Oh no,no, BP is verything to start new business, otherwise you roaping in dark
100% interesting (as always). I've written "classic" business plans, as well as 8-slide decks as a business plan. I think the advice needs to be "You shouldn't do a business without a plan, but you shouldn't spend more time on the plan than the business."
How about being asked to write a business plan only to realize that the people who asked you to write it never actually took the time to read it? Oh, wait. You address that in point #4.
But what if you write a blog and some reader actually steals the idea? How do you avoid that?
I go back to the comment attributed to Gen. Eisenhower (though I am sure there are multiple sources): "Plans are useless, planning is essential." The purpose of a business plan is to force the entrepreneur to go through the process of planning, i.e. of thinking through the big issues and opportunities for the business.
Krishan, trust me you are roaming in the dark until the first version of your product actually gets in users hands. BP's really are for fundraising only. Dharmesh is spot on here.
Thanks for the comments everyone.
A couple of quick points as follow-up:
1. Like the Eisenhower quote: "Plans are useless, planning is essential".
2. Karl: Even for fund-raising, business plans are pretty much useless. In the tech world, I've never met an investor that actually reads a business plan. In fact, if a VC asks to see a business plan, I worry.
I am a business plan expert and I discourage people from writing the traditional business plan. Instead I encourage the business person to "prove" his or her concept.
I have tried writing my business plan but always find myself changing it a billion times. I'm lost in my business plan, however, afraid of doing it any other way....
I'm in a business plan class right now and our professor admits that the ultimate plan will be relatively useless, but the planning will be essential. I love the reference to agile development--using the Business Model Canvas + customer development is much leaner than composing a 40-page plan that is outdated (or already fatally flawed) before you finish writing it.
1. ABP (Always be Planning)
ABM (Always be Measuring) and
(Always be Marketing)
2. Agreed, but Cincinnati VC's are a bit different than the one's your use to.
It indeed sounds too familiar ;-)
After experiencing almost everything you've said (and I suspect you have as well), I have to agree with you in almost everything.
The one thing business plans are not useless at is that they help you consider things you hadn't though of before writing it.
So my advice would be write it and move on...
This article outlines everything that I have thought about for the past nine months. I've recently hit upon an idea for a startup and have gotten more traction by NOT WRITING A B-PLAN than by actually trying to write one. And I'm having more fun connecting with people who are interested in the idea and want to help. Your business plan can't build the business. ONLY YOU CAN!
Some form of planning is essential - what's critical is the action plan that sits 'behind' the business plan this becomes the working document and can be monitored, measured,tracked and when relevant changed.
Au contraire! A business plan begins as your dream for the future and is a living document; it is malleable and should adapt to the responses you get as you implement it. Like a road map, you can’t determine where you are going unless you know where you are at and you don’t know where you are at unless you know where you have been. Maybe you would feel more comfortable calling it a business diary or in your case a blog, but as with most things in life, before you embark on them, it will be best if you have a plan.
Some form of planning is essential - what's critical is the action plan that sits 'behind' the business plan this becomes the working document and can be monitored, measured,tracked and when relevant changed.
As a person who has done it both ways, I have to say I find Dharmesh to be exactly right- the process of writing a formal BP is so time consuming and energy draining that you just end up frustrated and out of touch/date with your market and consumer. They don't function at the speed of business and development, although I must say that for the beginner, it is beneficial for making you think pragmatically about the minute details that you would otherwise overlook. This is important in start up mode to avoid the classic OOPS, I ran out of money or OOPS I didn't think of that scenario. I also like the alternative of real-time feedback from a blog. Probably a balance of both is best, as always! Thanks for writing!
Ha! I had to laugh reading this post. I know exactly how this vicious cycle goes. I agree - you get sick of your business plan and it takes valuable time away from "doing".
I do feel that planning is important. Our team just had a 2 day strategic planning session to pivot our product - it was immensely valuable & we really focussed on our product vision, customer & things we "need"for launch.
But to get the most out of those two days I spent the two days prior working on the structure, topics to cover & provide high level background docs that everyone could read before the session. Planning for planning is critical :)
But back to the *ick* business plan...my questions is how do I convince my board that we don't need to focus so much on a business plan for a pitch to VC's in the coming months. Is the 8-slide deck the key?
Thanks for your blog - I love your posts.
Seems to me that "to plan or not to plan" has a lot to do with the context, situation, setting, objectives, needs, etc...
