Why Freelancers Don’t Really Need a Business Plan

Pick up any old business book and what’s the first thing they tell you that need to do before starting your business? Write out a business plan. While I can’t speak for any other types of businesses, I’ve found that as a freelancer, business plans are utterly useless, and in some cases, harmful.

Interestingly enough, larger companies are starting to come to the same conclusion. If you’ve ever read 37signal’s Rework book,  you’ll know they’re also not a fan of the business plan. It’s interesting how a seemingly innocent piece of paper has now come under fire from several sources.

So why don’t you, as a freelancer, need a business plan? How can it do more harm than good?


It’s an Excuse

There are some people who want to go into business for themselves, but are terrified to make the jump. So they decide to take some extra time “planning their business” out. In fact, most of them have planned so much, they never actually started anything.

I know someone who’s been working on their business plan for the past two years. Yes, two years. They could’ve built a very successful freelance business by then, but instead, they’re crippled by what the business books tell them is important.

I’ve always been a fan of jumping into something. While I’m normally a planner, business is the one area where I’m completely free of anxiety, procrastination and excuses. If you’re excited about starting a business, the time to do it is now. Six months down the road, you might not be so excited anymore – or the stagnation could kill your enthusiasm for going out on your own.

It’s Useless in the Real World

Business plans are absolutely useless in the real world. While it’s nice to write down your goals, a business plan is a guess. A guess at where you’ll be at six months, a year, two years from now. Unfortunately, business never goes as you plan it. Therefore, what’s the point of wasting your time on a guess?

It’s also useless from the standpoint that it’s just a piece of paper. You type it, print it out, and shove it into a desk drawer where it never ever sees the light of day again. Even if you decide to hang it up next to your desk, how often are you going to look at it when you’re in the middle of client duties? Never.

It Can Hold You Back

Having a business plan can actually hold you back if you actually do try to stick to it. What happens if you’re more successful faster than you planned? With a business plan, you might actually cripple yourself by not raising rates when you should, not firing clients, or not reducing your hours.

It’s important to note, that if you do insist on writing a business plan, that it shouldn’t be set in stone. You should probably rewrite it every six months to change with where you are in business today. However, I suggest that you forgo the business plan altogether in favor of making real goals.

Making Real Goals

The difference between making real goals and writing a business plan may seem negligible at first, but goals are actually something you strive to achieve. Goals have actionable steps that you take almost every day to try to reach them by your specified date. Yes, goals have a deadline!

I prefer goals over business plans because they’re easy to change and update, while being something you don’t really forget about or shove in the back of your desk. Goals are there, in front of your face every day. Goals become the way you run your business, the amount you charge and the types of clients you work with.

So how do you set a goal you can actually achieve? The trick is to choose a goal that’s easy enough to be achievable, but tough enough that you’re going to have to hustle to make it. For an example, a goal of making a million dollars this year by being a freelance designer is probably not possible to achieve (unless of course, you happen to be famous), however, a goal of making $100,000 is something that can be achieved with some work and perseverance.

So how would you go about making the $100,000? First, you need to decide your rates. If you were to keep your current rates, how many hours would you have to work to achieve your goal? Is it possible? If not, you’ll need to raise your rates. What kind of clients do you want to serve? Can they support your raised rates?

After deciding rates, hours and clients, it’s time to put your goals where you can always see them and into actionable steps. I like to break my large yearly goal into small monthly goals. So, if my goal was to make $100,000 a year, that means I’d need to make $8,333 every month. Breaking  your goals down into smaller goals makes it seem less daunting, while giving you “check in” points so you don’t forget where you’re going. Make sure you put these steps into your client or business schedule and treat it like a normal business task.

Your Thoughts

What do you think about business plans? Have you ever written one and stuck to it?

Image by Caitlin Childs

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Comments

  1. says

    Even though I’ve never used a business plan, I can’t help but think it has some potential for freelancers. So I disagree slightly with the assertion that it’s totally useless. There is some benefit in writing to organize thoughts and establish a sense of direction, particularly for the free-spirited or sometimes unfocused freelancer.

  2. says

    I have to agree that writing a business plan is useless for a freelancer.

