Entrepreneur's Journal: Do you really need a business plan?

Posted Sep 7th 2008 4:00PM by Tom Taulli
Filed under: Books, Entrepreneurs, Small Business

I read many business plans. And, unfortunately, there are many that are lackluster. After all, an entrepreneur doesn't want to get bogged down in process.

Then again, there are many examples of successful businesses that didn't have formal business plans. For example, Compaq Computer was based on the scribblings on a napkin.

And yes, I agree you don't need a business plan.

However, the fact remains that a successful business still needs effective planning (former President Dwight Eisenhower once said: "the plan is useless, but planning is essential").

Well, the good news is that Tim Berry -- who is the founder of Palo Alto Software (the biggest provider of business plan software) -- has recently published a book on the topic. The title is spot-on: The Plan-As-You-Go Business Plan.

Of course, this can be a broad topic. Hey, don't many business books talk about planning?

This is true. But Tim focuses on the needs of small businesses; that is, those key things that move the needle.

For the most part, Tim is a big believer in putting together cash-flow forecasts. Ironically, a company can fail because it is growing too fast -- and not dealing with the costs of inventory and financing. Keep in mind that Palo Alto Software almost failed because of this predicament.

Well, Tim provides many useful templates and examples in putting together an effective cash flow plan. And I like how he makes things practical (you don't need an MBA). He writes: "You can spend a lifetime calculating details and never get as close as you would with a good estimate." Thus, in your forecast, you'll never be able to get an exact figure for your receivables. So, why not look at the prior trends and get some averages?

Tim even has a site for the book -- at PlanAsYouGo.com -- that has some great information, for free. It's definitely worth checking out.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He is also the founder of BizEquity, a valuation website.

Tags: Business Planning, Palo Alto Software, Tim Berry