It's often helpful to look backwards when you're trying to move forward, in order to learn from the successes and mistakes that other people have made. And what's striking about the history of business plans is how little has changed. Sure, the medium we use has changed over the centuries, going from parchment paper to online PowerPoint presentations, but the end result – having a written plan that demonstrates to the business owner and possible investors how to make a profit – has remained very consistent.
To show you what I mean, following are a few highlights along the historical timeline of business plans.
The 18th century
Maybe the first business plans were written on clay tablets by the ancient Sumerians, when they were writing about trading and livestock, but the originator of the modern day business plan is often given credit to Pierre Samuel, Sieur du Pont de Nemours.
Here's the short story: Before Samuel and his son Éleuthère Irénée left their native France in 1799 to build a gunpowder mill in Delaware, they wrote numerous letters to potential investors that offered a plan on how the mill would make money. Clearly, this was a business plan that worked. Samuel and his son secured their investors, and today their business is known as the DuPont Company.
The 19th century
During the 1800's, associations began holding business plan competitions. You might call it an early version of crowdsourcing. Industry leaders offered cash prizes to encourage the best and brightest to submit their ideas for improving production or fixing vexing problems.
For instance, in 1874, the National Butter and Egg Convention awarded $1,000 to the best essay that discussed how to produce the largest quality of butter, of best quality, for the cheapest price and how to sell it at the highest price. Make no mistake. The Convention was looking for a business plan; they even referred to one in a lengthy statement: "...the best incentive to the adoption of any business plan is to show that it pays. Let it be provided and illustrated in practice that improvements in butter making secure larger profits, and they will be adopted..."
The most famous of these business plan competitions was in the following century: the Orteig Prize; $25,000 offered on May 1919 by a New York hotel owner to the first aviator to fly from New York City to Paris or vice versa. Charles Lindbergh won the prize.
In modern times, universities, communities, corporations and others sponsor business plan competitions, as a way to encourage entrepreneurship and industry best practices.
The 20th century
By now, it was conventional wisdom that a business plan was crucial to the success of an enterprise. For instance, a 1921 issue of "The Journal of the Engineers' Club of Philadelphia," noted the importance of a business plan, especially if you wanted the business to succeed:
"It is necessary not only to have big men in the operation of a big business, but it is above all necessary to have a good business plan. Individuals come and go, they work and they pass, but the work must go on."
Over 50 years later, in 1976, Changing Times (a magazine that later became Kiplinger's Personal Finance) offered advice to the aspiring entrepreneur, advice that sounds like it could have been written today:
"An early step in starting a business is to draft a blueprint that shows how your business will be organized, where it is headed and what you'll need to get there. Bankers, suppliers and others you'll rely on for help will want to see your plan. It needn't be a formal document, but it should contain information that demonstrates you know what you're doing."
The 21st century
Business plans are still just as vital as ever, although how you write and read them may be different than in the days of yore. Now, there are apps, templates and software designed to help people create their business plan. You can also take workshops, seminars and audit college classes on the subject, and as I've written about before, even the TV show "Shark Tank," is essentially about the importance of having a good business plan. In other words, business plans may be flashier than ever, but whether in the form of a hologram or something else, they're very likely to be around in the 22nd century.
- Throughout history, one thing hasn't changed. If you want investors, you need to show them how to make a profit.
- The centuries and decades may change, but the argument remains the same: Business plans don't only benefit the investor, but the business owner. Business plans force business owners to think critically about their business.
- Entering business plan competitions can be good motivation for getting your plan finished and executing it well. The PR for the winners is excellent.
- Take a good look at your business plan and ask yourself if, based on the plan, you could envision your business being around 100 years.
- As a way of examining your business plan more critically, ask yourself whether you think future generations might look back on it and if they would admire it. If the answer is no, then the current generation may not either, and you have some work to do.