Don't you believe it... businesses need business plans

If you want to start or develop a business, the received wisdom is that you need a business plan.

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Last Updated: 31 Aug 2010

But do you really? Here are some reasons why writing a business plan may not be such a great idea...

It looks too much like a formula for success. A business plan can fool you into thinking that all you have to do to succeed is follow it. Success can come in unexpected ways, and you may miss spontaneous opportunities because they don't fit your plan. When Honda entered the US motorcycle market in the late '60s, it had no strategy other than 'seeing if we could sell something in the US', according its US boss at the time. So it was able to switch from selling the big bikes it thought Americans would like to selling the 50cc machines that Honda execs rode - creating a US market for small motorcycles in the process.

It can be a terrible distraction. Planning is time-consuming and can result in paralysis by analysis. You can research customer preferences ad infinitum, but you won't know what customers will buy until you ask them to put their hand in their pocket. One failed start-up burnt its way through a six-figure sum planning and preparing, only to run out of money before it got off the ground. For £20,000, its founders could have launched a couple of products and seen if they could sell any.

You probably don't need one. A study of 100 fast-growing companies by Amar Bhide of Harvard's Kennedy School of Government found that just 28% had written a full-blown plan, and 41% had no plan.

It denies the reality of business life. Planning can be an attempt to avoid accepting the inscrutability of things. Sooner or later, you have to take the plunge.

Alastair Dryburgh is head of Akenhurst Consultants - www.akenhurst.com

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