Lean Business Planning

Lean Business Planning vs. Traditional Approach

The Center for Business Modeling is based on one simple premise – to help entrepreneurs launch their ventures in the fastest and most successful manner possible. And in the vast majority of cases, this means launching a venture in the “lean business mode” from both a planning and operations standpoint.

Many new entrepreneurs are still taught – by well-meaning professors or industry groups – to follow the traditional route to business planning and launch. So what are the problems with this type of approach to business planning that cause us to recommend the lean business strategy? Here are five of the major issues:

  1. Almost every business plan is inaccurate as written. A recent Harvard Business Review article stated that 90 percent of successful businesses had to pivot from their original plan.
  2. The traditional business plan takes too much time to complete – time better spent elsewhere. When you are in a startup situation, the only resource more valuable than money is your time.
  3. Much of the information is unknowable at the time the plan is written. Almost all entrepreneurs are surprised when the reality differs from the expectation. Sometimes this is a pleasant surprise and sometimes a not-so-pleasant surprise, but it will definitely impact your venture.
  4. Plans that project financials five years out are somewhere between speculation and fiction. It is amusing to watch entrepreneurs plot how much they are going to spend on office supplies 60 months from now, but in reality, almost no one gets it right.
  5. Too many small business plans are based on big company data. Much of the entrepreneurial data taught at the college level is about rocket ship companies like Facebook or Uber, which do not apply to the SMB marketplace.

All of these challenges can be overcome by adopting the lean business planning model. Here are a few of the benefits received when you adopt the lean business game plan:

  • Much faster than writing a traditional plan. The time investment paradigm in the lean model shifts from planning to execution.
  • More intuitive. Tools like the Business Model Canvas, Lean Canvas, and the Center for Business Modeling Business Planning Framework, are much easier to understand and complete, and much easier to evolve over time.
  • Quicker for investors and partners to digest. Investors tend to have short attention spans in the beginning phases and very long attention spans as they get closer to funding a particular venture. You need to get your key points across in the shortest time possible or the potential investor will move to the next deal. Using any of the lean planning tools mentioned above, the essential elements of your strategy are contained on one page.
  • Helps you get to cash much faster. The game of business gets a lot more interesting once you get on the playing field. The lean model is designed to help you launch quickly, expose your products and/or services to prospects, learn from these initial tests, and re-launch based on the knowledge gained in the early test period.

I encourage budding entrepreneurs to adopt the mantra of Test, Fail, Succeed, Scale (in that order please). The lean business planning approach is just what you need to accomplish this. For a great book on the subject read Business Model Generation.