Video: Can you start a business with no business plan?

If you follow the video , you will know that we have so far discussed the importance of business plans. How writing a business plans is one of the more crucial components to small business success. But, not everyone feels the same way.

When it comes to starting a business in Canada, thousands of small business owners just start, and are successful. Sometimes it’s all you need. Some businesses are simple. Some people are lucky and it’s a great combination.

But not everyone can or for that matter should take the risk of just starting without planning.

In fact, 78% of small business owners fail within the first year due to lack of planning. Or lack of a business plan.

You definitely don’t want to be in that boat. But let’s take a look and see in the next few minutes together if you really need a business plan to start for your type of business or if you are going to be destined for failure.

This video is part of the small business video series, which you can access here to learn more about starting up, building a business plan, finding funding, and more.

Why you need a business plan

Before we get to discuss if you can do without a business plan when starting your business, let’s first go over a few key points as to why you need to have one.

A good business plan will:

• guide you through each stage of starting and managing your business

• Your business plan will be like a GPS on how to structure, run and grow your new business

• Your business plan can be used to obtain funding/capital

It is important to know that writing a business plan is not mandatory. It is optional, but it is truly an effective way to ensure that you plan for your success.

Think about it like this. If you are taking a family trip, do you just buy the plane tickets and go?

Maybe if you’re feeling a bit crazy. But, most people, if they want to have a great, fun filled vacation will plan the trip. The hotels where they will stay, the activities that they will do, book a few restaurant reservations in advance and simply be aware of what to expect.

The same goes for a business plan.

As you try to start your business, planning is crucial. It will help you prepare for the unexpected and ensure that you have all that you need to succeed.

There are plenty of reasons why you may need a business plan.

If you are just starting out, the plan is like a roadmap, it will take you through the process and it will get you thinking about all of the ins and outs of your business.

If you are looking for money from banks, investors, or government agencies, your plan is a must have. These lenders will always want to see your business plan before they consider you for any funding.

On the other hand, you may also be planning to find a business partner. It’s always best to share a business plan that explains your business model in detail with a potential partner. You want to be on the same page after all and the best way to explain your idea, is via a business plan.

With so many small businesses failing within the first year of business due to lack of planning, that should be a red flag for you. Take the time you need, develop your plan and feel at ease knowing that you’ve taken the proper steps.

Now, not every business type may need a plan. So let’s review that.

Why you might not do a business plan

1. Already started the business
2. Already making money
3. Testing the waters
4. It’s a short term plan
5. No time

It is often said that a business changes nearly 100% from your planning stage, to when you actually launch your business.

This is very true as assumptions in planning a business are only assumptions based on the research you do as you prepare your idea for the real world.

The real world on the other hand is harder to prepare for.

But, those with a business plan can often redirect, and re-work their idea in accordance to the needed changes and adjustments to fit the real world. Those without a plan, have to do the same, but with no plan to go off of.

While it is recommended that everyone has a plan in place, some business ideas may simply not need one.

You may think you don’t need a plan, especially if you have already started your business, or are making money.

If that is the case and you are seeing success, you are good to move forward, but it is still a good idea to plan for the future.

If however you are running a test, trying to determine your audience, seeing if your website will work, or trying to collect data, you might not need a business plan just yet – at least not until the test is over.

Testing the waters, or doing a trial and error run is a good way to collect crucial information to help yu better understand the market prior to launching you business. This, in combination with a properly written plan thereafter, can have wildly successful results for your business.

A lot of businesses are seasonal. Some are spontaneous and some of the best inventions or ideas happen this way. And some business ideas are so short term that a plan simply isn’t needed.

Let’s say you have a special skill you want to turn into a business for 3 months. Planning for it and spending 6 months to put together a business plan may not be ideal. But, if you can just jump into it, for the short term amount of time you have available and make some money, it is a perfect example why a plan isn’t needed.

That’s not to say you shouldn’t plan for it – but perhaps a formal plan is not required.

Not having time is also a factor why one might decide not to write a business plan. Nobody has unlimited time and when it comes to entrepreneurship, there simply isn’t enough time in a day.

That being said, some businesses really do need to be planned, but with some, especially some of those quick sale ideas have to happen when you think about it.

Think about the pandemic that just passed us. Many businesses started creating masks and protective gear within a matter of 30 days after being allowed. The market needed it; the demand was there. No business plan was prepared in most cases as there wouldn’t be enough time to get it all out there. So a true trial and error test.

Start First. Plan Later.

A common strategy, that often sees a 50-50 result is to start the business first and plan later.

This works in some cases, but not all.

The entire point of planning your business is so that you know what to expect. But unfortunately not everyone has the time as mentioned, or the know-how of what to put in a business plan.

Afterall, how can you plan your business if you don’t know what will happen in the real world.

Well, this is why research is a crucial step of the startup process. Research to help you determine who your audience is, where your market is, how much you should price your products or services, how much things will cost and so on.

Starting a business is a serious task. Shortcuts should not be taken as in the long-run, it does not end well.

Now, you may get lucky and all the little gimmicks, the short cuts and the lack of planning may work out for you, but statistics speak for themselves and over 78% of small businesses fail in the first year due to the same problems.

If you truly must start first and plan later as per some of the scenarios we discussed previously, it is important to at least try and pin-point a few crucial points as soon as you can.

These points, as shown here will be to determine your audience and market.

No matter how limited in time you are; or if your business is short terms or not, planning for your audience and market is the very minimum you can do.

If you will spend money on promoting yourself, you want to target the right audience as well as the right market.

Let’s say you have a seasonal business and rely on heavy snow to teach people how to snowboard. Last thing you want to do is start advertising everywhere, targeting everyone . Instead, know your audience and determine who will be the right fit for that specific product or service you offer. This will help you focus your ads, get you better results and help you succeed.

The other thing to consider briefly is the costs. Don’t just jump into a business and not know what to expect. Plan your costs.

The initial startup costs. Can you cover them?

The on-going monthly costs there after. Will you have the funds?

Prepare for the unexpected and have the capital in hand, or have access to it if you need it. Don’t get stuck in a situation where you have no money and have to wait to get it. By that time, it may be too late.

Lastly, be sure to define your risk scenario.

What are the risks with your business? List them and briefly explain them. This way, if that risk does become true, you will know how to overcome it.

Planning a business, no matter if you write a formal business plan or not, should be done. Preferably before you start the business, but if you can’t, at least cover the basics.

So, can you start with no plan in place?

In Short:

Yes, you can start your business without a formal business plan.

But be aware of the consequences. Ensure you plan for the very basics at a minimum, no matter what, and that you are aware of your risks.

Keep in mind even though you can do something, doesn’t mean you should.

78% of small business owners fail within the first year due to a lack of planning. Something to think about!

Not all business plans are created equal, but by following the needed components, your plan will fit into what is expected by the industry.

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As we come to the end of the video, I hope you’ve come to a realization that you really should write a business plan for your business.

But, it’s not mandatory. A business plan is a tool that helps protect you and prepare you for the unexpected. It is there to help to get you thinking more in-depth bout your business idea and plan for a better future.

Some business types may not need one, but it doesn’t mean that you shouldn’t take the time to carefully plan certain aspects of the idea anyways.

Whatever the case may be, so start a business in Canada, be sure to work with a Canada Startups expert who will help with your business idea, building your business plan and finding the needed funds to make your dream come true – and stay tuned for the next video in the series as we get into the finer details about the business planning process.

If you have found the above video helpful, review the other small business startup videos in the series as we will be discussing various things related to business planning and the required steps. These topics will range from the importance of your business plan, to the various components to include, tips and methods to get a plan in place.