Everyone knows creating a business plan is an essential step in starting a business. It’s not only a tool for courting investors and getting funding, but it’s also a road map that you can use to monitor progress.

Most businesses spend countless hours researching and refining business plans before they even have proof that their ideas will work. While some are able to succeed this way, many others eventually learn an expensive lesson in failure and waste their time and resources in the process.

When introduced too soon in an innovation exercise, business plans can be self defeating and might even lead to failure. Here’s why.

  1. A business plan doesn’t show proof of market interest

When they find a gap in the market or come up with an innovative solution, overly enthusiastic entrepreneurs often rush to document their ideas. As such, business plans tend to be based purely on assumptions, without market evidence showing potential customer interest.

In other words, entrepreneurs often sell their ideas without testing it first. And this is one of the main reasons why most startups fail.

Many big brands know this too well, which is why they are constantly testing new products before mass producing it. Take Starbucks, for instance. It’s well know for testing new concoctions and offerings before putting it on the menu, such as the cookie straw, the mini frappes and the six new Frappuccino flavours it debuted on its 20th anniversary.

What this teaches us is that a business plan shouldn’t come first during the early stages of validating an idea. Before putting pen to paper, it’s important to test the product first and then adapt and evolve it based on market feedback. Chances are that the “perfect” product or service you thought of at first isn’t actually the perfect solution for your target customers. So maybe you have thought of the perfect hangout place for college students, but the location or some other elements of your business may not be the right fit.

As you test your idea, it is very likely for your product or service to change – which leads us to the next point.

  1. A business plan locks you in once you sell it to investors

Having a polished business plan makes you confident to sell your ideas to potential investors. But while it may actually help you secure the necessary capital, it essentially holds you accountable to ensure success exactly how it was laid out in the document – down to the last detail.

Leadership and investors buy and finance a business plan, expecting that it would take exactly the same direction as outlined in your pitch. But once you get your product to market and find that it isn’t what your customers want, you can’t simply turn around and take a different direction from what your backers have approved.

The truth is no matter what the leadership says about your business model, it’s the customer who will ultimately decide your venture’s fate. So rather than pitching an already defined business plan to leadership, sell an opportunity and an action plan for turning our idea into an executable business model.

  1. A business plan based on premature ideas won’t scale

A business built without hard market evidence has a higher likelihood of failing hard and fast. Once you have sold your ideas, you will have to spend capital on infrastructure, technology and manpower to mass produce your product or deliver your service. That’s a huge investment to make. But regrettably, it sets your business up for premature scaling if customers don’t patronise your business. Chances are you will run out of money before you even see a return on investment.

Final thoughts

There are numerous ways to test your ideas to determine the market’s responsiveness to it. You can pre-sell your product, for instance. If you’re opening a restaurant, you can set up a pop-up shop to see if people will actually like what you have to offer. If you are developing an innovative product, you can test a prototype with a group of beta-users to see if it works. Or you can start a crowdfunding campaign to get early validation and determine market interest.

The bottomline is you should never invest too much on a piece of document until you have strong evidence that your idea will work and has a market. Otherwise, you will just waste your time, energy and money in the end.