    Indeed, you need to have a direction, goals, what type of clients you’re looking for, your rates, but those should be within your purpose, not on a 20 long pages document, that for sure you’ll never open up.

  3. says

    The only time you need a business plan is when you need to approach a bank to set up a business account. Without one a bank won’t entertain you. This is true in the UK anyway.

    You don’t necessarily have to keep to the business plan once you’ve got an account open.

  4. says

    I agree, that when you’re freelancing all on your lonesome under your own name a business plan isn’t much use, but there are parts of a business plan that /everyone/ should do before they take the leap.

    The SWOT analysis for one. A basic marketing plan for another. Competitor Analysis as well. Product/Services Breakdown.

    As soon as you decide to get serious and become a “design business” though, business plans are imparative. I spent 6 months working with a Small Business mentor on mine and it’s come in very handy with benchmarks, competitors, pricing, and – most importantly – setting goals. I check in with it every month to see how far ahead/behind I am compared to the financial projections.

    So far, and I think this is because I do check in every month, I’ve been ahead of projections every month since opening.

  5. says

    I agree with you Amber, wholeheartedly. I think some people get so caught up in the strategizing and planning, that they never move forward.

    I was in business 2 or 3 years before a planning-type friend suggested we put together a business plan. So, we spent an entire day in an office writing and drafting and brainstorming, when actually, I could have just been working on new projects. I don’t believe we ever finished the plan, and 12 years later, I’ve never once needed it.

  6. says

    A business plan is only as useless or useful as it is designed to be. I’m not a fan of the anti-planning trend. I think it misses the point. for startups in todays environment, a traditional formal plan is only practical if seeking outside investment. But that’s not the only type of plan. If one is new to freelancing, having a plan for how much you want to make, how to accomplish goals….this type of planning is useful and can make things more tangible when starting out. The best plans are being revised after being tested, to see what works and what doesn’t. This idea of a business plan being some piece of paper you stick in a drawer and forget about is antiquated. Planning is always useful, even if your plan is informal and always changing (which it should be). of course your plan can only evolve if you’re testing it, which means you have to do something. it’s the inactivity that’s the problem, not the planning itself.

  7. says

    You’re missing the point about a business plan. A business plan is only as useful as you make it, but it doesn’t have to be a large document outlining various scenarios.

    Simply making goals and planning how you will reach those goals is a business plan. If you say that you’re going to make six figures next year and specialize in a single aspect of development, then you are essentially making a business plan. If a business development or business planning professional has told you otherwise, then they are simply incompetent at their jobs because they only see one “style” of business.

    It’s also good to have a plan in the event that you need to just cut bait, regardless of your industry or style of business. Do you just wait until it looks like your current business proposition is not working out to reevaluate your positioning in the market, or do you set up a trigger that makes you check yourself if you’re not on track for certain goals?

    My business plan is only a couple of pages long, but lays out what my goals are for next year, what to look at if I am significantly (20%) off-track 6 months into the year, a rating system to help decide if a prospect is close enough to my ideal client profile, and a plan about what I will do for my existing clients in the event that I am forced to cut bait for any reason. Time spent on it: ~4 hours.

    When I’ve got free time, I pull the business plan out, give it a quick once over, and consider any revisions I may need to make. A business plan is constantly evolving document.

  8. says

    I agree, Amber! I jumped into freelancing without a business plan and relied on short-term and long-term goals. It’s been very beneficial for me so far. I worried whether I should put together a business plan for a long time, but in the end, I don’t feel it’s worth my time. Thanks for the post!

  9. says

    In the UK a business plan is essential if you are looking for anything other than self financing a business. If you want a loan – you need a business plan. Want to get a venture capitalist involved? Business Plan. Wanna go on Dragons Den? (A show where entrepreneurs go up in front of multimillionaire VC’s. I believe this is called Shark Tank in the US) Business plan!

    Sadly no matter how useless they may seem in the UK at least they are required. Equally I have never seen a bank turn round to someone who they’ve given a loan to and say “Sorry sir/madam you’ve exceeded your stated business plan goals – we’re going to ask you to repay your loan now…” I think if that did happen the press would have a field day – especially in the UK, where anything seems newsworthy these days!

