Business Plans…Formalized Obsolescence

There’s a great piece in the WSJ on line called "Do Start-Ups Really Need Formal Business Plans?" by Kelly Spors.  I’ll leave the meat of the article for your reading pleasure, but I wanted to throw my 2 sheckles in.  I think the core of the matter is really whether or not you’re creating the plan for yourself or to raise capital.  If it’s for yourself, you wont waste the time on the unnecessary fluff anyway.

  1. If you’ve decided to make it or fail…you’re always right.  A business plan means nothing for you in the determination equation.
  2. Most of what you put in your plan will be meaningless within X months.  Especially in today’s business climate, it’s more important to know that you’ll adapt well vs. how well you format your market research. 
  3. Elaborate financial models are manipulated to yield the results required to get the funding you need and will typically net the numbers below.  If VC’s know this, why do they keep asking for 5 years of fake financials?
    • year 1:  Loss
    • year 2:  Break-even
    • year 3:  $3 mil
    • year 4:  $7 mil
    • year 5:  $21 mil
    • IPO
  4. Your company will likely morph into something you never planned for. Looking back at your business plan, you’ll be shocked at what you didn’t know.  Big elaborate plans = way more material that was irrelevant and more wasted time discovering it.
  5. It’s really more about what you’re NOT going to do isn’t it?  "I’m going to take on the world with $1mil is a battle cry I’ve seen in more than 50% of the plans I’ve encountered.  Big plans are typically chock full of "stuff for stuff’s sake"

I’m curious, what do you think YouTube’s bizplan looked like?  I’m sure some research will yield the answer…but I’m guessing it was pretty simple..or a few PPT slides. 

Spend time on your market, why you have a defensible niche, and how you and your team will be able to roll with the punches and adapt. 

Comments

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2 thoughts on “Business Plans…Formalized Obsolescence”

  1. I imagine YouTube didn’t have a business plan until Sequioua Capital wrote them one after their first round of Angel Investments, when they knew full well they were writing a plan to flip the business.
    I think business plans are dead unless you are looking for high capital investments. In b-school about every class discussed writing business plans. Seems like a waste of time now.
    Besides, by the time you’ve written your plan the market has changed. What’s the point.

  2. I’m an author, Entrepreneur, and Investor. The Business Plan is Dead. As an Entrepreneur, I wrote a book with this as the Title. As a person that’s raised capital in Silicon Valley, I will absolutely tell you they are not looking at a business plan as a prerequisite to fund your idea.
    Angelsoft has a great concept. It’s important to get your idea to one page. They help you get your idea to one page. After the introduction page, you need an executive level presentation that maps out your Magic, Market, Management Team, and Money needed to get to profitability. Most importantly, you need a Network to shop your plan through. 96 percent of startup capital comes from the private market, not Venture Capital.
    For more, you can read my book, “The Business Plan is Dead – How to Raise Capital in the New Economy” by me, Jeff Wofford, Silicon Valley Entrepreneur. Available on Amazon. 🙂
    Jeff Wofford, Author
    The Business Plan is Dead

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