Why a Business Plan Isn't Needed for Every Business

But entrepreneur Cat LeBlanc started her company without a business plan, and she's convinced that for many people, that's the best way to do it.
If you're trying to raise outside funding from investors, however, you're the exception — that's the case in which a business plan is needed.
Over four years ago I left my highly successful (read: stressful) job in investment banking to start my own coaching business where I help future online business owners find the right business idea, get paying clients quickly, and build a business foundation that scales.
Eighteen months into the business, I had my first $20,000 month. Since then, the business has earned up to $24,000 a month.
Little secret: I didn’t make a business plan, and you probably don’t need to, either.
If you are raising capital for a startup, potential investors will need to see a plan — but if you are aiming not to borrow money, a plan may not provide any advantage at all.
When I began my business I purposely didn’t start by creating a complex business plan. I knew that in the fast-paced online market I was entering, I would only get a true sense of the numbers once I tested the idea in reality, not on paper.
Instead of a traditional plan, I took more of an experimental approach and created what I now call ‘a concept to test.’
A concept to test includes:
The idea
The value proposition to clients
An offer
A minimal amount of marketing to test the concept
This is just enough to put an idea to market and see if it works. No more, no less.
My initial concept was based on a mix of my talent and people’s needs. I realized that people needed help with business ideas; specifically people who wanted to start online businesses. I saw that they were confused and overwhelmed and didn’t know where to begin. I knew that if I could get some time with them, to guide them through my idea generating process, that I would be able to help.
I fleshed out this concept by clarifying exactly who my client was, created the messaging that would speak to them (my value proposition) and designed offers that would appeal to their needs.
To test this concept I first posted in a Facebook Group full of my ideal clients to gauge interest. Immediately I got my first US$197 sale. I was then able to grow my business very quickly from there.
What I learned from this experience was that starting your business, or launching a new product, does not have to be as complicated as we tend to think. It can, in fact, be really simple. All that matters is that:
You get in front of the people who need your help, and
They can see the value in your help.
Now, whenever I want to create a new product or service, I take the same approach. I design a concept to test and see how the market reacts. In the case that it doesn’t sell at first, I am able to make adjustments relatively easily and test again. Doing this means I can stay flexible and launch products at low cost rather than going through a complex planning and build procedure each time.
This year I tested a new iteration of a product that hadn’t landed in the past: a program now called ‘Ramp Up.’ I didn’t invest months of my time, thousands of dollars, or do a gigantic product launch. Instead, I reached out to a few people I thought might be interested in it.
I sent them some basic marketing material to see if they would like to sign up. They did. I got the first few people into the program. I then created the first months of material and just started growing from there.
In this way I was able to build the revenue stream flexibly and there was close to zero loss when the first version didn’t work.
Julian Lange, Entrepreneurship Professor at Babson College, with his colleagues studied 457 new ventures to find out the effectiveness of business plans.
The conclusion? "There is no difference in the operating performance of businesses started with or without written business plans," Lange found.
This doesn’t mean that there’s no value in planning. Planning can help with the thought process and can help you consider different aspects of the business. But planning in advance doesn’t appear to help once you are up and running and dealing with the mechanics of your business in the real world.
I believe this is because, when you create a business plan before you’ve opened your business, most of your data is hypothetical. You truly don’t know how many units you will sell or exactly what your costs will be until you have made the sales and have delivered.
Once you have the business or revenue stream up and running, you have a much truer sense of the numbers and can then plan and make projections accordingly.
Cat LeBlanc helps future online business owners find the right business idea, get paying clients quickly and build a business foundation that scales. You can watch her free Zero To Paying Clients Masterclass to get more details on the testing process. Follow her on Twitter:@catjleblanc.
Sign up for notifications from Insider! Stay up to date with what you want to know.