    I keep a business plan handy and I spend about half a day a quarter updating it with project forecasts etc – which basically take my previous quarters earnings and depending on whether I am up or down on previous quarter add 5% or take off 5%.

    This gives me a constantly moving goal which is reasonably achievable – unless I happen to get lucky and bag that “must have client” which gives me a huge earning on a 1 off project, when I may have to consider how I forecast. This works nicely for me as I always have my business plan reasonably up to date should anyone wish to see it but also means I don’t get too bogged down in spending time on it. If I don’t make my target this quarter – so be it I adjust next times, and chances are no one saw it anyway!

    Dave

  10. says

    I’m not sure I completely agree. I took the freelancing plunge without a business plan, but over time I’ve developed one–probably in part due to habits, but I also have a bit more focus than when I started.

    I’d say that a formal business plan isn’t entirely necessary, but having -some- sort of plan is essential.

  11. says

    I think Brian makes an excellent point. I think the issue with business plans is that there is a connotation of being apart of a rigid corporate culture. In the article, setting goals is still a business plan its just more flexible and a little less formal which flows really well with a freelancer lifestyle.

    On a related note, with goals, it is very important that you write them down or talk about them with other people, it keep you accountable.

    I find when I tell friends and family, “I want to do XYZ”, I will be more committed to reaching that goal for fear of not being able to keep my word.

  12. Chris J says

    While I agree that they’re a waist of time in the beginning, I believe they hold a tremendous amount of value if you’re a year or more into your freelance business. I’ve been at it a year and spent almost a week of planning back in January. BUT that was after I started. Those plans have proven to be priceless to me now.

    Planning aside, what I find to be most helpful is brainstorming with mind maps on a regular basis. This is what continually helps me improve my workflows.

  13. says

    Before I quit one of my two teaching jobs (now I have none of them – design rules! : ), I was in a “development team” of a language school governed by a non-public higher university. Everything we did in the first 3-4 months was writing a business plan. All the time it was constant BS like “we need a business plan, we need a business plan, we need to finish it ASAP… blah blah….” Then came the school year and it turned out we didn’t have any budget to make things happen – it was just time lost on some crap business plan, the dean wasn’t interested in investing in the language school at all, it was just his superiors’ idea and part of some strategies for the university. It was talking about planning all the time but when it came to decisions – nothing happened. I wanted to design brochures, the website, etc. but there was constant hold back like “we need to have green light from the top” and it was the same for 8-10 months – just waiting for the top to give us the green light. After 8-10 months of such stalemate I was totally demotivated and I quit the job. It was linked to classes in this university and I decided to quit everything to have more time for some decent freelancing without BS planning. Like some people said before – a good, clearly visible direction is crucial, but don’t let doing extensive paperwork hold you from developing. Now I have my own steering wheel without some fat cat demanding some crap stuff being done.

  14. says

    I think there is a lot of use for freelancers, contractors and all other types of solopreneurs to write a business plan. Putting your thoughts and goals down in some kind of written form is never, in my opinion, a bad thing.

    True, not everyone thinks in terms of lists and todo’s and calendar milestones, but for some – having something more than an idea of where you want the business to go is needed.

    A business plan doesn’t need to be a document you spend 2 years working on to perfect. It can be a road map of where you’ve been and where you want to go. It can and should change with your business.

  15. says

    The main problem in this discussion is that most of us are talking about different things when we say “business plan.”

    Unfortunately a lot of people do straw man thinking, defining a business plan as a long formal static document, so of course, with the way they define it, it’s useful only in some special cases.

    I say that the straw-man formal business plan document is not the point. The point is planning, not just a plan. It has to be dynamic, flexible, and just big enough to help optimize the business and control its destiny. There’s a comment here above, by Kymlee, that does a great job explaining what planning is really about and why it’s good for a freelancer. I totally agree with Kymlee.

  16. says

    When I first saw the headline in Safari’s top sites page I though the title was why freelancers needed a business plan. Glad to see otherwise. As Amber said, there’s a nice short chapter in Rework and simply put, business plans are bad because they take time to do, and they can’t foresee all scenarios you may find yourself into.

