Business Plans Are Bullshit
Breaking Free reader Rui writes in with the following question…
Can you suggest where to get help in order to develop a business plan?
Hi Rui,
What most people mean when they talk about business plans is a 25 page document with lots of fancy stuff like an executive summary, break even analysis, excel graphs, and market segmentation.
Personally, I’m not a big fan of these. I wrote one back in 2004 for my tutoring business and I think they are bullshit for one primary reason: almost everything I predicted in it turned out not to be true.
It’s nothing more than guess work and it turned out to be a pretty big waste of time.
One of my pet peeves about people starting businesses is that they spend way to much time THINKING and not enough time DOING. I fell into this trap too. You don’t need to guess if something is going to work and model it in Excel when you can just do it and find out for real!
This is why I’m a big fan of finding quick and inexpensive ways to try out new business ideas.
Instead I suggest you do a quick and simple business plan which answers some key questions and makes some rough estimates. Preferably, it should be drawn on the back of an envelope with lots of scratching things out, and it shouldn’t take more than a few minutes.
Here is an example of a good business plan:
Some things I like to jott down and think about:
- Can it help a TON of people (estimate some revenue #’s to help yourself get excited)
- Does it scale well (i.e. is it passive, does it require my personal time to help each additional person)
- If it really took off, would it fit into my lifestyle and would I enjoy it?
- Would it be fairly quick and inexpensive to test out the idea (this is important since 9 out of 10 of my ideas don’t work)
- Does it have a high profit margin (this covers up mistakes and keeps you out of commodity businesses where you can only win on price, a bad place to be!)
- Can I do significantly better than solutions that already exist out there (a quick Google search usually answers this)
- Can I sum up the biggest benefit (or value proposition) of this business in one sentence?
I think all great business ideas can be summed up in one sentence. Play around with it at the bottom of your “business plan”. If you can’t get it into one concise, clear sentence, you probably don’t know what you’re doing yet.
If it seems to have promise, then take a night to sleep on it and then get to work building it! Don’t give yourself a chance to fall into “analysis paralysis” where you eventually end up doing nothing on it.
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Chris - Manager's Sandbox said,
Wrote on October 7, 2008 @ 11:02 am
Brian,
Great article! Reminds me a lot of an article I read on Put Things Off. I used to spend a lot of time drafting plans, too, but since I’ve started put together one-pagers and then just launching and testing instead, I’m much happier and things happen substantially more quickly.
Keep up the great articles!
- Chris
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Brian Armstrong Reply:
October 11th, 2008 at 1:23 pm
Thanks Chris, any sites you’ve launched quickly that you want to share? Always good to see other examples.
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Satollo said,
Wrote on October 7, 2008 @ 4:36 pm
I totally agree. I have customers spending tons of hours in refining ideas never starying at least with a minimal working project and implementation. They loose time and time in deciding how many questions ask to a user in the online signup form, without starting with a simple form and looking what’s happen. All this projects fails. I have a collection of projects failed in my drawer (at least payed) which count more meeting than web pages deployed.
That doesn’t means that business plan are not useful. Using a right amount of time to think about a project can show up original defects to be avoided. But not infinite.
Little projects based on new ideas have to be considered “experiment to try out”. I’m not talking, of course, about projects like the 1 million kilometers network of a large telco.
Business plan doesn’t apply well on every situation.
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Brian Armstrong Reply:
October 11th, 2008 at 1:27 pm
Good point satollo. In projects that require large capital investments it’s probably worth putting a more traditional biz plan together.
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bdurfee said,
Wrote on October 7, 2008 @ 9:30 pm
Brian – you never fail to teach me something worthwhile and to often make me laugh in the bargain. I love your advice and attitude – keep it up!
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Brian Armstrong Reply:
October 11th, 2008 at 2:09 pm
Thanks :) I try to entertain myself so glad I’m not the only one.
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Prabu Rajasekaran said,
Wrote on October 8, 2008 @ 9:30 am
Brian,
How to persuade people who expect a business plan and to our way of telling an interesting story? What to tell people who definitely need a business plan to start a conversation?
