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.