

DHH: Doing a Start Up in the Real World [video] - sant0sk1
http://events.carsonified.com/fowa/2009/dublin/videos/david-heinemeir-hanson-2

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swombat
37S keep on insisting on the whole "don't write a business plan" thing. In
this talk, DHH puts up a strawman.. "Build something good enough that people
want to pay us money for, and charge them monthly.. that's my business plan."
That's not a business plan, that's a business model.

A business plan is simply the result of doing basic research like:

* estimating the size of the market * checking out the competition * estimating your costs * figuring out what drives your costs * figuring out just how much you need to sell, and at what price, to cover your costs * agreeing who's gonna do what when, roughly

and a number of other things..

A "business plan" is just a piece of paper. Business planning, on the other
hand, is essential - unless you like to fly with your eyes closed.

~~~
dhh
According to that definition, we enjoy flying blind, then. We never did any
substantial research in any of the areas that you suggest and we managed to do
just fine.

Doesn't mean that you should never do those things, just that I generally find
them overrated as your ability to gauge market sizes for non-consumption
products is very limited (which is what we try to do almost exclusively,
attract people who haven't used a product in the category before).

~~~
mauricio
The "we did it and we do just fine" argument to me is really what's overrated
here.

How do you know you are doing just fine? How much of the market have you
captured? How big is that market? What if you had created your business plan 5
years ago and today you did triple your sales? Would that extra 2-3 weeks of
work be worth it?

~~~
run4yourlives
_How do you know you are doing just fine?_

I'm pretty sure they just look at their bank accounts.

In all seriousness, there's doing fine and being greedy. There will always be
a step to climb, a market to reach or revenue to grow. The goal is to do
enough to enjoy life and be comfortable, not to be the richest man in the
world. At some point, you can do "well enough" and not worry about what "could
have been".

~~~
mauricio
I'm sure their investors would disagree.

~~~
run4yourlives
They are their investors. :-)

~~~
mauricio
[http://www.37signals.com/svn/archives2/bezos_expeditions_inv...](http://www.37signals.com/svn/archives2/bezos_expeditions_invests_in_37signals.php)

My point is this: Though they may have taken Jeff Bezos on for his expertise,
Bezos made his investment to earn a return. You don't invest in private or
public stocks in a capitalist world to do just fine. You don't start a
business for that reason either. That's not greed, that's entrepreneurship.

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gstar
I'm so mentally attracted to the concept of not formulating a business plan
other than "make something people want, and then put it up for sale" - but in
my business it hasn't been viable.

To get the loan that we've taken out, and to get meetings with useful people,
we've had to have a traditional business plan and cashflow forecast.

Here's the good news though: it only took me one evening to write and another
to edit, and it doesn't matter if we don't stick to it.

I wonder if Jason Fried had to man up and write one when he founded his
consulting firm?

~~~
run4yourlives
Writing a business plan to show a bank and "writing a business plan" are two
different things, really.

Looking at 37S, my guess is that they're mostly self funded, so I don't think
they ever went looking for loans. I would say this is the "ideal path", even
if it isn't practical.

If you do need start up capital, then of course you're going to have to show
the bank that you're good for it. You should still cling to the idea however
that your ultimate business is about making "something" and not sticking to
what you thought you would be making before you started.

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wensing
Don't get so hung up on his point about whether or not you should write a
business plan that you miss the rest of his points, which are great. Among
other things, that it's about execution and staying power, not the idea.

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jgrahamc
Starts with poor audio and then improves a lot.

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mattjung
My Conclusion: do it your own way (which is not necessarily: do it the
37signals way).

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dpnewman
I always find DNN compelling. And appreciate the fact that he spends a lot of
time trying to get others to go out and realize their visions, while providing
some key guidance.

I agree with most every angle, except I do think he over-simplifies, a little,
the idea that all viable businesses must start with a product that people pay
for. While it's a hard road, and a great challenge, web apps that begin life
as free play a very important part in the whole web ethos, and some become
very valuable through a variety of valid business models that can be tacked on
later depending on what/how things evolve. So to dismiss "startups" that shoot
for this particular "success" wholesale, I would say is it's own sort of nay-
saying. But again, as a whole...loved the pres.

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mauricio
Not creating a business plan and making up prices out of thin air is
definitely the most fun and least time consuming. I think DHH nails that
aspect of it.

But, how feasible is it to start companies this way? Sure it may have worked
well for them and it may even work incredibly well for your business. As
hackers though, we know that just because something worked once, twice or 500
times doesn't mean it's the truth or will always work.

It's best to be prudent wherever possible and do some research into your
market and pricing strategies. I'm not saying go off and create 5 year
business plans, I'm just saying it definitely deserves some of your time
cycles.

~~~
run4yourlives
Why? Is there an identifiable increase to your chance of success if you have a
business plan over not having one?

In the traditional business, I suppose the answer would probably be yes
(although I haven't really seen anything that supports this). Working in tech
however, is much more of a crapshoot. Most of the time, you can't really
research a market you're creating. This alone makes the whole process a giant
guessing game.

If forming a business plan is just a series of guesses, you'd be better off
moving straight into the part where you're actively testing those guesses with
a workable product.

~~~
mauricio
I think you make the assumption that the tech you are creating here is
inexpensive. If you can make your idea with $5k and a few months time, go for
it. Make up prices and make up numbers.

What if your new product, that has never been done before, will costs tens of
millions? Surely those products have existed, and yet are still somehow able
to do the prudent 'guesswork' to convince venture capitalists.

~~~
run4yourlives
_What if your new product, that has never been done before, will costs tens of
millions?_

Bluntly, my opinion here would be that this isn't a viable option for a
startup, unless they have access to easy angel capital or can self fund to
that amount.

Developing an idea with that price tag is an is a risk orders of magnitudes
higher than a low cost startup. Having a hit is hard enough, but you'd need a
run-away smashing super hit to even break even.

Even if you choose that path, there are still aspects of the idea that can be
harnessed and build at much lower costs to begin income generation to help
fund the remainder of the idea.

Investing money of that amount into an idea that has yet to prove itself is
not my idea of a good move, really.

EDIT - Curious, what problem space are you thinking about/working in that
requires that level of funding?

~~~
mauricio
I'm not particularly working in that type of space, but we are generalizing
here.

If you look into startups in the medical, pharmaceutical, chemical and energy
fields, you will see very high startup costs while sharing the high risk
attached to software startups.

Even in software though, there are companies working on solving difficult
problems that would require the work of scientists, engineers and
administrators for 1-2 years. This would place you into that multi-million
dollar category pretty quickly.

