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Advice for Entrepreneurs: Skip the Business Plan

May 3rd, 2012

Don’t write a business plan. Business plans are designed to force you to think through every obstacle and potential event. But, if you write a business plan, the only thing you’ll learn is you can convince yourself of anything.

We need to avoid the business plan.

They take too long

You will waste more time fussing with Excel’s chart formatting on a financial break-even analysis than answering real questions about your business. You will make wild predictions about revenue, which may not be grounded in any type of reality.

Take a look at any business plan, and you’ll see revenue predicted to grow exponentially. For most startups, revenue growth is not exponential or even consistent.

You’ll quickly realize business plans are fiction.

Your business will need to change the moment you launch

Within weeks of launching your business, you’ll will find yourself needing to change something about your business. It may be your overzealous revenue prediction, or something else. Either way, whatever you wrote in your business plan will need to adjust significantly.

Unplanned events cause every business to evaluate how they operate, produce or market. Every business will experience them. A 30-page business plan will not necessarily make you any more prepared for those situations.

Investors invest in people, not business plans

Business plans are not for investors. If you’re seeking support from a venture capitalist, you’re not going to spend a meeting reviewing your business plan. Instead, you will give a brief pitch, share your revenue and margins to date, and then answer their questions.

They wouldn’t believe your revenue estimates anyway.

What to do instead

There’s a clear distinction between writing a business plan and the process of business planning. A business plan is a Microsoft Word document with charts and pages of your ideas. Business planning, however, can happen anywhere. Open up TextEdit on your Mac, or grab the back of a bill, and jot down answers to these five questions:

  • What will you sell and for how much?
  • How will you attract your first customers?
  • How much will it cost to acquire each customer?
  • What will your expenses be?
  • How many customers do you need to be profitable?

If you narrow your business planning down to those few questions, you’ll be able to focus on launching, adjusting and becoming profitable — no executive summary needed.

Then, share your idea. Tell your friends about your idea. Sure, they could try to steal it, but trust me, they won’t be your most serious competition once you launch. You need support from friends, and you need their opinion about your business.

Are your prices too high? Are you pitching your product to the wrong audience? Have you underestimated your expenses? You may arrive at a few of these realizations after spending a lot of time writing a business plan, or your friends may be able to tell you upfront and directly.

It’s your choice.

 

The photo of this post is copyright (c) 2009 by Yahoo! and made available under an Attribution 2.0 Generic (CC BY 2.0) license.

  • James Ladd

    What a load of crap!

    A Business Plan is not about planning your business so much as doing analysis to see if you should even be in Business.

    AND if they are to be skipped why does every investor I speak to want to see one?

  • chrism2671

    Agreed!

  • chrism2671

    Agreed!