Analysis paralysis accomplishes nothing. Connecting to customers early on is most everything. But, measuring progress is very useful. How is that done without at least some sort of framework to measure against?
Check out the One Page Business Plan series (Jim Horan) for a simple, quick, low overhead approach to framing out a plan.
You are 110% right, write a blog/website instead and interact with people to improve it is the way to do now
Plans Vs Planning. Very important difference. I agree with the idea of planning. It forces you to think along specific routes like finances, marketing and so on. And, it forces you to learn more in order to do it.
That planning process is, unfortunately, called a plan and its very important to realise that it's just that, a plan.
A business has to be flexible, responsive to changing economics and be constantly innovative. in my experience, an entrepreneur, in general, will not stick rigidly to the plan, they will refer to it and remind themselves how they thought a few months previously. Ideas thaet they may have forgotton about.
Thanks for your creative insights. I agree that they day of the "old fashioned" plan are long gone. But we still need a plan, and not all of it should be exposed in the public eye. We need to do competitive analysis, marketing plans and certainly social media plans. But yes, keeping it short and very visual will make your plan a working document rather than a defunct effort. Business planning can be fun and creative!!
Business plans are largely evil for the reasons Dharmesh listed and more. However writing down a plan can help in getting an opportunity to chat with investors. Blogging some of this stuff is a great idea, but often business plans include information not meant for a public forum but needed to get people interested. Either way I love seeing anything anti-Bplan. Man are they dangerous!
This is right on. I am all for the blogs because you build an audience, so that when you have something to sell, they can find you easily.
Yea, the planning part is great, but writing (and re-writing x100) it into a "perfect" piece is quite a pain. When I reach out to people to get me in touch with investors, the first thing they ask is, do you have a business plan?... In a way, I feel that the business plan is somewhat disconnected from the actual company/product/service; it loses the personality. Can we just meet and talk? :)
Great post -
No battle plan survives the first bullet being fired - an old saying but just as true today for business plans. Startup Day +1 you will find all those things you sweated blood over in the plan are not quite as expected!
Don't write a business plan for investment (it won’t get you in the door), but have the data handy for when you might be asked. They can be useful for your internal thought process on ‘what if’s’ – better to spend time on communicating your business, team, market, business model, barriers to adoption, exit strategy, use of funds etc... in a simple, non clichéd presentation – oh and don’t make the financials look like the usual hockey stick
Different thought. Classic Dharmesh post. Reminds me of "writing something that is at times radical"... from inbound mktg.
I am yet to meet a VC who does not ask for a business plan... or else I would have been funded by now ;)
This article is kind of what I've been wanting to hear or read for the past couple weeks. I am founding a web startup, I did go to a fancy US business school and learned how to draft the perfect biz plan, but now that im actually executing my biz ideas according to my vision and not a piece of paper, i am more proactive and efficient than ever, just like your lovely reference to agile development, i am able to respond quickly to change and shape my project facing reality not obsolete notes and research. Do plan, do stay organized, do set deadlines, do write down your ideas, plan of action, strategies and all but please let go of that irrelevant fantasy business plan !
Sometimes writing your ideas down can help you distill and refine them. Same goes for Business Plans.
I agree that writing a full buz plan is time consuming and is usually not looked at by the investment community, however, an Executivve Summary is a must do so you do have something that sttes the purpose of yoour busniess model and it potential value.
We all know that no start up has there initial plan cast in concrete.
The "plan" will constantly change depending on many factors, market, and changing customer needs to name a couple.
In my book "What IF? The Entrepreneurial Answer" I recommend an Exec Summary and power point presentation as the minimal tools to express the business model and to use a s a basis for the start plan.
Beyound that you have the constantly changing landscape to work aorund as you move forward and the "plan" changes accoringly.
I totally agree with you. We found it more valuable to develop the product, put it in front of customers and get feedback than writing business plans.
Dharmesh, good job of writing an article that stirs folks to dialogue, kudos for that. But shame on you, with all your knowledge, for offering validity to all the potential start-ups out there who seek reasons to avoid the effort it takes to research and write a business plan. Will you be there to pick up the pieces when they lose everything they own?
Jumping into business today without some sort of plan is suicide, and you know it. Business planning is a process by which a start-up can get a whole lot smarter about his or her business—a wiser approach than winging it. For the many people who hate their jobs and trade their time for paltry wages, a small business is often the only light at the end of the tunnel, and doing a business plan is the smartest and safest way to begin digging their way out.
