Why Business Plans Suck for an Online Business

A month ago I was in Arizona where I got a sun burn from swimming in the pool without wearing sunscreen. Just last week I was looking outside and watching the snow glisten off the top of our fence. Tomorrow, it will probably be 70 degrees outside. My question to you:
Have you ever actually changed travel plans or family activities based on what happened with the stupid Ground Hog?
I sure hope not! I’ve decided that Ground Hog day is a scam and I’m wondering what is the hidden agenda behind this stupid holiday. Any ideas? This weather rant doesn’t have much to do with the title or content of this post, but hopefully it gets you thinking about BUSINESS PLANNING and causes you to ask yourself the question “Who really is in charge of planning out my day?” There are a few reasons I want to share information on business planning with you today: Reason #1 – Many newbies to the world of online marketing think about “Business Plans” and it scares them so bad that they never move forward. Reason #2 – A business plan isn’t what it used to be, especially for an online entrepreneur who has to deal with an ever-evolving world of Google changes, Facebook flops, and Twitter Success Stories. Reason #3 – I’ve realized through the school of hard-knocks that if you “fail to plan, you plan to fail”. Luckily failure is an important part of success, but the most successful people I know recover from their failures pretty quickly. Reason #4 – One of my favorite online entrepreneurs, Brian Clark, had some great feedback about business plans that I agreed with 100%. First question then:

Does an Online Entrepreneur Need a Business Plan?

Here’s what Brian Clark thinks about business plans:
I’ve never written [a business plan]. With the kind of businesses I start, that are 100% powered by online marketing, it’s a little bit different. Doing a business plan is not really helpful… You don’t really need any outside money to get rolling. That doesn’t mean you don’t do business planning. Setting projections is really kind of a waste of time, though.
You’ll notice that Brian said business plans are not very helpful. However, he also said that it doesn’t mean you don’t do business planning. So what does he mean? Personally, I’ve never written a formal business plan either, but I do practice “business planning” in the form of goal setting: I write Outcome Goals and Performance Goals.

What’s the difference between Outcome and Performance Goals?

This is a question I had as I did research about setting and achieving goals as a self-employed entrepreneur. Of course, like you, I want outcomes: results, money in the bank. But before that happens I’ve realized that I have to take the necessary steps to get everything in place. This is where “Performance Goals” come in to the picture (aka “Business Planning). Here’s an example of how I “business plan” with performance and outcome goals: Outcome Goal: Make $100,000 this year with my online business. Let’s break it down:
  • To make $100,000 this year, assuming I start today, Thursday, March 31st, means I have 9 months.
  • $100K / 9 months = $11,111.11 per month
  • $100K / 39 weeks = $2,564.10 per week
  • 39 weeks X 5 business days = 195 business days
  • $100K / 195 business days = $512.82 per day
  • $100K / 3 Quarters = $33,333.33 per quarter
Notice that there are lots of different break downs you can do. One is not necessarily better than the other, the point is to create an accurate picture of what it’s going to take to hit your outcome goal. By doing this break down I can actually see what it’s going to take on a day to day basis, a week to week basis, a quarterly basis, etc. if I want to achieve this financial goal of $100,000 by Dec. 31, 2011 (assuming I start today). Now I have to ask myself this important question:
“How much control do I have of that outcome – to make $512.82 per day?”
If you’re answer is “I don’t know…” that’s not necessarily the wrong answer. However, I’ve come to the conclusion that there ARE things I can do every day that will improve the likelihood of hitting these specific goals. What are they?
  • Phone calls
  • Emails
  • Weekly or daily promotions
  • Testing different wording strategies
  • Client feedback and referral systems
  • Offline marketing
  • Joint ventures
The list can go on and on. But look at this list:
“How much control do I have of [these] outcomes?”
All the control! AND, how much control do I have of keeping track of what I do on a daily basis? All the control! I can set a goal to make X amount of phone calls today and send Y amount of emails to my database. Then, after doing these things, I can monitor my progress. Maybe today I called 20 people and 5 of them purchased for an average of $50. That means 25% of my contacts purchased something and I made about $250 today. If I contact 50 people tomorrow I have a chance to sell to 12.5 people for about $625 in sales. The numbers won’t always be perfect every day, but by keeping track of my progress (what was working, what didn’t seem to work), I can then duplicate my successes more and more and more (and hopefully eliminate the things that aren’t working)!

