Business plans: Fools errand or building blocks?

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  😉


Tags: , , , ,

8 Responses to “Business plans: Fools errand or building blocks?”

  1. Jason Cohen Says:

    Isn’t it interesting that all the people saying “no plan” are successful business founders and all the people saying “should plan” are not?

    I agree with you, however, that the act of thinking through your plan is valuable. Of course actually keeping the piece of paper leads you to think it’s now a “rule.” It also leads you to think you can stop asking those questions. Wrong!

    Thanks for a good explanation of both sides of the argument. In the end, *that* is what’s most useful.

  2. Nick Barker Says:

    Hi Jason,

    Thanks for the comment. There’s is a huge difference between saying (planning) and doing – execution is everything! Plans never go to plan 😉

    Your point on a plan becoming a “rule” is a real danger for startup founders – “The customer should be buying this product because its in the plan” or “We are sticking to the plan come hell or high water“. With so much time and effort invested into a detailed plan it can be too definitive, the “rule” as you say.

    Pleased you liked the post 🙂

  3. JD Says:

    A plan is preparation, which it seems unrealistic to suggest anyone should do without. I guess some people can achieve success having no idea what they’re doing (like the sidebar quote on the Unplan site), but that’s never really a good business stategy.

    Plans help business owners actually RUN their business. If you have a plan, and you compare plan versus actual, you can adjust on the fly for unforeseen circumstances. They actually give you MORE flexibility, not less, because you can see what’s coming prepare before it’s too late.

    Being married to your plan, planning out so long that the numbers are meaningless… I don’t think anyone suggests that.

    And as far as Jason’s comment — Tim Berry is actually a very successful business founder. Google him some time.

  4. Nick Barker Says:

    I agree there should be some form of plan. This is an interesting point my co-founder brought up in discussion yesterday “compare plan versus actual”.

    He felt that a plan reminds you of the logic on why you made a past decision when reviewing a current situation. You then don’t have to go through making the decision all over again. The logic or assumptions maybe wrong and need realigning.

  5. Sam Owen Says:

    Great post – I’ve just been through this! Personally I feel the trick is not to over do it and keep things concise, simple and relevant. Writing a comprehensive and all encompassing plan for months on end serves to create a business which is well thought out but which is ultimately, well, a bit boring.

    If you are creating a business which is truly unique and differentiates you from competitors, then no amount of planning can ever really be considered “enough”. That little 5% – 10% element of unknown is the often the bit that sets businesses apart.

    It’s a fine and difficult balance. Planning is undoubtedly important, but “Just get going” is an essential part of any business planning and it gets pushed to the back of the list too often.

  6. Nick Barker Says:

    Hi Sam,

    Thanks Sam! Its so easy though to over do it – burying yourself in research is much easier than picking up the phone to a unwelcoming prospective customer.

    A plan may say your idea is truly “unique and different” but its the customers that have to see the real value. I think planning is often academic – we can never get 100% of the answers by planning. JFDI!!

    I totally agree its a “fine and difficult balance”!! That’s where experience comes in – both your own experience of writing plans and from others helping/guiding you.

  7. Ben Says:

    Interesting post Nick!

    I’ve often thought about this issue, and would like to say ‘no plan!’ but I don’t think I would be able to justify that based on anything but laziness.

    I think the point is not whether to plan or not, but at what stage of the start-up process should you do a plan. I think the very first thing any start-up should do is figure out if anyone wants what they are selling and gain proof of concept. A business plan is much more valuable if you have already proved the demand, even in a small but significant way.

    I had a chat with a very successful entrepreneur the other day who views the whole entrepreneurial process as one of active market research and proof of concept. Only when the business is large and significant enough to seriously scale does he see in depth planning and organisation as necessary.

  8. Nick Barker Says:

    Thanks Ben – pleased it was of value 🙂 ‘No plan’ because of ‘laziness’ LoL!!

    I couldn’t agree more with your friend that the “entrepreneurial process is one of active market research and proof of concept”. We have to make guesses and assumptions on what the customer problem is, why it needs solving and what they are willing to pay to solve their problem. If we as startup founders don’t make calculated judgments we’d never get going!

    But like an experiment is it not better to take some notes of anticipated results and how the experiment is to be measured. Actual results can then be compared and the experimental process can continue and built upon. This is of value even in the early stages of a new startup product/service.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: