I’m a full-time entrepreneur, but also teach several courses for the SBA, including business planning. My students are probably surprised when I tell them that I prefer that they spend only a small amount of time writing their business plan. Of course they are surprised, especially if another instructor told them all about the virtues of completing a masterpiece of a business plan in order to attract investors and make sure their business had a good chance of success.
Steve Blank, founder of E.piphany and a pioneer in the lean startup movement, obviously agrees with me. He recently stated, “I’d be embarrassed if I was on a faculty teaching ‘How to Write a Business Plan for New Ventures’ … Business plan classes and business plan competitions are dead in the water for new ventures.”
19th-century Prussian general Helmuth von Moltke stated, “No battle plan ever survives first contact with the enemy.” Business plans have something in common with battle plans because no matter how thoroughly they are conceived, reality almost always turns out differently. Franchises are the exception because you are following a well-trod path. In this case, following the long-form business plan is preferable. But most of the time, you are better off creating a short-form plan, testing it in the marketplace and iterating as necessary.
While the intentions behind the long-form business plan are good, in practice, spending a lot of time and energy on the business plan can harm, rather than help, the new venture. I’ve seen new entrepreneurs get bogged down for months (even years) working on deep details of a business plan, instead of what would be far more effective: testing and refining. To put this a different way, I suggest you follow the mantra of “Test, Fail, Test, Succeed, Scale.” To do this, you write a simple overview plan, run small tests to validate your business concept (making your mistakes when the stakes are lower), refine as circumstances dictate, and scale as your tests prove fruitful. At some point (e.g. when you are trying to attract investors) you might want to write the long-form plan, and when you do so, you will find it to be far more accurate and actionable.
In case you are still not convinced, here are four more reasons to adopt the short-form, iterative method of business planning.
- It is much faster than writing a traditional plan. When you are starting a new venture, time is your most precious commodity. You should minimize any activity that takes you away from selling to new customers and bringing new products and services to market.
- It is more intuitive and easier to complete. Let’s face it: business planning is complex and tedious. Better to do a shorter, punchier version and get to market faster. Your success depends on selling stuff to individuals and companies, not writing business plans.
- It is easy for investors and partners to digest. As a sometimes angel investor, I have received a good number of business plans. If the plan makes a “thud” sound when I drop it on my desk, it is probably not going to get a complete read through. But I always have time for a short-form plan, assuming it starts in a compelling fashion.
- It is effective. Short-form and iterative business planning gives the business the best chance for success. Your initial marketplace tests, even if unsuccessful, will pave the way towards your future success in a much more effective manner than even the loftiest and most well-written long-form business plan.
Business planning in 2015 is very different from years past. The amount of market and financial data accessible today makes the process infinitely easier. And there are several good single-page business planning formats, including the Business Model Canvas and Lean Canvas, both of which are in widespread use. A more recent addition to the fold is the Business Planning Framework from Center for Business Modeling.
In later posts, I’ll discuss the minimum viable product (MVP) strategy and how it is closely aligned with and supportive of the short-form iterative business planning methodology.
View the Business Planning Framework here.