    @David
    I do understand that, but how would an investor respond if they knew your business grew year after year without any business plans. If they are looking for some numbers and expectations why don’t they make their own based on your company’s history. For example, in Romania this information is public (income, profits, employees etc) and there are multiple times when banks, for example, scavenge public databases to find great small companies with huge potential and contact them before they go to another bank.

    I strongly feel you don’t need a business plan to have a great business and grow it, but based on the location and partnerships you may want you may still have to do it. But I also think that instead of spending time for business plans you can show to banks or investors, you can also spend time with some investors so that they can feel your business not just read about it in a document.

  17. says

    i think that have different kind of work. Some of then had to be done by companies and some can be done by freelancers, specially when the costumer is not a large company or have a small budget. In that case freelancers are the best option because they have not structure or employee costs.

  18. says

    I read the title and was SHOCKED! I was shocked because I equated “business plan” to “business goals” and thought to myself, what the…?!?

    I kept reading and learned that you differentiate the two. What you have spelled out here, I don’t have a business plan either. What I have are goals. I have a vision of where I see myself in 2015. In order to reach that goal, I’ve set a few smaller goals to accomplish to get me there. if I stay on track, I’ll have no probably reaching my 2015 goal, and it may even come sooner than planned.

    I agree that people can get bogged down in formal business plans, but that’s not to take away the importance of business goals!

    Great post, thank you for sharing!

  19. says

    great stuff amber. I think as a freelancer, you shouldnt have a business plan because you never know when you going to make the money you wish. It’s similar to job contracts where you work only by calls or temporary shifts.

  20. says

    I’m just going to cheat a little and post here what I posted to Freelance Folder’s Facebook post on this article:

    I think just the term ‘business plan’ has a stigma attached to it as there are so many people who aren’t taught resourceful, practical, realistic ways to write a plan. Like a few people mentioned, a business plan isn’t something you write and toss aside… it’s an ever-changed, modifiable document that helps you stick to your goals. It’s not about writing down your dreams, or writing down how you think something is going to go… it’s about writing goals and specifying exactly how you plan to achieve those goals.

    You have to have goals for sales, for marketing, for customer relationships, for time management… and above all the goals have to be SMART (Specific, Measurable, Attainable, Relevant, and Timely).

    Strictly for example:

    “I will increase my sales by 220% by August 15th, 2012 by completing a minimum of 2 web design projects (at a rate of $1100 per project) per month beginning April 1, 2011.”

    This statement is easy to change, say if you meet your goal early and you decide that you would like to increase your sales by 600%, or if you get bogged down and need to change your dates, etc.

    To say a business plan is unnecessary is grouping together many aspects of how a business is started, and maintained and it also simplifies a rather LARGE area of how any would-be entrepreneur should treat any possible business venture.

  21. says

    I would say that buisiness plans ..are useful..I work with alot of non-profis and small business, and they haven’t given much thought to what it takes to run something. A business plan can give you the framework, and act like a road map to developing a venture that is successfull. Plus, when it comes to soliciting investors , or business loans, etc..you have to have something to share with potential funders. You don’t have to follow it to the letter, but at least put some letters down on the page…no doubt

  22. says

    I totally agree with the premise of this post. I know of one person who insists that writers must formulate a mission statement (another word for business plan). It’s absolutely useless. Goals, when written correctly, can sit by your bedside or desk for reviewing at the end of each day, week, or month. I check off goals as I achieve them and I can’t tell you how wonderful it feels when I get to check one of those babies off my list! Thanks for this post!

  23. says

    I’m kind of 50/50 on agreeing with this article. Yes, some folks go so overboard with the business plan that they forget to get down and dirty and get the work done.

    However, I think so many freelancers miss out on having a strategy, knowing what sets them apart from their competition, and having an actual plan in place to BE successful and profitable. And I think that’s why there are so many flakey freelancers out there.

    I do love being able to shift gears as my skills develop and trends change, but if you don’t set up a strategy or even a simple mission statement for yourself, chance are you’re going to burn out at some point.

