept.

Step two is to develop
the business model. A business model adds more detail to the evaluation
and begins to make sure all of the moving parts of the business work
together.

What is
the value that is offered to the customer and what is it worth to them?
Who is my target market? What do they expect out of me as a customer?
How do I get information to them and how do they want to get the
product? What are the key activities to make this all come together and
what will they cost? What are the resources I need to make this happen
(money included)?

There
is a great resource available to help would-be owners develop a
business model: www.businessmodelgeneration.com. This Web site
contains a large amount of free information on business modeling and
links to an excellent book to guide you through the process.

Now, it’s time for the plan

Step three is to write an actual formal business plan.
The business plan details the elements of the business model. It helps
organize what can become a complex and overwhelming array of issues.

The business plan puts
everything down on paper to make sure that we have thought of all of
the important “must-dos” that go into a successful startup.

Understand that the business plan is just a map, albeit a map into an
unknown territory. The actual path the business takes will almost always
be different from the original business plan. But the plan can help us
think through the details.

It helps us understand how all of the parts of a business fit
together to make a whole venture. It helps prepare us for our journey
and makes us better prepared to adjust to all of the surprises that we
will face almost every day we’re in business.

However, this final step of writing a formal business
plan is not always necessary. I know many very successful entrepreneurs
who never wrote a formal business plan for their ventures.

But almost all of them
understood the importance of business planning. While they may not have
written a formal business plan, they did take the time to go through the
first two steps of business planning.

While a formal business plan may not always be
necessary, sound business planning will always improve an entrepreneur’s
chances for success.

(This post ran as my column in the Tennessean this morning).