Posts Tagged ‘Business Plans’

Business plans: Fools errand or building blocks?

April 8, 2010

Conventional wisdom says write a business plan. However, many voices are now saying don’t! As a startup founder what do you do? I’ve written several plans before – at our web monitoring startup, on my MBA and in my past jobs. They take alot of time and effort, which distracts you from the job in hand – making stuff to sell and selling stuff to customers. However plans  have a purpose, but make’em short (one page), make’em short-term (one year’ish) and have a single clear objective. Also, have your hockey stick sales graph, if you have to have one, grounded in reality i.e. based on real customers/prospects (difficult in pre-launched mode).

There’s an increasingly voice in the UK/US for short or even no business plans in a startup. The fundamental idea of a business plan is to help re-risk a venture through pre-examination of a market opportunity. However we all know startups are a full-on risk scenario. There’s no escaping that. And almost as soon as the ink has dry on a plan the market has changed.

There are two distinct For and Against business plan camps. The anti camp say: “The very idea of ‘planning’ is ridiculous”, Jason Cohen; Brian Halligan argues it’s a fool’s errand” for start-up founders to create a business plan.” And ever the counter culture, 37Signals, are anti business plans – “What’s the point of a business plan if it’s obviously a fantasy that has nothing to do with reality?”. Two guys, David Sloly and Ian Sanders, have even created a website dedicated to the annihilation of business planning.

The pro business plan campaigners say: “A strong business plan is essentially the cornerstone of your business, and yet many entrepreneurs drag their feet when it comes to writing one”, Colleen Debaise, The Wall Street Journal; The goal is not to get a VC to read your plan.  The goal is to get a VC to invest so you can build a successful company.”; people like Tim Berry has even made an entire business our of business plans: Think of your start-up business plan as a matter of blocks; pieces.”

Taking a look back through history including philosophers and the military the value of planning is clear: “In preparing for battle I have always found that plans are useless, but planning is indispensable”, Eisenhower; Prior Planning and Preparation Prevents Piss Poor Performance (time honored British Army saying); and  “Let your plans be dark and as impenetrable as night, and when you move, fall like a thunderbolt.”, Sun Tzu

So, why all the fuss over putting your thoughts down on a bit of paper.. It’s the time, or more precisely the waste of this precious resource which startup are so short of. Our market economic cycles are becoming increasingly rapid, especially in tech. Therefore a young company has to move  faster than ever before and excessive analysis can drain reaction time. The difficulty is acting purely from the hip or gut without much forethought brings a short-term reaction.

I think the Greek philosopher Publilius Syrus (a slave) got it right 2100 years ago when he said It is a bad plan that admits of no modification.” They key is modification i.e. change and adaption. Like evolution – stuff changes. This point meets both  For and Against camps. A plan must change. It is not a static thing, in war or in business.

A complete lack of planning is unwise but excessive long/in-depth analyst is folly. Detailed planning only delays getting into the market and in gaining real insight (tactics) into customer needs. JFDI (Just Fricking Do It)! What really matters is having a grounded insight and measure in the core aspects of a plan within a business case. This detail fits nicely on a napkin or back of a cigarette packet  ;)


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