  24. says

    “A failure to plan is a plan to failure” – Anonymous proverb

    Like many people have said above, while I don’t think writing a massive document is a good idea for most small businesses and freelancers, some components within that document are vital and if you don’t write down these things, they get forgotten about altogether (at least you can find written plans when you clean out your desk draw from time to time!)

    I started my freelance business without a plan at all, but as things get busier and you take on larger clients, not having a basic marketing and financial plan in practice is a recipe for disaster. All you need is an A4 sheet of paper, and half an hour of your time to write down your needs, ideas and goals. Even something as simple as a daily to-do list is a business “plan”, as it gets you from A to B to meet your eventual goals.

    At a minimum I like to prepare a monthly cash flow forecast to see when I’m getting paid and how much of it will disappear – as well as a balance sheet / P&L statement which my accounting software generates. Marketing wise, i have a simple cyclic plan involving cold calling, emailing, social media promotion etc, and I rinse and repeat that every month. Nothing going beyond 3 or 4 pages in total, but it’s helped me go from strength to strength knowing where my business is at.

  25. TLC says

    I had to write a business plan for a grant application about 9 months after I started my business. It really made me stop and think about marketing, finances, and a bunch of other stuff.

    I think every freelancer should have goals and update them at least yearly, no matter what you call the document. It helps you stay on track, and at the end of the year, you can see what you accomplished.

  26. says

    I think business plans have the potential to be useful. The type and complexity of the business will dictate the length and detail of the plan.

    Also need to consider the ‘definition’ of business plan.

  27. says

    Freelancers should think about the branding of their name and their services. A business plan will help to navigate from A to Z on the different steps of growing the “business”. I just started freelancing as a web-worker (web, online media marketing,e tc) and it helps to know who I should approach based on my strengths and opportunities. I’m an introvert and I hate people so, social networking is out. My plan has directed me to more unconventional ways to grow my business.

  28. says

    While a business plan is not always necessary, I do recommend an honest SWOT analysis (Strengths, Weaknesses, Opportunities, Threats). I started my business with one (this is at MOST a six-hour process), and it helped me focus.

    One of my major lines of business is actually writing business plans for a client, and I’ve seen how they can be beneficial – sometimes the mere act of having to write things down makes one focus. A good business plan can make you focus on what services you are actually providing, what exactly you have to offer potential clients and why they should choose you over another provider, what unique skills and experience you bring to the table and where your weaknesses could be. It can also help you recognize potential secondary lines of business, and focus on what is actually profitable or in line with your mission. The least important part of any business plan, in my opinion, is the planning part — the timetable or stages or step-by-step predictions.

    That said, I have never written a business plan for my business. I do have a clear statement about what I do and why a client should hire me, and I have an internal list of which types of jobs are not in line with my core business and who I can refer them to. I go back to the SWOT when I need a reminder about focusing.

  29. says

    Planning is about recognizing where you are now, identifying where you want to get to and what you want to achieve, and how you’re going to do it.

    The problem in most situations is with the word “plan” itself. Too many people that advise you put the emphasis of your plan on the noun, the “thing”, the actual document, rather than on the act of planning, thinking and plotting, which is more about what you are going to “do” with your business, or achieve in your market.

    Planning is about doing things and specifying, illustrating or clarifying details about how you will achieve certain targets and objectives.

    And it’s a fact that people who plan will, far more often than not, be more successful than those who don’t, because of the level of discipline they end up introducing and applying to their business.

  30. says

    thank you! i’ve always felt a little guilty about not having a formal biz plan. I even downloaded various fancy plan templates two years ago and started one that i never finished, because well, business actually happened. I realized there was no way to plan out my freelance business in any real way so why waste the time?
    The best plan for me is to keep it simple, be flexible and open-minded, send out invoices on the first of the month and laugh a lot.

  31. says

    I agree! It’s easy to procrastinate and let something like a business plan hold you back. Only if you need funding should you write up a detailed biz plan. But tor the average Freelancer it’s only important to know 3 things:

    1. Who is my target market?
    2. Where can I find them?
    3. What solution can I help them with?

    Set goals on how and when you will reach your goals. Monitor. Adapt. It’s as simple as that. ;)

  32. says

    It seems like there is some confusion about the legitimacy of what a business plan actually does for your business (whether that be a freelance business with just yourself as the sole proprietor, or a large corporation). A business plan isn’t about compiling useless data or ‘bogging your business down’. The fact is, if you write a business plan for so long that you never get the business up and running it’s not because you’re focusing on the plan; it’s because your business idea isn’t feasible.

