There are differing thoughts today as to whether business plans are necessary or not. Some new school thinking is that with the right idea and ability to "pitch", you can find ready capital without a formal business plan. While others still have old school thoughts, and I'm in this camp, that you need a well-defined business plan to interest capital.
I think that experienced, serial entrepreneurs with a track record may fit in the first camp. They've proven themselves, start with an existing database of potential investors to call upon, have resources to introduce them where needed, and come with seasoned teams. While they may interest capital without a business plan, there is generally a very well laid out plan to execute in place.
Young start-ups and unseasoned early-stage operations need quality engagement documents whether introduced to capital or not, which is also more difficult for this demographic. For these entrepreneurs getting the attention of capital is more difficult, takes much more time, and initial investments are much smaller. This means working harder to find an audience of capital and to convey why your opportunity deserves its time or attention.
To interest serious players and bridge the gap between the two camps, your well laid out business plan is the best engagement document to have. And know, interest in reviewing the plan is just the beginning of the process. Two core thoughts to consider in answering the question "are business plans necessary?"
First: the business plan should be developed as a road map to help you manage your growth. I am a big proponent of milestone management and ensuring the team is consistently working toward achieving the planned goals, thereby propelling the growth of the enterprise.
Second: whether seeking debt or equity, lender or investor, any capital you're competing for needs an ability to assess your probability of success. When you have no other evidentiary story to convey - a clear, concise and detailed business plan is the best tool for interested parties to have a glimpse into what you’re offering and how you plan to execute.
Seriously consider building your road map, whether seeking capital or not – it could define the steps and motivate the spirit to accomplish what you envision.