April 11, 2013

Top 5 Business Plan Myths

By Lisa Jones

Many social entrepreneurs have preconceived notions about business plans that they use to justify not having one. During our annual fellowship retreat, we sometimes hear young leaders echo similar sentiments: “I thrive on creativity and designing programs, but I began my initiative knowing nothing about business.” Though they may dread the process, it isn’t long before they discover the need for a business plan that exists somewhere other than their heads.

If approached with an open mind, designing a business plan can be an intensely creative process—it forces a leader to document his or her dreams as well as a pragmatic plan of action. Whether you are a business pro using your profit-making venture for social good, or an idealist who prefers team retreats over spreadsheets, creating a business plan should be a reflective and challenging task that gives you confidence in your organization’s future. 

To begin building your plan, first consider the following myths about business plans:

1.   They are only needed when submitting funding proposals: 

Since business plans are often required in funding proposals, some people have come to know them as high-pressure sales pitches spanning 40 or more pages—assembled in a scramble to meet a submission deadline. While a business plan can be an important aspect of a funding proposal, your organization will arguably benefit much more from the business plan if it is used to guide the organization, not just sell it. Every day you and your staff choose to invest in your organization—use the business plan to instill confidence that you are achieving your goals and spending money wisely.  

2.   They are just for startups: 

Did you draft a business plan when determining whether your innovative idea could be your new full-time job? Probably. Did you track your progress on that business plan, updating it as your project matured and shifted? If not, consider the value of using your business plan as a living document that evolves and grows along with your project. Periodically re-visiting your plan allows you to ensure you have the necessary staff hired to meet changing needs, the infrastructure to manage new funding streams, and the documentation to minimize the impact of CEO transitions. If the master plan is in the head of a departing CEO, how will the organization fare without him? Learn more about why business plans aren’t just for startups

3.   They discourage flexibility: 

Did having a city map ever discourage you from wandering down an interesting side street?  Business plans are simply the maps that guide your organization. They should be rigid enough to cause you to question whether a new activity contributes to your core mission, but flexible enough to encourage innovation and exploration of new opportunities. Like a trusty map, business plans are meant to have pencil-ins and eraser marks, all while remaining useful to consult when facing an organizational crossroad. Learn how to keep your plan flexible.  

4.   They require specific formatting & expensive software: 

While some funders require specific business plan formats, the one you develop for your own organization should be dictated by how you plan to use it. Make a list of 2-3 situations in which you would consult your business plan. Build the plan’s framework with those end-goals in mind. While a solo venture could skip the “people” section, a volunteer-based organization may want to comprehensively document their human capital.  Try starting with this free business plan model and adjusting it to suit your needs.

5.   There is too much uncertainty to make a plan: 

Social entrepreneurs are often risk-takers. There is an inherent level of uncertainty with their ventures. This is why it’s important to not spend too much time perfecting a plan before acting on it—you may never get started! A great business plan will include a contingency section that incorporates areas of uncertainty into the overall strategy of the organization. Knowing what “Plan B” is if you don’t receive that grant you were planning for can take the anxiety away from the uncertainties social ventures face.   

If this article was helpful, be sure to “like” the YouthActionNet Facebook page to stay informed of more learning opportunities for you and your organization. 
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