Are you saying you don’t have a plan for your business? Good eye-catching article, potentially damaging message for newbies.
The mistake many people is to proceed direct to a business plan without first testing the feasibility of the idea. The feasibility process gets you in front of customers, vendors, advisors and the like to help inform the future business plan. The plan itself can be concise, and at a high enough level so that it can rapidly morph as you move forward.
No, do not fall in love with your business. Fall in love with adding value. A business is neutral, and too often a business is design to take a piece of action from the system but add nothing bad. This is never sustainable. Instead, fall for adding value within a visionary approach and do not look back.
Uf BP is just a nightmare, and it is so rigt that once you get trough it most of the scenario has change!
In my bussines (education in music business, recording, bands, production) the most important and difficult i think is to teach the musicians an persons related to, the importance of learn business topics that they don't like but need.
So I think a sales plan is the key for the business.
Forgive my english (I'm from Chile) and thanks for the article!!
The world it full of new products that can't be sold, new services that people don't want, new ideas that can't make money....I see them every day. Until you think past your initial love of the product/service/idea to contemplate the "business", you have no idea if it will be only a hobby or a money making venture....and you can't explain the difference to anyone else. The biggest value of a business plan is to make you think past your emotions.
Very important things... described in very interested way... Hats off to u.. Keep blogging
Thanks for writing this article. I am a Start-Up guy but I don't like to write business plans :-)
Sven love your last line. I agree. -
I think any idea can benefit from the diligence its exposed to under a business plan, I just dont think it should become the vision. A majority of the content in the kind of business plans you come across in our days is complete fantasy and rarely ends up being what drives the business in one direction or another.
I agree that the business will likley never get read. However, I have never treated a business plan like its a novel. Instead I see the business plan as an act of planning more for the benefit of the entreprenuer than an external reader. In order for a business plan to be effective a great deal of time has to go into researching your ideas and strategies. That research is invaluable to the insights you will gain that ultimately form the basis of the changes that eventually become your business. Also, even if you never write a plan you are foolish to not at least do a financial analysis on your idea. Better to learn your lessons before you start creating expenditures than afterwards.
I cannot agree although there may be a small population of people who might relate to his points. After counseling over 1000 people seeking to start a business or struggling I have concluded the vast majority need to be forced to write a plan (12 pages is fine) as they have not considered many vital details (to name a few, cash flow, forecasted bookings, exit plans, target customers with greatest need, strategy to reach them and etc.) Arguments can be made if it is the plan that is the primary objective or the "thinking" and planning that is needed to produce the plan but I think all should be exposed to writing a plan.
Thank you for the article. I agree with you observations. I believe that an active strategic planning process with "nested strategies" is much more relevant for capturing the writer's daily insights and strategies.
Writing a business plan is a step that can end up in futility when we lack the ability of converting the plan into reality. Being negative is like a still birth to progress. I Dare you to write, convert and move on.
Interesting perspective, as always. Agree the traditional business plan is obsolete before the ink dries. However, I love the innovative approach presented in the book Business Model Generation. Having a clear picture of your business and understanding the major components of your business model - not as a snap shot but as it evolves - is a timeless strategy worthy of a second look. http://www.businessmodelgeneration.com/
The blog sounds like a good idea for that reason. My first two businesses didn't have a traditional business plan. Just jotted down some goals on a piece of paper. Ran and did fine. Now on my third go around in a different market, started out with a business plan and got as far as the template. Nope off and running again and just happy.
I love the point about writing a business plan being an energy drain because it helps us take the perspective on what is fueling us as entrepreneurs and what is draining us.
Even though b-pans are futile in actual use, they are none the less a prerequisite of most investors, as well as an added layer of protection for a company that takes investment.
It is a hard sell to simply tell someone (or blog about) your idea and expect an investor to fork over their money. It just doesn’t work that way – except if it is your uncle Bob that always liked you, or your mom!
The problem is the traditional paper business plan. New electronic business plans that resemble a web site gives an investor or team member the ability to get to the information they want quickly. This is also a good way to share the process of building the plan with team members. An interactive electronic business plan is a flexible, living tool that can also provide understanding to everyone from the investors to the customers (if they are allowed to see it of course).
No business plan is perfect, but not having some type of plan in writing and then taking money from someone can be viewed, especially if things go bad, as fraud.
