Why do most business owners create a business plan? The vast majority reluctantly prepare one as a requirement to get financing.
Is a business plan a good management tool? I don’t think so.
I will agree that preparing a business plan can help a business owner think strategically about their business. A business plan will also provide some structure as it requires a business owner to document their current assumptions and guesses about the future of their business.
Compared to ‘doing nothing’, the business plan process is valuable. But I think the Business Model Canvas developed by Alexander Osterwalder is an option worthy of consideration for existing small business owners. The Business Model Canvas was developed to be used in conjunction with the Lean Startup methods that are described very well in Steve Blank’s Harvard Business Review article I mentioned last week.
Here are the reasons why I think the Business Model Canvas is a better fit for existing small business owners rather than a business plan:
1) It’s more visual – Most business owners I know think visually. Planning their strategy seems to work better moving sticky notes around a wall than writing out a ten page document.
2) It’s more dynamic – The business plan is a static document, but the business model canvas evolves as the business owner experiences the world around them.
3) It’s about actions as well as thinking – The activity of ‘validating’ the static guesses is more about actions and experiences than just thinking. While thinking is important, I find the following statement to be more applicable: “You can’t think your way into a new way of acting, but you can act your way into a new way of thinking.” The experiential learning obtained from ‘getting out of the building’ and validating assumptions is key.
4) It’s about key activities more than results – A business plan usually includes a projected income statement. Income Statements report the results after the activity of business takes place. Business owners need to focus on activities in order to get better results.
Since the Business Model Canvas is not a common tool in the business owners’ toolbox, you probably haven’t seen one in action. It’s a pretty good guess that your business plan hasn’t seen much action lately either! My guess is that a more visual, more dynamic, more action focused and more activity driven tool would be valuable to business owners.
In true Lean Startup fashion, as of today, I am accepting that my above statement is just a guess or hypothesis only in my mind. Now should I write that statement down into my business plan and file it away or should I go out and validate my hypothesis with some real small business owner customers?