By Eric Tachibana
One of the most common questions young entrepreneurs starting out on their first venture ask is: "Why should I write a business plan?"
Business plans are, after all, difficult and time-consuming to write, run to around 50 pages and take at least a month to complete.
To the average entrepreneur, that probably sounds like a pretty heinous task.
Who wants to spend hours sitting in front of a word processor when you could be out making sales? Likewise, it is argued that start-ups are inherently tumultuous by design.
By the time you are finished writing the plan, the business is likely to have pivoted once or twice, making the business plan out of date and failing to reflect where the business is really going.
These arguments are backed up by a well-worn bit of Silicon Valley folklore that has gained a huge amount of traction - the idea that many hugely successful firms began life as pie-in-the-sky ideas quickly jotted down around the coffee stains on the back of a napkin.
If it's good enough for Southwest Airlines, Compaq, HP, and Apple, proponents claim, it should be good enough for anyone.
And beyond all that, there is one other dirty little secret about what happens to business plans after they are written.
What do you suppose investors do with the plans they get each week?
After 10 years as an angel investor, I can tell you where I store them.
It's called the "circular file cabinet". Ikea sells them under the name Knodd Rubbish Bin.
Yes, the minute investors get your business plan, odds are they will rip out Appendix A, which is your three-to-five year pro forma, and bin the rest - the document that you have just spent three months working on.
Right in the trash. Without reading it. Clunk.
So, to reiterate, business plans are hard and time-consuming to write.
They probably do not reflect your business by the time they are finished.
Napkin planning seems to have been successful. And, the investor is not going to read the plan anyway!
Given all of that, should you write a business plan at all?