How important are business plans?

[SenseiSteve]

My perception is that an awful lot of startups, cross industry, are not properly capitalized or organized. This is especially true in web hosting, where for pennies on the dollar, you can throw a website up against the wall, but will it stick? In reality, many don’t, so we hear horror stories of lost data and clients, over and over and over. This reinforces the need to do your homework, formulate a viable business plan and then execute on that plan.

So, do YOU believe business plans are important, or a waste of time in this industry?

 

[huncky]

A business plan is vital for any business, as it can prevent the future liquidity problem, among other things. Although this is typically true for all websites / companies, regardless of industry. He who does not own a heavily developed business plan is unlikely to have a long career.

 

[bigredseo]

I like to use the term "Business Guide" instead of "Business Plan".

When I first started hosting, I didn't have a "plan" as such, but I had an idea and direction on things. Over the years I referred back to the guide on how I wanted the shape and direction of the business to proceed, but there wasn't an actual plan. I didn't have goals or markers that I needed to hit, instead, I had goals that would be nice to reach.

Of course, I ran my business very differently (much to how I run the business with my wife currently). Profits and Client Target Numbers are not on the forefront of any of our discussions. We don't answer to others, so our goals and targets more revolve around how much time away from a computer or vacation we want to take.

Certainly, if you're looking for investors, talking with a bank, or any other angle like that, you need a plan. How will you make money, how much time to make X, and how long to repay. But if you're funding the business yourself, and have limited shareholders, or a shareholder who just wants a piece of the pie and not dictating that they want a 9% return etc - then a plan really isn't needed, and a guide or outline is a better route.

It's not for everyone, but it works for how I operate. Of course, if I was to present my ideas on how to run a hosting company to an Economics Professor, I wouldn't pass the class And crazily enough, it was for that reason that it was successful

 

[Artashes]

do YOU believe business plans are important, or a waste of time in this industry?

This industry comes down to understanding costs. Forecasting is about the only thing I'd expect to look at or prepare, as it would reveal whether one has a realistic expectation on hitting those milestones.
Unless you are coming with 1000 potential clients lined up, telling the world that you'll be profitable in 3-6 months, with 4 full-time employees, is much less realistic than knowing it will take you 2 years to breakeven.

 

[bprashanth]

What is a business plan? I'd say it is the promise to keep working hard at a fixed set of principle-based ideas. And be flexible enough to change it once you see something that needs to be. And rigid enough not to change it frequently.
To this broad definition, I'd say a plan is very important.

But many just put up statistical analysis and say that I'd advertise here, here, here and invest such, such, such and my clients will increase so much, so much, so much and profit in x years. The problem with this is, future is unpredictable, sample space for research is generally very small. They "see" others just doing the same thing and start to do it. If this is the business plan, then it is very wrong. Maybe this is the reason so many startups fail IMHO.