On the other hand, if your business doesn’t need outside investment and it is a small group of people involved… heck with the b-plan! Just get it done…
An entrepreneur or business owner better spend extensive lots of time thinking about their business, prospective customers, offerings and strategy. Its makes the difference between working IN your business or ON your business.
Devising a plan should consume time. Otherwise, what is the point? Does the initial plan need to be a formal business plan? I think it is best to commit plans to writing, in some fashion, but it need not be lengthy, just specific with verifiable assumptions.
To use effective business and marketing strategies, consider reading: Should a New Business Idea be Kept Secret?
The traditional business plan format was invented on a type writer so i completely understand why you don't like business plans and that's why we reinvented it into the http://fundingroadmap.com to solve all of these problems and make a tool that was relevant for a 21st century digital world.
you mention the vc is theoneyouwrite thr bp for,yothinkinterms of the vc now is your boardof directors who expect to see bp's for your nrxt three yearsof planning pl youwrwrite the first draft of the plan from the heart,then all that follow from the mind
After counseling over 50 clients on start-up's, the main issues is that they don't like to write anything down. A BP is a thinking and defining process that all0ws ideas to become clear in a persons mind to allow focus on whats important. I found that the cash flow plan is the one of the most critical portion of the BP, so the founder can see what the cash needs are and when starting where the cash is going. Without this there is no measure of what your performance and chance of success will be. If you need financing the minimum requirement is a short comprehensive BP. This BP is the start and if you are successful becomes the short term guide. It will change over time and that is the key planning ingredient for comtnuing focus and likely success.
We do not read business plans. We do read slide decks, exec summaries (occasionally), and detailed excel business models. An excel (or google docs, or calc) model is good for showing assumptions the entrepreneur makes, and it's also something that can be monitored to some extent as live data rolls in, which can help adjust the direction of the business.
Planning is everything. It should be instantiated in a 15-20 slide presentation. Keeping it succinct forces one to clearly think and question. Writing a 50 page business plan is useless (except if the B-School requires it for the grade. I've lead turn-arounds and startups to success events over the past 20 years, and never was asked for more than the slide presentation.
Startups must author customers not business plans. -j
I just finished judging 8 Business Plans for a contest. In order to be effective they must be short not 32 52 pages. However, describing your part of how to start your business is essential for the writer and possible funding. The Executive Summary should be a concise factual summary, 1-2 pages. It can be painful but doing without can create real pain!
Couldn't agree more! It's been said that a business plan tells you where you're going but not how you are going to get there. I tell my clients that I'll help them plan their business but I won't help them write a business plan.
I've been writing business plans for start-ups for 17 years and am the author of a book on business planning called "Planning With A Heart." I agree - most business plans written the "traditional" way are pretty useless.
However, there are several essential reasons for writing a business plan. (1) It helps translate an entrepreneur's passion into practical steps; (2) written correctly, with financial sensitivity analysis, it gives a reality check on what's real, not just what's possible; (3) finally, it focuses on all the essentials - not just the "widget" but the operational aspects, profit margins, and financial management.
A business plan is a "snap shot" of a moving target; but, if it captures the core concept and identifies the business model clearly, then both the investor and the entrepreneur have a "benchmark" to adjust from.
Entrepreneurs should not be in the business of writing business plans. They should be in the business of doing what they do -- getting the goods to market and evaluating the results.
I still think the exercise of planning can instill a sense of responsibility and discipline that can serve the business owner well.
I love bullet 6, "Write a Blog, not a Business Plan". I'd love to see a whole article around that idea.
That's a great idea and a catchy title.
How about this? Your plan can fail, but you should never fail to plan.
Dahrmesh, I love your reasoning, I have always been the antithesis of the norm when it comes to a business plan. I write Ideas, and then research and develop the ideas into something I can sell to others. I have begun about 16 businesses for others, and the all started with outlines, not plans.
I have only just recently begun to explore blogs and the reach they can have. thank you for giving my beliefs credence.
Dharmesh, I'm curious if you opinion regarding the value of writing a business plan differs based on the type of startup. It appears most references are to tech startups. We require a business plan from prospective clients in order to determine if they are "worth" working with. Plans are typically pretty short...and I would agree that there is danger in getting lost in the writing of them...but I haven't found a better way by which to quickly understand a startup than looking at something structured like a business plan. I love the idea of leaning on the executive summary. But it has been my experience that the best executive summaries are the result of (at minimum) thinking through a business plan.
