Business Plan Expert: Amar Bhide

There have been scores of stories about companies that have started without the use of a formal business plan, defied conventional wisdom and all odds, to go on to create not only successful businesses, rather, empires.  As a matter of fact, an Inc. 500 survey found that only “40% of business founders had written a formalized business plan before they launched their company, of the 40% whom said yes, only 12% said they had conducted formal market research, and 65% said their business had strayed significantly from the written plan”.  With stats such as these supporting the mantra of the creative and flexible entrepreneur whom forgoes the business plan, does this mean the mantra of the business plan is stale?

Economist Amar Bhide, a Tufts University professor, and author of The Origin and Evolution of New Business, Call for Judgment: Sensible Finance for a Dynamic Economy, and The Questions Every Entrepreneur Must Answer,  says that a “comprehensive analytical approach to planning does not suit most start-ups”,  Bhide proposes a simple structure asking the “entrepreneur to assess their personal goals, their strategy for how well the business achieves these goals, and then runs through how well you are equipped to execute this strategy,”  Bhide  also reminds individuals that their “businesses will require different strengths and skills from you as it grows, and illuminates how your role as the founder must evolve as the business grows.” Bhide adds that a traditional business plan does not reflect this sort of flexible strategy and that investors, which may range from a variety of institutions including billion dollar venture capital funds to friends and family, typically looks for innovation, value proposition and market analysis as benchmarks in a successful business plan/venture because it says that an entrepreneur has done his due diligence. However, in today’s complex, and technological advanced environment when things are changing rapidly, the time an entrepreneur would spend conducting extensive analysis to bolster a solid business plan would actually take away from opportunities the business could be seizing. Finally, Bhide says that a large portion of businesses today are started with the aid of venture capital, so there is little downside to being wrong – if a venture does not work out, it can be modified or the completely scrapped –without major consequences.  All in all, Bhide says the most critical asset that a business plan can demonstrate to a potential investor is adaptation rather than planning.

What do you think? Do you think the art of business planning is good or harmful to the nature of entrepreneurialism?