business planning

This week, I (Mina) have been working on a short business plan. We have been working on developing our business for over six months, but we don't yet have a written plan. In fact, I have steadfastly (and perhaps stubbornly) been resisting writing one. This resistance is partly a futile one-person backlash against the now-ubiquitous business plan competitions that seem to be taking place every other week in some form or other (I do work at a university after all). But mainly, it comes from a desire to avoid the fate of many I know who have written business plans, who work and work and work on the plan and run five thousand different projections on their trusted Excel spreadsheets and research every competitor they can think of only to find that three years later, they are still working on the plan.

This is how it seems to work: You write a plan. You are excited. Maybe you enter a contest. Maybe you make it to the finals. You show it to people. You get feedback. This is where things can take a nose drive. Someone says to you, "You know, this is an interesting idea, but I'm not really convinced by your "Target Market" section (or "Competition" section or "Financials" section or ...). You are smart enough to know that their point has merit. So you set out to revamp it by googling like crazy that night. But you don't get the kind of information you need (or even worse, you get contradictory information or too much information). You decide you need to devote a full day/week/month to this, which you don't have right now as you're too busy trying not to get laid off like most of your friends. You put the plan away until you can find that day/week/month. Pretty soon, the plan -- your once beautiful, exciting plan -- is buried in your computer harddrive under all that stuff that mysteriously download themselves onto your computer when you're not looking. Months pass. You almost forget that you have a business plan. One day, you are at work and realize for the 100th time that you work with morons and you've had it. You are going out on your own. You come home, you dig through your hard drive, find your plan and get back to work. You are savvier this time and recruit some friends to become partners. Together, you devote the next few weeks/months researching and working on the sections that were criticized. You finally have a draft, and the Excel expert who is now part of the "founding team" has even managed to make the charts look prettier than they were before. You send it off for some feedback. You're hoping the reader (who also happens to be well-endowed financially) will say, "This is brilliant! Here's a check for a million dollars for you to start and I only want 1% of the company." Instead, you get "I think I just heard of a company that is just like this. I can't remember the name. You should find out." (Or, "The "Target Market" section is too long and confusing. Focus!") You work on the plan some more. You google like crazy. You hold team meetings. Everyone agrees that the team needs to devote a full week/month to do this, no interruptions. Nobody can agree on a good time. You put the plan on hold until you can find that week/month. Meanwhile, your teammates get married, go on vacation, get laid off. Life happens. Pretty soon, the plan is once again buried in your computer harddrive. Months pass. One evening, you are out having cocktails when a friend says, "Hey, weren't you working on a business plan? Did you start?" You bop your head to the music, smile and pretend like you can't hear, but when you get home, you dig up businessplan_v2 and get to work. You send a midnight email to your team members, "Time to get back on track!" Being charismatic, you are able to rouse the troop. You get to work. You google like crazy. You finish v3, send it out to trusted advisors. And they say, ... Three years later, you are on v14 and still working on it.

I guess what I'm saying is, we wanted to get going rather than get paralyzed by all the information out there and even more than that, we didn't want to get hung up on producing a document which sometimes seems to take on a life of its own. Of course we did some back of the envelope projections to make sure that our future business made economic sense, and we held informal focus groups to make sure that we weren't the only two people in the world that had a need for our product. But because our start-up costs were relatively modest, we decided that the best way to proceed would be to create our e-commerce website and then get feedback from our customers on the actual product and make incremental changes based on the customer experiences. We're obviously not the only ones to forge ahead without the guidance of a plan. You're thinking, "Small businesses do it all the time. To be big, you need one." But in fact, Amir Bhide, who wrote the seminal book The Origins and Evolution of New Businesses, reported that 41 (forty one!) percent of Inc Magazine's 500 fastest growing companies wrote a business plan of any kind. Only 28% actually started with a full-blown plan.

So, why are we working on one now? Mostly, it is to keep us on track. We tried to keep everything in our heads and our heads just aren't big enough (or smart enough) to hold all of the ideas, decisions and milestones relevant to the successful launch of our business. And while "analysis paralysis" (a Bhide term) can be an ill side effect of business plans, research and analysis, there are also studies that link the writing of a formal business plan to various aspects of success in launching ventures. If we're like most start-ups, we will need all the help we can get, and so here comes the business plan.