I'm glad Dan Boudreau called you out, Dharmesh. Web startups and agile software developers are one of a kind in the entrepreneurial/technology world. Some projects are successful but most are just endless iterations of poorly planned businesses/projects. It's best to stay away from individuals too lazy to plan and/or think through the planning process and capture it in written form. I would like to see how smoothly you could drive from California to New York without a plan under constraints. You can be as agile as you want but a plan will certainly increase your chances of success. Nevertheless, flexibility is a plus and feedback (and the ability to re-think your plan quickly and incorporate such feedback) is of great value. Scanning the environment constantly and revisiting your assumptions and constraints are also a must.
I was hoping people would accept Dharmesh's incisive and compelling thesis and sage advice. Disturbing to see the push back...
A point needs to be made clear. Business planning is not bad or wrong per se or universally. On the contrary, for established firms, going concerns and the enterprise, for example, business plans and planning is positively essential. Personally, while working for very large firms like HP, a robust business planning activity is simply required.
However, the point here, the principle, is that startups are NOT small versions of big companies. This is where the warped notion of startup business planning goes off the rails, falls down.
The purpose of a startup is to create a customer, to create many customers. Period. It is not to plan. Startup business planning distracts from creating customers. It is why 90% of startups fail. It is a shameful statistic.
Since many investors and startup people often start life in an established firm, the notion of business planning is inbred, de facto, a motor response. Many university professors suffer the same mindset. The notion of a 35-page business plan for a startup is a laughable disgrace. Many spend a year or more on this farce before ever talking to a customer. It’s pathetic (and expensive).
Heed the sensible, valuable advice offered. Investors and stakeholders want to hear about delighted customers. That’s all.
This makes way too much common sense... The concept of Business Plan is part of the formulaic methodology taught in Business Schools... Has anybody really learned more in any level of school than they did "on the job"? The key word you use here is "Agile"... Business Plans are not Agile and, quite frankly, the whole Startup Funding process works against Agility big time...
Peter Alberti, Karl Treier, Ben, Sebastien and Bob Goedjen all make great comments. ayouens the preparation for your "2 Day" strategic work allows you to focus and action which you experienced.
Starting with a strategic plan will deliver you:
- Your business vision and mission statement
- Your strategic objectives to help you achieve your vision and mission
- A detailed action plan to help you achieve your objectives
- A results measurement, review, and control plan
If you are raising capital, sure a dozen slide presentation is good, particularly if you are convincing and speak well. But an excited investor needs somewhere to hang their hat on, the same way a purchaser needs "the facts on WHY they bought" so they can communicate to others about the "good investment decision" they just made (otherwise buyers remorse/regret).
The only way anyone really knows what's in your heart and head is from the written detail that they can question on. It provides evidence to investors (and your team and yourself).
Best evidence is doing it. Investment may be the impediment (chicken and egg), but what can you do and what can you prove and who can you work with to bring the dream alive.
If you need a hand, feel free to drop me a line - happy to "chat".
drdmann [at] basecamp101.com
Wouldn't it be useful to have a basic business plan for the business. I do understand that things don't happen as per the plan, but you need some basic stuff to check if you are moving in the right direction ..
I totally agree. In our business, which relies heavily on changing ways of working, this is especially relevant. We use our blog (blog.clinicyou.com) to illustrate this.
I recently considered going into business with someone who wanted to "wing it" as far as a business plan. Even though I had never written a business plan I began it simply to see how far the capital would take us especially since I was the one investing real dollars and they were investing sweat equity.
The business plan helped me to see we had totally different communication styles as I tried to get relevant cost information from her in order to finish the business plan. I also saw that she had a totally different concept of how to run a business than I did.
I finally came to the difficult conclusion that these differences in style would only get worse causing big potential problems for the future. It also helped me to see the money wouldn't last long. I withdrew before any papers were signed and money was invested. Whew! What a relief!
I'm glad I wrote the business plan!
The traditional business plan is a document meant for someone else like investors or bankers. As an entrepreneur it is far more important to plan over writing a plan. A living document that you use and update as you build your business is critical.
