Throw Out Your Business Plan – Part I

If you are starting a new company or creating a new business within an existing company that is truly unique in the market place … my recommendation is to NOT have a business plan.

Why: “Are you advocating we jump into a new business, throw things around and see what sticks. Smells like WebWan or Boo.com strategy to me

NO, I am NOT advocating a “see what sticks” approach.

A truly new and innovative business cannot be “planned” in the first 12-18 months. Talk to any successful company that pioneered a disruptive/innovative business model … I bet you they preserve their 1st year business plan as a symbol of how clueless their planning was and how they grew in spite of the plan. (If some one says they hit their plan +/- 20%, you want to investigate if it was truly disruptive/unique)

Let’s see … what a typical investor or CFO expects from a business plan:
– Predict P&L with +/- 20% accuracy for the next 12-18 months … to manage investments and cash flow
– Link sales projections with market potential and market share … so they are “realistic”
– Pin you down to certain revenue targets and manage you (ab)using those
– Assume you will a seasoned player of corporate budget games … (where budgets are created to earn high bonus irrespective of true success or failure)

All of the above objectives will distract the leadership team of a new company and send them off in the wrong direction.

So, if you have built a business plan for your new business … be afraid.

Traditional business plans are useless. Instead a new business should “plan to learn what value proposition creates loyal and profitable customers”.

Why_Not: “Wooah … Wooah … Wait a minute … what about Hotmail … they didn’t have profitable customers. What about hard ware companies Cisco bought for millions of $s just for their IP … most didn’t have even one real customer. Explain that to me

Sure, a new business can be valuable enough to be sold at a high valuation for building any one of the three things I listed … “value proposition”, “loyal customers” and “profitable customers”. But, my recommendation on what to focus in the first 12-18 months for a sustainable business model in a truly unique business still holds.

How: “I liked the traditional business planning based on ROI, Break Even, Market Share, Revenue, Sales etc. because it is very precise and measurable. I don’t see how this can be implemented as it doesn’t seem measurable enough to me. How would I know whether we are succeeding or failing? How do I know what loyalty is? What do you mean by … I should learn? All this seems too mushy mushy to me. Tell me how

(To be continued)

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Views expressed are solely personal opinions of the author; and do not represent the views organizations/institutions he is associated in any form. The author has no responsibility for actions taken based on ideas expressed here. (Author: Sridhar Turaga)

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Author: st

A dad. A partner. A son. A problem solver. A learner. A teacher.

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