Seth Godin on Rethinking Business Plans

It’s about time that business writers, assorted experts, entrepreneurs, academic and the rest start focusing on the huge damaging and wasteful misunderstanding that most of us have contributed to: that completely out-of-date idea that a business plan is a document, done once, related to raising money.

Seth's blogSo I’m delighted to see Seth Godin jumping onto this issue with a good restatement of the problem and an infusion of new ideas to shake us up. His modern business plan post on his blog Monday starts with a quick but very real problem:

It’s not clear to me why business plans are the way they are, but they’re often misused to obfuscate, bore and show an ability to comply with expectations.

The most important word there is “misused.” Because that’s the myth of the business plan. Case in point: last week a journalist asked me if we had “an official business plan” for Palo Alto Software. That was his phrase, not mine: “official.” As in formal. Static. Left somewhere in the drawer.

Somebody on Twitter asked me what I thought of Seth’s post, thinking, I’m only guessing, that I’m in favor of the more traditional business plan. No way. I love the new thinking. It’s right in line with what I’ve been posting for several years now.

There’s no such thing as an official business plan, but the idea highlights the misuse. People spending months developing documents instead of businesses. That’s waste.

It should be business planning, a process, reviewed and revised regularly, a tool for managing and steering a real business.

Seth’s recommendation is excellent. Let’s shake the old expectations up, change the expectations, change the arrangement… and what he recommends doesn’t do anything but enhance the real business purpose of business planning.

His recommendation? A new standard order of plan documents:

I’d divide the modern business plan into five sections:

* Truth
* Assertions
* Alternatives
* People
* Money

He goes on, in the post, to talk about each of those sections. Excellent suggestions. His new order would make a great business plan.

From my point of view, this suggested reordering is nothing but positive. The business plan is just step one of planning; it’s about managing change. It’s not a sales brochure. It’s not a pitch to investors. It’s not even a plan; it’s planning. It’s about managing change. It’s about optimizing, prioritizing, setting long-term goals and short-term steps, with metrics and tracking. Why not put it in this order?

If nothing else, at least it shakes up that mythological business plan that so many people are tempted to misunderstand and misuse. And there’s no downside to it.

Read his post. See what you think. And if you read my stuff on business planning, I think you’ll find I’ve always been in favor of flexible one-of-a-kind business plans, as part of planning process. It fits perfectly with my work on business planning, including the two highlights of my recent work:  Plan-As-You-Go Business Plan and Business Plan Pro.


  • Lee Chrastil says:

    I have spent the last two weeks researching and learning what it takes to write a good business plan. Interestingly enough I have been in this business doing business for more than 4 years now and have never written a business plan, or have I. My biz partners and I sit down about once a quarter and brainstorm how things are going, what we are doing, what we want to do differently and how we are going to do it. We even write it all down on a white board and as we reach goals we mark them off. I think that perhaps we have been writing the modern business plan all along.
    Our company has reached a crossroads now and we need capital and perhaps that worst time to get capital. So we are going to family and friends to find loan money, which brings me back the purpose of writing a business plan.
    With just one read of Seth’s article I was sold on it. I took all the research I had and began to reformat it.
    Additionally I am going a couple steps further. FIRST I am going with a non traditional size. I am producing the Biz Plan on half sheets more like a book and on top of that I am taking some design ques from resume I have seen from graphic designers. I am producing a full color business plan with some interesting design ques.
    Thanks to Seth and yourself for providing me with some inspiration. I will let you know how it goes.

    • Tim Berry says:

      Lee, thanks for the comment, and allow me to suggest you take it even further and separate in your mind the plan, the planning, and the document. The plan is what’s going to happen and why, strategy of course but also concrete details, with tasks and responsibilities and dates and deadlines and review schedule and all. That document you’re sweating is just the output, and it’s just a picture of the plan as it existed on that day. If you run your business right, with planning as managing as steering, that plan is going to change regularly and often for the rest of your company’s existence. Don’t confuse the real planning, on the computer and in person, with the document that’s just output. Tim

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