Several years ago, I attended a seminar at MIT. It was geared toward entrepreneurs, and I was in illustrious company – I was in the audience along with the founders of Burt’s Bees, TicketCity, and 1-800-GOT-JUNK, among others. The speaker – a venture capitalist – asked everyone to stand up. Then he asked those of us who’d used outside financing to start our business to sit down. Not a single person did! Finally, he asked us to sit down if we’d actually followed our business plan to guide our decisions. Again, not a soul sat down.
Now don’t get me wrong, many of us had developed and written specific business plans, which isn’t necessarily a bad idea, especially if you’re trying to get financing from a bank. But what’s so telling is that once these plans were written, they were largely useless to us – the entrepreneurs. Why is that?
- Irrelevant Financials. Let’s face it, if I could accurately predict exactly where my business will be in the future, I’d probably be sitting in the Cayman Islands, trading stock and making millions. The fact of the matter is that our company’s revenue and expenses can vary because of significant factors we have no way of predicting. Now that’s not to say that you shouldn’t make an attempt to follow a budget (a completely different animal,) but I am saying that you can’t necessarily rely on the figures that fill out your business plan.
- Your Dream Team. A portion of your business plan is devoted to the people who plan to help you along your way to brilliant success. Here’s the trouble: not a single member of your dream team matters as much as you do. You’re all in; they’re not. I’m not discounting the importance of having a great management team or looking for sage advisors. What I’m saying is that relying too heavily on your supporters can be your downfall.
- Defining Your Niche. Finding your niche is key to the success of your business, but the problem is that truly finding that niche – your ideal customer – often relies on real-world selling, rather than trying to predict the future. If you pigeon-hole yourself too early, you can waste a lot of resources trying to appeal to a market that might not be best for you. You’re much better off letting that organic niche create itself, rather than chasing an idea just because it’s what your business plan predicts.
The exercise of creating a business plan can be extraordinarily useful in terms of helping you crystallize and articulate your vision, but it’s a mistake to let a document meant to start a business turn into a manual that you continue to use even after it’s outdated. Entrepreneurship relies on innovation and a willingness to capitalize on opportunity, even if – or especially if – that opportunity didn’t exist when you started the business. Don’t let yourself or the growth of your company be limited by your business plan.
Tags: Business Planning, Entrepreneur, Finance, Mondays with Mike, Product Management, Startup