More and more professionals agree that a better strategy is to explore and fine tune your assumptions before declaring a specific plan with financial projections based only on your dream and passion.
In the process, you may save yourself considerable re-work and money, or even decide that your dream needs more time to mature, before you commit your limited resources, or sign up with investors to a painful and unsatisfying plan.
I just finished a new book on this approach,Beyond the Business Plan, by Simon Bridge and Cecilia Hegarty, which outlines trade-offs and recommends 10 principles for every new venture explorer. Here is my edited summary of their 10 principles, which might just convince you that you don’t need a business plan at all, or at the very least, will help you write a better one later:
1. A new venture is a means, not an end.
A new enterprise should be pursued primarily to help you achieve your goals, like providing a better life for others, satisfying a passion of yours, or enjoying the benefits of a technology you have invented. In that context, it could be a social enterprise, or even a hobby, in which case a business plan may not be beneficial.
2. Don’t start by committing more than you can afford to lose.
New ventures are usually exploratory and risky by nature, so don’t let any business plan process convince you to commit more than you can risk as a person, should your exploration fail. Start with an effectual approach, which evaluates risk tolerance, and suggests a more affordable means to an end.
3. Pick a domain where you have some experience and expertise.
Don’t handicap yourself by starting something for which you have to build or acquire knowledge, skills and connections from scratch. No business plan will save you if you are just picking ideas at random or copying others, just because the story sounds attractive.
4. Carry out reality checks and make appropriate plans.
Before a business plan has any validity, some work is required to validate that your technology works, a real market exists and your assumptions for cost and price are reasonable. Don’t be totally driven by your own passions, the emotional enthusiasm of friends or even third-party research.
5. The only reliable test is a real one.
Market research techniques for trying to predict the market’s response to a new venture can be costly and are often unreliable. Testing for real is the assumption behind approaches such as Lean Start-up. It is also what explorers do – they go and look, instead of trying to predict from a distance what they will find.
6. Get started and build momentum.
Too much hesitation will kill any new venture, as markets move quickly and difficulties mount. Getting started helps generate momentum and creates a sense of accomplishment, which can carry your start-up through many obstacles. Early perseverance pays off.
7. Accept uncertainty as the norm.
You will never remove all uncertainties, so accept them, and plan your activities in an incremental fashion. Too often, a business plan is seen as a mechanism for eliminating uncertainty, lulling the founder into complacency. Eliminate major uncertainties before the plan and update any plan as you learn.
8. Look for new opportunities.
Many useful opportunities are either created by what you do early, or are only revealed once you have started and can see out there. So keep your eyes open and respond to new customers, markets and partnerships. You will also find that looking hard helps eliminate opportunities that are not right for you.
9. Build and use social capital.
Social capital is people and connections. No entrepreneur can survive as an island. Social capital is as important as financial capital for all ventures. As with all capital, you can use only as much as you have acquired to-date. If you have no social capital, no business plan will likely get you the financial capital you need.
10. Acquire the relevant skills.
Three basic skill sets are required for successful delivery of almost every venture. These are:
- Financial management
- Production capabilities
- Marketing and sales.
If you don’t have the relevant skills and knowledge, take time to build them or find someone to partner with, before you attempt any business plan.
If you decide to continue building a conventional business after exploring these principles, especially with investors and employees other than yourself, I’m still convinced a business plan is a valuable exercise. You should do it yourself to make sure you understand all the elements of the plan and facilitate communication of the specifics to your team and investors.
In essence, building a complete and credible plan is the final test of whether your venture has legs. The entrepreneur lifestyle is all about doing something you enjoy without undue stress, uncertainty and risk. Are you having fun in your venture yet?