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Satollo Reply:
October 8th, 2008 at 10:42 am
If you need money and your business angel need a business plan, give him a business plan. But if you are creating your own business and you don’t need other money sources, you can make a sketch instead of a business plan. :-)
Too simple?
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Brian Armstrong Reply:
October 11th, 2008 at 2:21 pm
I would agree. If you need to ask for money then you probably need to put something more formal together. But even in that case, it could probably be much simpler that most people imagine.
Famous VC Guy Kawasaki says “most of the plans that we see at Garage are too long and too detailed—to the point of reducing credibility”
http://blog.guykawasaki.com/2007/01/is_a_business_p.html
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John Hoff - eVentureBiz said,
Wrote on October 8, 2008 @ 8:33 pm
Hello Brain. First time to your site and after my comment I’ll take “the tour”.
However, I do have to disagree with you on this topic (on my blog I write about entrepreneurship).
Discovering how to write a business plan and actually taking the time to write one is extremely valuable and a great first step toward building a successful business.
It not only gets new would-be business owners thinking, but it shows them how to think as a business owner. And all those bar graphs and extensive research mentioned are things you can do later when you actually have data.
If you’re a new entrepreneur, learning about a business plan will help you know which questions to ask, how you should focus your thought process and niche.
In other words, I’m saying that learning about a business plan and actually writing one has a valuable teaching aspect.
It also helps the entrepreneur to think seriously and critically about his/her business and not just throw a business together and shoot for the moon. It teaches us that starting a business is tough and requires work.
To just throw together a few scrap notes and think that’s a great foundation for starting your business doesn’t fly with me and it teaches a very bad lesson.
Furthermore, if you have any aspirations to growing your business which may include partners, investors, and bank involvement, a sturdy business plan is invaluable – and necessary.
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Brian Armstrong Reply:
October 11th, 2008 at 2:25 pm
Good points John. It may work for some people. I think it’s valuable to understand financial statements and what not for sure. I guess the reason why I prefer this route is that I don’t see a shortage of people with good ideas. I more often see a shortage of people actually taking action on their ideas. So I’m more of the school of thought that people should stop thinking so much about doing something and just actually do it.
But there certainly is a time and place for formal biz plans. Hope you enjoy the site and thanks for stopping by!
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Gopal said,
Wrote on October 10, 2008 @ 11:35 pm
Cut out the Red Tape and first look within yourself to know what you are truly passionate about and what will be required of you to have lasting success. Have a big picture view of what you want to do with your business and then know the key elements that will either make or break it. Don’t spend too much time on intricate details that will bog you down and frustrate you. You can spend a lifetime analyzing and procrastinating. Nothing will change in your life unless you make a move. You will have plenty of time to fill in the gaps as you go along but the important thing is to take action. Business plans may work for some but from my own experience there is no perfect way to get something done. Just do it! That is the plan. Success, G.
http://www.boom.thevfusiongroup.biz
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Brian Armstrong Reply:
October 11th, 2008 at 2:27 pm
Thanks Gopal!
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Entrepreneurs don’t worry about the economy. We have busines to do… said,
Wrote on October 26, 2008 @ 10:00 am
[...] why business plans are bullshit and you shouldn’t borrow money to start a business… The best businesses in recent [...]
Chris - Manager's Sandbox said,
Wrote on October 29, 2008 @ 10:25 am
Brian,
Sorry I missed your reply to this a few weeks ago. My current blog, Manager’s Sandbox, was up and running in 3 weeks. I wrote a 2 paragraph business plan in about 15 minutes and then went to work. You can read about my experience here: http://managerssandbox.com/take-the-leap-start-your-own-business-in-your-spare-time/
Great resource here – thanks for everything!
- Chris
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Brian Armstrong Reply:
October 31st, 2008 at 1:46 am
Cool, thanks for sharing the link Chris. Nice looking Blog.
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