Don’t write a business plan!

Today, I came across a fantastic post written by Don Dodge. It’s the post that I’ve wanted to write for a long time. I haven’t written it because I don’t yet have a track record like Don Dodge.  But Don’s given me the green light to say what’s been on my mind for a long time:  “Don’t write a business plan!”

In his post, Don wrote: “In all my years in startups and all my work with VCs I don’t ever recall seeing a written business plan. The fact is that investors do not read them.”

When I started Punchbowl Software, I wrestled with this fundamental question: should I write a business plan? During the idea creation stage, it felt a lot more natural to me to tell the story in a few Powerpoint slides. So that’s what I did. I spent hours trying to develop the story, researching aspects of the business, and using Powerpoint to jot down thoughts and ideas.

In the back of my mind, I thought I probably should write a business plan. Keep in mind that I had just finished my MBA at the University of North Carolina, and the entrepreneurship that they teach is centered around writing a business plan. I felt like I should have a business plan. Numerous times I sat down to try to write a more complete plan. It didn’t feel natural at all. I struggled to write sections about “the market” and “the financial model.”

As I started telling people that I was in the early stages of building a startup,  about once a week someone would ask me to see a business plan. “Send me your business plan” was a refrain I heard all too often. Yet in my gut I knew that writing a 20 page business plan didn’t make sense. I had broad concepts, not an articulated plan to “go to market.” I had notions about how the company might make money, not a specific “business model.”

Months later, I started pitching MyPunchbowl.com to potential investors.  Once in a while, I would still get the question “can you send me your business plan?” And once in a while I would think about writing a 20 page plan– and then realize what a utter waste of time it would be to write a plan about a startup idea that was evolving so rapidly. It didn’t feel right to me, so I didn’t write one. Again and again, I would be asked for a business plan (yes I would question myself each time I was asked) but I stuck with my instincts.

Over time, I developed a set of documents that I use to pitch MyPunchbowl. Here’s a quick list:

1) One page overview of the business concept (includes info about team, market opportunity, competition etc.)

2) Powerpoint Presentation (no more than 10-12 slides)

3) Pro Forma Financials (5 year model with focus on years 1 and 2)

4) The actual working, live product at MyPunchbowl.com (with real users!)

Paul Kedrosky points out that VC’s are professional nit-pickers. Give them a business plan (that they actually read), and they’ll find a million faults with it. I guess I agree with this — although I’ve yet to meet a VC that would actually take the time to read a written business plan.

If you’ve read this far, then I hope you take my advice. Don’t bother writing a business plan. Work on getting a product out the door and getting real users. Focus on your Powerpoint pitch and pro forma business model.

And Don, I’d love to show you my business plan. It’s only 10 slides.

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5 Responses to Don’t write a business plan!

  1. Blake says:

    37 Signals just posted about their lack of a 5, 10, 20 year plan. Their situation is a bit different, but I think you’ll find it interesting nonetheless.

    http://www.37signals.com/svn/posts/542-the-5-10-20-year-plan

  2. Jim Provost says:

    Not that I would ask for actual numbers, but have you any recommendations and/or can we see the template of your pro forma financials?

  3. Tim Berry says:

    I think your title here is very bad advice that you’re not even following yourself. You are planning, obviously, you have your one-page summary, your presentation, and your financial projections. I’ll bet — since you’re successful — that you’re also planning all the time, reviewing the main points, watching your progress towards goals. Am I right? Or do you just wander around the business possibilities, randomly, changing your directions to react to each new change in the business breeze?

    Why redefine a plan as a 20-page hard-copy document in text divided into headers and such? Why suggest that people not do a business plan when you really (I think) mean that they might not have to lay their planning into an outdated document format?

    I think with the way you’re defining business plan here you’re essentially putting up a straw man you can throw stones at.

    And yes, BTW, I am biased. I’ve been a professional business planner for 30-some years now and I look at your four key points in the middle of the post and I say congratulations, you are planning. Plans should always be kept alive, tracked, reviewed, and revised as needed. Planning is like steering, a combination of minding your directions while making continuous corrections.

    — Tim

  4. mdouglas says:

    Tim,

    Thanks for your comment. Is my title somewhat inflammatory? Yes. That’s by design. After all, it got you to read it. 🙂

    But what I’m really trying to say is that if you are an early-stage entrepreneur and you’re asked the dreaded question “Can I see your buisness plan” that you need to realize that they are expecting the outdated 20 page document format which is traditionally called a business plan. And I think producing a 20 page document is a waste of time. Maybe what I need is a name for the kind of planning that I think it actually useful. How about a “startup plan”? Yeah, that seems more like it.

    – MjD

  5. Nick says:

    Tim,

    I think Matt is making a distinction between a plan, and planning. And I also think this is a distinction you were beginning to make as well (whether intentionally or not) in your comment.

    Of course Matt is planning. If he was not planning, he would have no idea what direction he wanted to take his company; and I can bet he would not have a working prototype as he does now. But the point is that you don’t need to waste time transferring this planning into a physical plan — especially when it will most likely be outdated as soon as it’s complete. Planning is more fluid. It helps you tackle each new obstacle — often an obstace you would have never envisioned in your original plan — while keeping your ultimate destination in mind. But the plan itself is just an excercise. If you already have your planning complete, than the formal plan is just redundant.

    Furthermore — and speaking from experience — everyone still persists (in business school, mentour programs, etc.) on pushing the need for a business plan. As if it is some magic document that is required for you to move forward or be considered a true business. It’s not. I agree with Matt, it’s a waste of time. It’s an outdated business tradition that has been perpetuated by the institution as something that needs to be done. It’s time to reject this requirement. There are much more important things to spend your time on, and there are better ways to articulate your business model.

    “The plan is useless; its the planning thats important.” -Dwight Eisenhower

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