90% of start-ups go bust, often due to poor planning. Founders know they should write a business plan, yet many never do – spouting lame excuses based on misconceptions and cognitive biases (see footnote[1]).

Or else, they throw together a sketchy, useless plan. Or an over-optimistic one they don’t believe. Or produce a plan way too late; ignore expert feedback; or don’t actually use the plan.

Even if the start-up survives, poor planning probably wasted lots of time, money, and opportunities.

So here I explain why you should write a business plan – and why excuses for not doing so are flawed. (And my next post explains how and when to write a plan.)

A parable

A builder has an idea – no, a vision – for a skyscraper. It’s so vivid in his head – he talks about it so animatedly, so truly believes in it – that he just knows he doesn’t need an architectural plan or that kind of crap. Besides, it might take him weeks, he’s not sure he can draw, and it wouldn’t progress things anyhow. Don’t plan, act!

Admittedly, he’s more of a wannabe builder, as he’s never actually built anything before. But he’s googled an article called Build Your Very Own Skyscraper by a top property developer (D. Trump), and can figure out the rest as he goes along. Fired up with excitement and self-belief, he buys some tools and sets to work.

What are the chances his skyscraper won’t get built, or it collapses? Maybe 90%?

You, dear reader, are the builder; your start-up is the skyscraper; and here it is, built without a plan:

or, more likely, this:

What are plans for?

An architectural plan lets you examine a building design from different angles, check that all its elements make sense (e.g. elevators, lighting, plumbing, parking), and get expert opinions (from structural engineers, quantity surveyors, planning authorities) before construction begins. You can revise the design in response to feedback, or abandon it if it seems unsafe or uneconomic. This process takes time and effort – but saves far more during construction, and cuts the risk enormously.

A business plan is a simulation

Similarly, a business plan lets founders examine a start-up idea on paper, check it makes sense, run it past experts, revise and improve it, and decide whether to go ahead. It’s a simulation of a business, in words and numbers.

Writing a plan helps you flesh out your idea; clarify your assumptions; research missing infor...

Startups