I don't care if your business plan is written on yellow sheets of paper with #2 pencils or the most modern software. If you are a start-up, use a "plan" to test that you have a commercial opportunity - a product or service that has value to someone who will buy it from you, it has the potential to make a profit for the owner(s) of the company, it is a good use of your skills/resources and is amenable to financing (friends, family, fools...). Use the plan to determine who is your market, where are they, what "pain" they have and how you will seduce them to buy from you. Here is where social media is an excellent tool to incorporate. (I don't care about your mission or vision)
If you are looking for angel or VC investments, use your plan to tell me how you make money with you product/service (again I don't care much about your mission or vision) .
If you are in a growth mode, use your plan to determine if you want a bigger piece of the pie or a bigger pie.
The half-life of a business plan is very short.
My 2 cents (well actually just a penny!)
I love this article and the point i enjoyed most was point 6. Write a blog, not a business plan.
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I think a business plan can be useful in painting broad strokes for people outside the start up. However once established the business plan is not really worth the paper it's written on. The passion and vision needs to be communicated by the people involved. Tech or traditional start up, the fact is it always comes back to people. You need to sell your message and that cannot be done by putting a two dimensional plan written on a piece of paper in front of a person. It can only be done by putting yourself in front of a person. A business plan can only be a very small part of the process (usually it's useful to have as it allows you to answer yes when asked if you have a business plan and then move on).
I beg to differ. A biz plan put things into "written" perspective. It covers all angles (if done right). It labels starting points. During the grueling process of putting in formal writing a biz plan, founders "find" their weak spots. It is a great way to see where you are standing. I personally love the projections and the barrier of entry sections. When checking out a new or old venture,after briefly reading the summary and researching about the team, this is my next favorite sections to skim through. It lets me know how much "homework" has been done and how "far off" they dare to go. Flexibility is a needed reality. A good biz plan allows room for it.
This is a great article and if we didn't live in the real world it maybe true. I am a specialist helping small businesses and start ups secure financing for their business. YOU HAVE TO HAVE A BIZ PLAN to get financing.
A blog is great and the points in this article are correct. However, you will need money(unless you are filthy rich and want to use yur own money)to have a business to blog about. Perhaps, the author should add a comment that you could hire someone to write your business plan but you need one.
In my opinion, the only two elements of a BP that are of any lasting value are the starting point, and the arrival. This is the compass. This is how we keep focus. We have to know where we've been, and where we are going.
Dharmesh, if you're willing to invest in my business, I'll be happy to not write a business plan. Unfortunately, most of the VCs I've talked to look at you funny if you don't have one. It's kind of like having a fax number or any other business affectation -- It's completely useless, but if you don't have one, you seem out of touch and (therefore) more of a risk.
Maybe I'm way off the mark, but I think that to be successful you need to have BOTH a business plan AND a blog. Here is why: A business plan is an organized document with your goals for what you want to achieve with your business. Starting a company without one is blindly throwing out your work with no real goal. Ok for brainstorming, but not going to get you somewhere long term. A business plan can be edited over time to adapt for your companies changes. And a blog is a goldmine to get found. If you don't have one you are missing out on a major opportunity. So I agree with you on the blog point.
Essentially, if you have a good team, you can devise a BP on a napkin with the basics; however, it depends on the industry you plan to compete in. A good SWOT Analysis is always a good idea just so you know where you stand with competitors. I like Mark Cuban's statement: "When I am beginning stages of a start up, I try and figure out how to kick my own ass, then I know I am ready to go to market."
With experience in a certain industry, you can do what Mark does to see quickly what your weaknesses are.
More important than a BP would having proper signed contracts in place with every potential contractual situation or you will be open for all kinds of problems. A biz lawyer told me, "a business is only as good as its contracts". Protect yourself no matter what your start-up is in!
If you have plan with great strategy with good procedures and communication that all meet some condition..your plan will never fail.
Startups need to plan. A business plan is one way of planning.
Like the Eisenhower quote, the problem is when people confuse the process with the output, and focus on perfecting the output.
The goal of writing a business plan shouldn't be to get the details right; it should be to document the macro-level assumptions and make sure they're no glaring holes.
Other ways of planning like Business Model Canvas can achieve the same thing. Writing a business plan, per se, isn't necessary.
But planning is necessary.
Waterfall vs. agile often get interpreted as planning vs. no planning; instead it's heavyweight vs lightweight planning.
Business plans can be lightweight planning, but most aren't. For those who want to write a business plan, focus on the executive summary first; then elaborate only when an experienced entrepreneur reads it and sees gaps.
