Most businesses don’t have a plan

Through the years, we’ve spoken to hundreds of business owners about their business plans and their planning processes. More specifically, we’ve asked them individually and we’ve polled them as a group at our seminars to determine if they have a business plan of any kind and how they use it.

Initially, we expected that a fair number of them would tell us that they had some type of business plan and that they followed that plan throughout the year. Boy, were we wrong.

Approximately one in 20 business owners told us that they had a business plan of any kind. At first, we thought that this low number somehow might be due to the particular attendees of our seminars. Somehow, perhaps, we were getting the “non-planners.” Maybe they were attending our seminars because they didn’t have a plan and they were smart enough to know that they needed help. We didn’t really know the answer, but that was our theory.

Through time, however, that one-in-20 number has been quite consistent, regardless of attendance at seminars. Only about 5 percent of the independently owned businesses that we’ve encountered created a business plan of any kind.

And of that one in 20, many fewer actually use the business plan as a tool for ongoing management. They have a plan, but it seems to sit on the shelf until next year, or the year after, when the company makes a new plan. Essentially, the plan is generally ignored throughout the year; there is little effort to direct day-to-day actions based upon its strategies or goals, which go largely forgotten.

An even smaller percentage of owners provide rewards to their employees when the goals of the plan are met. There is, in effect, no link between the stated goals of the company and the rewards given to employees who help achieve those goals.

Why so few? Why do so few owners have a plan, let alone a planning process?

Some business owners say that having a business plan is useless because things change so quickly. By the time they create a plan, they say, it’s already obsolete. Why bother?

Other owners say that they don’t have the time to do a fancy plan that only an MBA would like. After all, they’ve got a business to run. Let the MBAs stay at home with their calculators and expensive mechanical pencils—at least they’ll be out of the firing line of running a real business.

Other owners say that they don’t do a business plan because they don’t know how, or they function better as a crisis manager, or they tried it once and it didn’t work. There are numerous other reasons as well.

All of these owners have one thing in common: creating a business plan doesn’t appear to offer more value to them than continuing to do what they’re already doing. They simply haven’t been convinced that making a plan is worth their time and effort.

We believe that the reason for this is not obvious. Business owners have been taught incorrectly that the plan itself is the primary article of value.

Conversely, we believe that the process of planning is much more important that the plan itself. The plan is merely the logical outcome of an effective ongoing planning process, and it’s the planning process that allows businesses to act nimbly and effectively in the face of change.

Let’s look at this a bit closer. Many owners and managers have been led to believe that they should create a plan, stick rigorously to their plan, and then expect success to knock on their door. If this were the case, of course, all business owners and managers would create a business plan in their first week on the job. Only a fool would ignore a sure thing, and business owners and managers certainly are not fools.

This myth is further enhanced by pithy and attractive metaphors that often are used to teach us about the value of having a business plan. One of our personal favorites refers to the sport of scuba diving, where responsible divers plan the depth, time, and location of each dive well before they enter the water. This planning is essential in scuba diving. If you do something wrong, such as stay at great depth for too long and then surface too quickly, you could die. So, to impress business owners about the urgency and importance of creating a business plan, coaches and authors take a page from the scuba divers’ training book and tell the owners to “plan your dive, and dive your plan.”

This seems like logical and efficient advice. Make a plan and stick to it. It even has overtones of the early childhood urgings from our mothers. “Just stick to it, kid, and you’ll come out okay.” This is powerful stuff indeed.