Somebody on Quora asked for a history of business plans, and Noah Parsons suggested I answer. I searched for an authoritative source, and didn’t find anything that really goes into history. But the topic is interesting to me, and I’ve been dealing with business plans since 1974, so I thought I might at least add some anecdotal history.
First, an interesting bit of data, a word search on the appearance of the phrase “business plan” in books, compared to “venture capital” and “entrepreneurship,” using Google’s beta ngram search. It shows the relative use in books, from 1900 to 2008, of the terms “entrepreneurship,” “venture capital,” and “business plan.”:
What I think we see there is how the business plan (the blue line) became really prominent in synchronization with venture capital (the red line) and entrepreneurship (the green line). There was some kind of a bump in all three in 1907, then a steady increase in entrepreneurship from the late 1960s. Notice how the blue line for business plan seems to track very closely with the high-tech boom and growth of Silicon Valley, and with Venture capital.
This fits my anecdotal history, my impression of what I’ve seen in the general area of business plans since I first started with business plans in 1974, through to the present. My earliest references to business plans, back in the middle 1970s, were generally corporate. I had friends and business contacts who were managers of large companies, and they dealt with business plans as annual corporate exercises.
My first focused involvement with business plans was in 1979, when I took a course at Stanford called “small business management,” which was in fact a course on developing business plans for seeking venture capital, for high-tech ventures. It was taught by Steve Brandt. As I got out of business school and into consulting with Creative Strategies, and then when I left that company to go out on my own, business plans were a core component in all high-tech startups.
If you look carefully at the high points and drops, remember that this is book usage, so it’s on a longer cycle than say use in newspapers or magazines. It takes a couple of years for a trend to show up in a search of books.
I started on my own in 1983. I was based in Palo Alto, across El Camino from Stanford, in the heart of the Silicon Valley. There was a huge demand for business plans. Venture capital was taking off, Silicon Valley was taking off, the PC boom was in full swing. That drop in the middle 1990s, all three terms, that shows up on the chart? That was the recession of 1992-1993, I think. The PC boom started to settle, but the Internet boom hadn’t started. Then the second big drop in recent times is the aftermath of the dot-com crash beginning in 2000.
My personal opinion, not backed by research, and just a guess, is that the term “business plan” is suffering lately from the misunderstanding of the business plan as if it only exists as a formal document. In my mind, the format is evolving as tools and capabilities evolve, so that the business plan of today is as valuable as ever, but not as a set formal document, but rather as the first step in planning, to be part of a process that includes regular revision and review. If you check the large number of posts here in the business planning category, you’ll see what I mean. (Sorry, there’s 186 posts right now in that category; I write about business planning a lot.)
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Comments
thank you a lot! your article at least helped me to finalize this part of academic research of the business plan ( I’m preparing my MBA theisis too) . one thing ,I couldn’t find the date of your article publication ?
Hi! I’m working on my thesis about the business plan and I’m also interested in putting in it something about business plan history. I found this article, it’s very interesting, but can you please tell me if you have more information about the historical context, sir?
Thank you.
@Filippo sorry, but, as I say in the post, I couldn’t find better sources than what I have there. That’s the best I can do. Good luck with your thesis … I’d love to get a copy. Tim
Tim. Loved the way your graph trended and the correlation
between the green red and blue lines. Amazing that one would never build a
dream home without a detailed plan or a boat without drawings, yet with a
business will happily go along with someone saying everything will be alright.
Thanks Gerald. I think part of the problem you point out is that people think a business plan has to be a big formal document written over a long time at great pain, full of elegant carefully worded summaries and descriptions. If people realized it is a plan, not a work of art …
In the good old, bad old days before the explosion of technology one would talk about five-year plans as (comparatively) the pace and change were slower. These days with disruptive marketing and creative destruction is the “Five-year plan” appropriate or, as I suggest, should we focus on the three-year plan?
I really agree with your statement that a business plan is
the first step in planning. I relate the business plan to that of a
battle plan mapped out by generals. The plan that generals make is
out the door a battle begins. The crucial thing is the ability to
adjust that plan, whether it be for battle or for business, as new
facts and data come in.
Greg, yes, my theme on business planning for several years now emphasizes the planning instead of the plan. Your military reference reminds me of the famous Eisenhower quote, which I use a lot: “The plan is useless; but planning is essential.” Tim
There is a critical shortage of informvtaie articles like this.
In 1965 I was a loan officer with the SBA. A Business Plan
was a requirement of loan applications. Loan applicants struggled
to provide their business plans since there was so little available
for guidance. Ironically, small business persons still struggle to
provide viable business plans even though there are significantly
more support resources. Some things just don’t seem to
change!
I just started using you soft ware this evening. I am reading the your book, Hurdle, required reading for my MBA class here at FIT. I am enjoying the straight forward reasoning for having a business plan. Seems to be a no brainier, but your post seems to show why so many people failed during the dot com boom. I was in San Francisco during those years doing hair and had more than one start up sit in my chair. I would ask questions, listen to them try to tell me what someone had just given them a large amount of cash to do. I always wondered why they sounded more like a wing and a prayer. As you know, most fell by the waste side with over decorated business and no product. I am sure you will see more from me on you site.
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