Business plans: Old school thinking?
Business plans were once the most important tool when embarking on a new venture. Today, they’re barely worth the paper they’re written on.
In an era not so long ago, a few years perhaps, business plans were cobbled together by budding entrepreneurs eager to unveil their recipe for making their operation successful to sceptical bank managers or investors.
The plan would show how they’d provide a return on loaned money, the structure of their organisation and how they’d blitz the competition, among other things.
What was the sole reason behind this activity? Quite simply: no business plan, no moolah.
A business plan doesn’t equal a successful business
Bank managers, investors and entrepreneurs have learned over the years that no matter how good a business plan seems on paper, there doesn’t appear to be any correlation between a well-written plan and a successful business. In fact, there are many examples of successful ventures that started without any evidence of a business plan.
Let’s examine this further. The core of any business is to create something customers are willing to pay for. It really is that simple — at least to start with.
"The ultimate currency in negotiation these days is traction."
When starting, don’t start a business at all.
So when starting a business, it actually makes better sense not to start a business at all.
It’s preferable to create a light version of your product or service, with the bare minimum of features and offerings in order to deliver customer value, and get it to market as soon as possible. This is by far the best way to validate your concept and determine whether the market will pay for what you’re offering (before pouring more of your own money or investors’ money into the operation).
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Get customers. Get feedback. Get investment.
If all goes well, you’ll have your first paying customers and the added bonus of soliciting feedback from real customers before taking your offering to the broader market. If you approach banks or investors for money, this would significantly improve your chances. You’ll be able to demonstrate that customers actually want your products and services instead of just talking about it.
The ultimate currency in negotiation these days is traction; proven demand for an offering. It’s hard for anyone to doubt your ability to be successful if you already show evidence that you’re on your way.
The business plan process is still valuable
While the business plan itself may not set the scene for success, the process of devising a plan is still valuable, as it allows you to think through all the core aspects of your business.
Having said that, more efficient ways of accomplishing this task have emerged in recent times. LeanStack’s Lean Canvas is one of the more popular methods. Carrying out this exercise while road-testing your offering would yield the best results.
Here’s the plan
Focussing on what’s important (crafting an offering that solves a problem that customers are willing to pay for), measuring results (based on degree of traction), soliciting feedback, and continuously improving your offering is a more reliable strategy for achieving success than starting with only a document that captures your hopes and dreams.
What are your thoughts?