I enjoyed this post on business plans on Silicon Alley Insider, beginning with a memorable title:
That post by Henry Blodget embeds a video with serial entrepreneur Kevin Ryan being interviewed.
How do they write that Bart Simpson comment: Is it “No-d’oh?” Here I am believing in business planning as absolutely essential for managing a company right, but who equates business planning with wasting months writing a business plan? Nobody who actually knows planning and has a planning process in a business.
There are so many dumb ideas floating around this collection of misconceptions that I get frustrated. Not that either Henry Blodget or Kevin Ryan are dumb, but they’re playing that straw man game again, defining a business plan as something dumb, and then calling it dumb. No D’oh.
You can read here how Kevin equates the business plan with wasteful and impractical market analysis. He says …
“If you know a market, and you’ve thought about it, then doing a business plan isn’t going to help you that much. If you know a neighborhood and you know there’s no Japanese restaurant there, you can do economic analysis that shows complicated ways that having another restaurant would be good, but if you live in that neighborhood, you know.”
Notice how this goes: business plan = market analysis.
In truth, however, business planning and market analysis are different things. Like horses and carriages, they often go together, but you can ride a horse without a carriage, and you can plan your business whether or not you do market analysis. And, for the record, I’ve been saying that a lot lately, and writing it too.
Kevin goes on:
“When I go out to raise money, if a VC focuses a lot on the details of a financial model, I don’t work with him. That means he doesn’t really understand.”
Okay, no argument there, but now it’s business plan = detailed financial model; and that’s horse and carriages again. Especially as Kevin goes on to suggest what they should focus on is …
“Is this a big enough market, do we have a good idea, and do we have good people.”
But Kevin, do you mean you don’t think it’s a good idea to plan a business? To write down objectives, timing, who’s responsible for what, figure out staffing, calculate burn rates, set marketing messages, and yes, project your sales and expenses, so you can coordinate both together and manage your course corrections by having the original course written down?
I doubt it. Because if you’ve been able to answer those questions you pose, then you’re probably already planning.