    If you have a well-written business plan what it will do for you is outline how you think your business is feasible. If you work your way through a marketing plan and then move on to a competitor analysis and you find yourself disheartened it’s because you have solid data showing you that you have no niche in the market, and therefor no longevity and no feasibility. This doesn’t necessarily mean that you scrap your whole business; it means you need to rethink exactly how your business will operate, and perhaps you have to rethink who your target market is and how you are the best choice among your competitors.

    I think a lot of people who believe they don’t need a business plan aren’t thinking of businesses as dynamic and ever-developing and changing. The foundation for changes and modifications is your business plan. You reevaluate your positioning; you do a new competitor analysis and revisit your marketing plan. You make changes accordingly and you continue to prosper.

    The bottom line is, a business plan doesn’t hold you back at ALL – assuming your business idea is FEASIBLE. The only thing holding you back at that point is your business idea.

  33. says

    I think the plan is useless in itself, but the planning behind is critical.

    “Plans are nothing; planning is everything.” Dwight D. Eisenhower

  34. says

    I don’t often totally disagree with articles but i will make an exception in this case!
    The Author clearly has not fully appreciated that business planning is simply a process for thinking about your business. A written plan is merely a snapshot and immediately out of date. As has been noted they are required for some purposes but mainly as evidence for a rational thought through process.
    A business plan is like the cap on top of a Doric pillar- its is there to join the individual operational plans ( production,operations,property,HR.Sales,marketing,Finance) together to ensure they all work in harmony.

    I totally accept that some freelancers will have very simple plans because they do not have the need for all of the functional areas- but they normally have more than one which need to be coordinated.

    I am reminded of the quotation below:

    “If you have no intended destination then any route will get you there”

    Richard

  35. says

    I can’t stop laughing when you wrote that business plans are useless… as I feel the same way. In fact, I started without one and just went for the saying ‘Ready, FIRE… and then, Aim!’ I think that business plans just nurse your need to procrastinate more instead of you going out there and having your foot on the water. You can’t know things if you don’t try. I think the best person to illustrate my point is Richard Branson. If you really like to have something to aim for, having a one-sentence goal is enough and you simply let experience be your teacher. That’s my take!

  36. Klavzz says

    I disagree. You may not need a Business Plan in the ‘going-to-the-bank-to-get-loan’ way but as freelancer we really need a Plan for our Business. That person that has been writing a plan for two years – have just found their calling “Writing Business Plans” they should do that as a freelancer.
    It doesnt have to be formal – and written in some lofty language – but I think one is needed for freelancers especially!!

  37. says

    Thank you for saying the unsayable! I’ve been a freelance designer before and am in the process of starting up again. Try as I might I’m just not motivated by lists, targets and projections. Last year I wrote an OGSM plan as part of the excellent Zero2Illo 12 Week Challenge. This is where your Objective is your overall vision for your business; your Goals are the elements of your business which will help you achieve your Objective; your Strategies are the individual steps involved in achieving your Goals and your Measures are your financial targets, deadlines, etc. All very worthy but I find the process like leading the proverbial horse to water.

    I know how much I need to pay my bills every month, I can identify different types of active and passive income streams. Other than that I can only look on my business idea as a number of steps up a ladder. If I try to set goals that are too rigid then I just get disheartened when they don’t come true.

  38. says

    I agree, that writing down business plans can be a form of procrastination. It really is a mind thing, the mind needs to be satisfied that there is a business plan in place, because somebody else told them that there needs to be one.

  39. says

    I totally agree with your post. I tried writing a business plan, but everything changes so quickly that it ended up just being a waste. I didn’t necessarily jump into my freelance, but I don’t really have a business plan either. Just some goals that I need to make that are also achievable.

    :)

  40. says

    Great post, I think others have mentioned this, but to me a business plan is a form of procrastination– fear turned into a step you have to accomplish before you can move forward.

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