For most entrepreneurs, writing a business plan is the first step in starting a business. Business plans are formal written documents that include all the business’ goals, objectives, market research, projected revenue and much more. Business plans are what banks and other financial institutions ask for, but how close are business plans to reality? Not at all!
What is Wrong With Traditional Business Plans?
They always turn out to be wrong. In principle, there is nothing wrong with planning, as long as it is the right type of plan for what you are doing.
Most start-ups these days are building things that are new. They are not tried and tested businesses, so it’s really hard to make any reliable predictions about them. When you work on your product or idea and finally launch it to customers, customers often don’t behave the way you expect. That 50 page business plan is full of assumptions and gives a false sense of security on the business, the market, and customer behaviour... and because you spent so much time on it, it makes it hard to change direction.
What’s Better Than a Business Plan?
What a start-up really is, is a temporary organisation that is searching for a viable business model. Most startups don’t want to be a startup forever, they want to grow into a business that makes money each month. The process of creating a viable business is messy. You start with one idea, you see how it works, you learn from it, you change it and improve it, it doesn’t work, so you try something different.
This process isn’t about following a business plan but learning from your customers and adapting quickly. This learning is key to unlocking a great business model. So what is better than a business plan? A Pitch Deck! A few slides showing the key parts of your business. A short document, easy to read and understand by you, your team and your investors. A plan that outlines what you need to learn, which most likely includes:
- Who your customers really are
- What their needs are
- How you can solve their problem
- How you can make money from that solution
You can then put the outcomes of all your tests and learning into a Pitch Deck. A pitch deck is better than a business plan because it is short, memorable and easy to update and change! Pitch decks are what Venture Capital Investors read (They are also what entrepreneurs themselves read!) so focus on those. The fewer the number of slides the better. For more information on what goes into a pitch deck, check out our next post!