If you read the popular media on business, you'll find an almost endless series of articles with titles such as "Start Your Business With $100," "You Don't Need a Business Plan," "How Important Are Business Plans?", "Research Shows Business Plans Are Not Important For VC Funding," etc. Read enough of these articles, and you'd think anyone could start a hugely successful business without any funding or planning. If you believe this, I want you to know that I am selling a beautiful bridge in Brooklyn. Call me today, before the price goes up . . .

If you flip a fair coin ten times, you have a one in 1,024 chance of landing all heads every time. Those aren't very good odds. On any given day if you ask a thousand people to each flip a coin ten times, you might find that five of them get all heads. So are these people geniuses, or are they just lucky? In the case of coin tosses, the answer is obvious: they were just lucky.

But suppose a thousand entrepreneurs all start new businesses without doing any market research or planning. The odds are pretty good that a few of them will eventually succeed. They will get a huge amount of publicity and will be trumpeted throughout the business world as geniuses who broke all the rules, yet succeeded. In the case of entrepreneurs, the consensus seems to be that those who succeed do so because they have special talents, not because they have special luck.

But are these entrepreneurs really that much different from coin tossers? In most cases, I submit they are not; they just got lucky. The fact that they started a business without doing careful market research and planning is all the proof I really need. But in a few cases, there may have been something else going on. Some of the winners had great political or business connections, so despite the fact that there were no formal business plans, special circumstances were baked into their informal plans from the beginning. In other words, you could say that these winners were also coin tossers. The only difference is that in their cases the coins were biased in their favor, and they knew it from the beginning.

But what about the others - the vast majority of unprepared people who either eventually succeed or slowly fail? You won't hear much about them, even though these are really the ones we should probably spend more time studying.

The odds of staying in business versus failing are not even. It is a lot harder to make things go right day after day, week after week, than it is to have just a few things go wrong. This is even truer in today's hyper-competitive markets than it was twenty years ago. Furthermore, one problem often leads to other problems, each one feeding off the others, until either total collapse (or some other ending) occurs.

A realistic plan is not just a beginning point A (where we are today) and an ending point B (where we want to be in X years). It also includes an analysis of different ways to get from point A to point B, along with consideration of risks, resources, cash flow, opportunity costs, and other factors. A good plan is also based on facts, not fantasies. That means a certain amount of work has to be done to uncover market realities such as who your main competitors are, how large the market is, etc. Even if the plan does not work out exactly as envisioned, you should still gain something just by going through the business planning process.

If information is available that will help you increase the odds of success, why would you not avail yourself of it? And if a few dozen hours of planning and analysis help you eliminate several otherwise apparently attractive options, why would you not do the work? It turns out there are several reasons.

Business planning has gone out of vogue lately. People want instant gratification, and going through the process of developing a solid business plan just doesn't scratch that itch. According to Sir Harvey Jones, a British businessman who hosted a business television show with the BBC called Troubleshooter in the 1980s: "Planning is an unnatural process; it is much more fun to do something. The nicest thing about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and depression."

People also seem to have selective amnesia. They tend to remember successes and forget failures, even though the failures are often much more troubling, and definitely more common. In the case of small businesses, it is often difficult to learn much about business failures, because they just don't get much attention. But in the case of giant international corporations, business failures are hard to hide.

Consider the case of BP. Years ago BP made a strategic decision that it was easier to invest in marketing and lobbying than it was to invest in realistic planning and fail-safe technology. Fines and lobbying expense were typically much less than profits, so this seemed like a reasonable business decision. But BP also made another choice, which compounded with the first one. They knew that the "easy" oil fields were gone, so they decided to go after the "harder" ones. They decided it was worth the risk to build and operate several deep water oil rigs in the Gulf of Mexico. The combination of slapping together a phony plan that downplayed all the real risks, not investing in the technology they knew they needed, and, all the while, drastically increasing their risk by drilling in far deeper waters than ever before all led to disaster - the largest oil spill in U.S. history. In this case, despite the fact that BP paid billions of dollars in fines, additional marketing expenses, and cleanup efforts, the American public ended up getting much of the bill, and BP is now more profitable than ever. So in this case, things worked out pretty well for them.

Arrogance and greed are other factors. Lehman Brothers was considered too big to fail, but they are now gone. In fact, they went under at record speed: all it took was a few months. And don't forget Enron, Tyco, Worldcom, and Arthur Andersen. All of these companies were valued at tens of billions of dollars at their peaks, and are now either gone or worth a small fraction of their peak value. All of them started out as solid, worthwhile companies, and then became corrupted by greed and arrogance.

Another example is Divine InterVentures, the venture capital creation of "Flip" Filipowski - the guy who made a fortune from Platinum Ventures. In the late 1990s Divine InterVentures was the darling of Chicago. Flip famously said, "Profits don't matter," during the height of the Internet boom in the 1990s, and many people believed him. But by the end of 2001 Divine InterVentures had collapsed, and it is now known as one of the worst performing IPOs in history. (After their IPO, the company's value eventually dropped by more than 99%.)

In his book Built to Last, James Collins analyzes some of the longest lasting and best performing companies in America, companies such as General Electric, IBM, Boeing, and Ford. He does a slightly different analysis of other excellent companies such as Walgreens, Abbott, and Kroger in Good to Great. While great management and leadership are central to all of these companies' success, steadfast realistic planning is also clearly a part of their secret sauce. Good or great companies figure out what they are good at, and then relentlessly focus on that. They also plan continuously, rather than just once every five years. It sounds easy, but it actually requires large amounts of discipline and hard work.