We have all heard the back and forth about whether or not your business needs a business plan. Some people out there think you still need a traditional detailed plan while others believe a leaner version of a plan is more than enough and some say throw the whole thing out the window. Whatever side you sit on, there probably is no right or wrong answer. With an increasing number of business plan competitions though there is a new debate that is gaining steam.
The question being posed is whether or not business plan competitions are beneficial or not. Generally these competitions pit young entrepreneurs or even students against one another to see where their business plan stacks up. Often the reward for winning isn’t an overwhelming amount of money and the coaching quality is lacking. Despite the negatives that some see, these competitions are more than just trying to find a sustainable business.
To begin with, not all startups and new businesses are created equal. There is a reason why some startups seem to have investors clamoring to get on board and why some startups seem to have to grind out every inch of success they experience. These reasons do not make one better than the other. There are some entrepreneurs that have a new business and they don’t need to see if their idea has legs or if they have the proper plan in place. Those entrepreneurs are just taking a different path than those that enter these contests.
A lot of these competitions are filled with entrepreneurs that are inexperienced or are young. It is never a bad thing for these entrepreneurs to get feedback on their business before investing hundreds of hours and taking on debt. Knowing that your business is not sustainable or knowing that you need to go back and revise portions of your plan can be invaluable. Yes that might mean that a viable business did not come directly from the competition but if those entrepreneurs learn something, go back and rework their business, maybe a sustainable business comes out of the competition as an indirect result.
One of the biggest criticisms is the prizes that are awarded from these competitions are too small to really help a business. Often those that enter these competitions are not looking for big money to launch or are businesses that are in their infancy stages. For those not looking for big money they obviously are getting something else (networking, feedback, experience, etc.) from the competition.
For a business in its infancy stages, $3000-$5000 can be important. You look at what Grand Rapids’ Start Garden is doing for these businesses: giving them $5000 to test out their idea and see if it has legs. Doesn’t the reward from a business plan competition allow a business to do the same kind of “experimentation” with their business without having to take on debt or give away equity?
Business plan competitions are not perfect. If you make them too big, you are going to attract “professional business plan writers.” If you make them too small you are going to receive the criticism a lot are getting now. In the end though, if they spark business or promote growth and education how can they be bad. It is on the organizers to attempt to bring in professionals and connections that can not only give feedback to these entrepreneurs but can become partners, advisers or mentors to them too. If one or two collaborations come together and new business develops, that is always a good thing.
Source: “Pitch Perfect? Do business plan competitions help launch sustainable companies?” Mike Brennan and Brian Edwards of MiBiz.com