Finally, experienced entrepreneurs need less planning than beginning entrepreneurs. This makes it hard for me to advise whether to write a business plan or not to a beginner entrepreneur. I agree with Dharmesh that I wouldn't write one for a new business; but the process of writing them in the past taught me a lot, so I'd be hesitant to completely advise against them.
Great piece. I also did TONS of business plans while in biz school. Don't teach that, now, though. Planning IS essential, though. It's how we make our dreams come true. But we also have to ACT!
As Yussi Vardi, investor and entrepreneur once said, "Business plans are a great section in the science fiction genre. They are made for people who dislike sausages and don't know how they are made".
I do not agree with not writing a business plan, as to my mind, a business plan to a person about to start business does the following:
Helps them to understand the various aspects of their business;
gives them more confidence to talk about their business to an investor;
tells the investor that they are serious if they have a well written plan;
the executive summary tells it all in a concise way;
provides a familiar guide book.
I always encourage my clients to be involved in writing their business plan so they can realize the above benefits
Without a doubt, when a start-up is looking for funding, a business plan is essential. However, over 99% of all businesses are bootstrapped.
I feel it's always dangerous to share your business plan, as anyone can steal it and use it before you do.
I've seen hundreds of business plans, and I've scarcely read any of them right through. Life is too short to waste it on reading page after page of empty, unsupported assertions that illustrate all too vividly both the lack of hard-edged experience and the arrogance (i.e. unwarranted over-confidence) of the author. You have no automatic RIGHT to expect anyone to give up several hours of their lives on something you've sent them - you have to EARN their interest and attention. Sorry, but that's life!
As an entrepreneur, you need an operating plan that you can flex when you need to - hopefully there shouldn't be so many unforseen events (didn't you see ANY of them coming?) that you finish up changing the fundamentals every week!
Most people are too lazy to write simple business plans - it's easier to dump all the rubbish on the page and let the reader make some sense out of it, but unfortunately few readers will do the job for you - they just move onto someone else. If it's a complicated business, all the more need for a simple business plan (sorry, "simple" doesn't mean leaving stuff out - it means making it intelligible). The writer needs to remember that he/she is writing the plan for the reader, and the reader might not be as deeply fascinated by the same things as the author is!
An external investor (cash, sweat equity, banker, supplier, angel, VC or whatever) will get far more out of your business plan than you'll ever consciously write - they are looking to see if the person/people behind it actually KNOW what they're writing about, whether they have actually done some meaningful work on the project, and whether he/she/they are credible managers of a successful business. Basicly they want to know what YOU intend to do with THEIR money/support, and what the chances are of them ever seeing it again, let alone the chances of seeing it multiplied several time over.
Doing a business plan is NOT essential, particularly for a VERY small business, but building a potentially worthwhile (to someone other than yourself) business without an APPROPRIATE plan is as stupid as starting a journey without any idea of the what the best route might be. However there is a big advantage in NOT having a business plan - when failure comes it will come as a complete surprise and you will have avoided spending weeks worrying about it.
Maybe you know more about all of this than I do, because you might know everything whereas I don't. But if you'd like a tip here it is: the most important single factor in getting your plan read is to get the first para of the Exec Summary right. If I read that right through, there's a good chance I'll think you might be onto something so then I'll read the rest of the Exec Summary right through as well. By the end of that, I COULD be persuaded to read the rest of it, and THEN I might ask to meet you, and so it goes on. But if it's all too difficult, that's OK - I'll just offer you my best wishes, and move politely away to something else.
Never trusted in BPs.
Never written a BP.
After reading this article I'm sure I'll never (say never) write one.
We only develop agile(?) software (sometimes documented, but after the development).
Most of our software is in customer's hands.
Most of our customers
Thank you Dharmesh.
Provocative though ultimately personal view on business plans and probably not terribly good advice for scores of individuals with zero biz experience -- who don't even know what questions to ask let alone know what actions to take.
Planning is the opposite of floundering, winging it and delusional thinking. Traits that are rife in the entrepreneurial community.
Advising people not to plan is misleading new age propaganda. Of course there is a difference between planning and the business plan but the distinction is largely semantic. The real distinction is between poor planning, which granted is largely a waste of time, and quality planning which reduces the need for pointless trial & error (often referred to as prototyping because this is the sexy new fad).
The Dot.Com bust was largely a result of poor quality thinking, people who believe they are bigger & better than best practice. People who believe they don't need to plan because their ideas are sooo brilliant. I worked for several of them.