The Business Planning Take Away

If goals are based on outcome and outcome only, motivation may be super high at first; but,  as we achieve the initial goal, the benefits of further achievement at the same level are reduced and motivation will decrease. Sometimes we don’t have complete control of how much money we make on a given day, week, month or year. If we set goals that we have control of, our mindset and motivation are not going to be in the hands of others. There’s nothing worse than failing to achieve a personal goal for reasons beyond your control such as bad business environments, poor judging, bad weather, injury, or just plain bad luck. Goals based on outcomes are extremely vulnerable to failure because of things beyond our control. True business planning in the online marketing world is different than traditional business planning. Setting goals you have control of and keeping track of your progress is critical to your overall success! Brian Clark’s podcast really confirmed my belief that business plans in their traditional form are a big waste of time. What are your thoughts on business plans vs. business planning? Nate Moller, a self-employed entrepreneur, has been teaching clients how to start an online business for over five years. He’s worked with thousands of companies who are looking for answers in their online marketing journey. Follow Nate on Twitter and become a fan of Moller Marketing on Facebook!

10 thoughts on “Why Business Plans Suck for an Online Business

  1. JamestheJust says:

    Nice breakdown of planning and setting goals – looks like I have a lot to do for the $100k this year. 🙂

    Not actually my goal – but I did like the reality check, and I don’t think that’s what Brian meant.

    Business plans are definitely something that can be integrated to an online presence – and having joint ventures or funding isn’t out of the loop, either: it just depends on your business model and goal.

  2. Daniel Black says:

    Nice post, I get your point. I personally believe that business plans are not of much relevance as opposed to good business planning and regularly reviewing your plans to take account of changes you may not have considered before. Setting achievable goals-realistic goals- is also one way of keeping your motivation high.

  3. Nate says:

    Thanks for the comment James. I’m not sure what you meant by “…I don’t think that’s what Brian mean.”

    If you listen to Brian’s podcast in it’s entirety, you’ll discover that yes, Brian did really mean that business plans in their formal model are a waste of time and effort: most of us are NOT going after investor money to start an online business. We are planning and setting goals and planning things out, but we’re also “bootstrapping” and reinvesting money into the business as we grow it.

    I’m sure there are online businesses that rely on start-up capital; however, I only know of a couple and the ironic thing is those haven’t really panned out like they were intended.

    Great discussion though. Hope to hear back from you on what you meant exactly.

  4. Nate says:

    @Daniel Black
    Hey Daniel,

    I appreciate your comment and agree that setting realistic goals is key. If you don’t believe you have any chance of achieving a goal, it’s really a waste of time and effort to shoot at it for a while and then give up and do something else. You definitely need to stretch yourself but my motto is “Small success leads to Big Success!” It’s about accomplishing smaller goals everyday (performance goals) that will not only increase your confidence, but will ultimately help you achieve the outcome you’re shooting for.

    Talk soon!

  5. Chris Adams says:

    Arizona! That’s my home state, and yes, bad sunburns happen at least once a year. Good point on the planning and its importance. I’ve also seen firsthand how imperative planning is for anything you do – build a website, launch an SEO campaign, etc. Yet for some reason so many people don’t want to do the planning and then wonder why they quit 2 months in. Although I have seen just as many people plan, plan, plan, yet fail to take action. I’m not sure which is worse.

  6. David Stevens says:

    @Chris Adams
    Without action you’re just dreaming. Overall, having realistic performance goals is key — I’m going to make 5 calls a day. Or, I’m going to identify and reach out to 10 websites with a Pagerank of 5 or above in my “space.”
    Outcomes are beyond your control. But they need to be measured (without getting all obsessive compulsive about it).

  7. Nate Moller says:

    @Chris Adams
    Personally, I say it’s better to take action FIRST and then, as you get going and get a taste of success, start mapping out a plan. I’ve seen far too many people over-plan and then end up doing NOTHING or talking them self out of doing what they really want to do.

    Sometimes planning can lead to waste of time too if you’re not motivated enough to IMPLEMENT! It’s kind of the shoot first, then aim approach.

  8. Nate Moller says:

    @David Stevens
    Thanks for the confirmation on what I think too David! You can’t be afraid to pull the trigger and have confidence that if you do all you can do, eventually you’re going to hit something 🙂

    Another key is to keep adjusting your shot and monitor your progress. If I just shoot and shoot and shoot at a target that doesn’t even exist, I’ll probably waste a ton of money on shells and end up quitting. After I take a couple shots, I need to assess how far off I am, analyze the target, and make necessary adjustments (no, I’m not really into guns and all that but hopefully this analogy makes sense when it comes to being an entrepreneur and planning things out).

    Thanks for the comments!

  9. caliowl says:

    I kind of agree with Brian that business plans are not helpful online. With my own sites, before you have blinked what was working, or what may have worked has changed; and plenty of failures along the way. I tend to focus on short term goals – see what works on a weekly basis – and then focus heavily on what does.

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