The rules have not changed and neither has human nature. Planning reduces the inherent flaws that trip up most human beings.
What are we going to throw out next? Discipline? How about control, let's get rid of these too and burn some juniper bushes instead.
Come on people, let's stay grounded and try to keep reality a little real.
So what is your advice for someone who has an idea - only in its infantry stage and has not been completely developed, where would he/she starts?
What a change from the norm. I have always read that a business plan is a major step in starting a business. Most entrepreneurial books and articles say that business plans are an excellent way to organize ideas and lay a foundation to present to banks and other lenders for loans. Blogs sound like an excellent idea for start-ups looking to generate an audience, leave comments, and leave discussions open for interaction between people.
I love your thoughts; they are definitely right in line with mine... now if only I can get the University here to understand that better in developing a "Entrepreneurship Program." I keep talking to them about writing a blog about real life stories, but they aren't exactly on board. I think I should just start it anyway.
Goood post for my ı am not good english. Dear onstartups.com
Love the post - and the direction. Most of the work I do know is small business looking for bank loans - and a traditional business plan is required. I like turning the plan "inside out" - use sales projections, and how you explain them as the first part of the plan. We work down the P&L and up the balance sheet, making notes along the way.
I will forever be a fan of business planning - never a fan of the business plan.
Side note - time to switch to Discuss for comment?
I started my company about 15 months ago. Did not have a business plan but did have a business strategy. Working with that in mind did not waste my time trying to defend my plans but gave me focus on what we needed to do.
Strategy is very important to run a small business. A business plan may be useful if you are looking for funding or reporting to investors.
Good article and agree with your comments as previously I was part of a plc and we spent a lot of time on plans :-)
It's HOW you write the business plan that matters. What are you discovering about your business idea? Are there areas that if you didn't really dig you'd get blindsided? What are the keys to success?
I don't care what you call it or if you write it on a paper napkin. If you write a hands-on, grass -roots, where-will-I-get-my-next three-customers type of business plan (short and to the point) you're far better off then if you didn't.
What do you think? Have you tried writing a business plan? Do you know of a "friend" that tried to write one, because they thought they needed one for some reason?What's your take?
No. Not really.But I understand that having a Business Plan is essential for getting loan from a bank.Very interesting observation coming from such a big company founder. I agree that it is better to spend that time in client acquisition and marketing
I have been wondering for years if business plans ever was worth the time or effort spent, I completely agree with this article. If your business isnt that complicated, a few rough sketches would do I suppose.
But then again, investors want your plan in writing and not in your head. You should be able to convey your thoughts to them and thats where business plans are useful.
I am in early stage startup and found our pitch deck much more realistic and useful for communicating what problem were solving, how we'll do it and what we still need support wise to accomplish our mission.
I did write a business plan just to raise a small amount of capital from a family member, but yes...the projections were mostly fictional.
Totally agree. I attended one of these entrepreneurship clases at college and had to develop a fully featured business plan for an idea. The idea was cool but I spent sooo much time filling all the ficticious sections for it to be called a business plan that I ended up with a completely unvalidated 60 pages idea that was absolutely worthless. Unless you are some really branded entrepreneur, investors only care about your projections if they're based on real validation numbers so don't waste your time decorating unvalidated ideas.
going through the motions of raising the questions in your head that a business plan answers is important to vetting your idea. But you won't have all the answers right away and you shouldn't wait until you do to move ahead. you need a plan when you need to ask for money. if you start of bootstrapping then you can hold off on the formal plan.
I have always though this, good to see someone else sees it the same way. Also the amount of time that goes into a well written business plan is tremendous !
Spot on again. I decided long ago that biz plans are largely a waste of time but the experience revealed something interesting. The VCs I talked to and the mentor who helped us put together the plan kept pointing at one thing - the marketing plan. In the end, it is all they cared about. I came to the conclusion that a marketing plan is far more valuable than a full blown biz plan. Especially, as you say, the biz plan is mostly fiction anyway. VCs just want to know that you at least made the effort to write a biz plan but they know most of it is crap. It does give them insight into the entrepreneur's thinking however. The only other people who care are banks but they only give you money when they think you don't need it.
Well said again, Dharmesh ;-)
Right on. I do love my product,my app and vision ( which changes but sort of stays along the same line. my business plan is outdated in 2-days.. but I do keep a running journal in google.. when I investigate VC money..
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