

Ask HN: When should you make a business plan? - throw-away

A lot is changing around in the start up world.  Whats the deal with business plans?  Are those things still made?  Just before boot strapping or before your first angel approach or before vc?  What do you put in a business plan?  Do we still go by those decades old templates vc firms used to love?<p>I am in India.  I was talking with my first potential angel and he was quite surprised I didn't have a business plan already in place.  The whole idea of sitting down and putting all kinds of arbitrary anchors in my mind around pricing, growth rate, future revenue and all that feels a bit... premature.  I  feel like my first beta would be a much more appropriate place to do this.  In fact, it feels wrong.  It feels like I am being asked to be dishonest.<p>I will make up something.  Seeing this idea come alive is so much more important.  But I was wondering how is it over there at the valley.   When did you all put down your business plans?  What has your experience with them been?
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andrewce
Business plans can be extremely useful, or not useful at all, depending on how
you use them.

The biggest questions they should answer are: "What are we doing, how will we
make money from it, and how much money will we make?"

(It should also answer the question of "What do we do if everything fails?").

I found Guy Kawasaki's ten-part outline (
[http://blog.guykawasaki.com/2006/01/the_zen_of_busi.html#axz...](http://blog.guykawasaki.com/2006/01/the_zen_of_busi.html#axzz0ykt2Y2c3)
) to be pretty reasonable. I followed it for both of the business plans I
wrote (freelancing), which both achieved their purpose, and will follow it
again for future business plans I write.

Depending on who your potential angel(s) is/are, you may have to be more
"optimistic" than you would for others, as far as your financial projections
go.

That said, the real purpose of the business plan is to give potential
investors some solid numbers such that they can decide the odds of them
getting their investment back, and also to force you to sit down and clarify
your plans so that you don't get sidetracked with nonsense.

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10ren
I'm not in the valley, but Steve Blank is, and he suggests "business models"
instead of business plans. They are a set of questions that your business
needs to find answers to as it goes along:
[http://steveblank.com/2010/05/17/no-one-wins-in-business-
pla...](http://steveblank.com/2010/05/17/no-one-wins-in-business-plan-
competitions/)

also, _plans are useless but planning is invaluable_ ; that helps with actual
success, not so sure about getting funded.

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vincentvanw
Having studied entrepreneurship as a master-degree, I learned that business-
plans are important for the entrepreneur to verbalise what he is doing. If he
can't do that in a plan, can he do it to outsiders, specifically his
customers? However, running a startup for a year now, I find the act of
writing a business-plan always comes second after doing what needs to be done
to keep the business alive. Still, writing offers some reprieve from the day-
to-day stress and I'm much better versed than my co-workers on the grander
vision and how to get there.

Will a business-plan get you funded? It did in our case, from a governmental
institution, but all the _real_ investors I met preferred two things: a
working product ready to launch and a clear financial overview of the
potential return on their investment.

~~~
skatey
A new startup should write a business plan. If nothing else you familiarize
with writing about your ideas and products on paper. With that you make a
clearer vision of where you are headed and what you want to do. I believe you
are thinking about everything everyday and all the time, but if you have to
explain it to someone, it can be easily done with a business plan. It also
shows you have read through most of the 10 points that potential investors are
looking for, so you did your homework.

No one is saying that you should make an ultimate one, its a practice to
refine it on a monthly, or semi monthly basis, depending on the pace of your
development.

And also a product by itself is great to show around, but the numbers in
business plan can also convince a lot of maybe not potential users, but
business partners and investors.

I vote for writing it just so you put all your thoughts and plans on paper and
doing iterations forward from there, I believe it's useful.

------
trizk
A business plan is an exercise to both familiarize yourself with your market
and explore your vision. It helps ensure that what you are doing is grounded
in reality and provides you with a well thought out initial trajectory. It is
not set in stone and is something you use as a loose guide to direct your
company. You can and will carefully pivot based on ongoing analysis of the
dynamics of the situation in the trenches. Although it is of more benefit to
you and your company than to anyone else, it certainly helps show that you are
on top of your game.

~~~
throw-away
To be honest, I am not at the top of my game in that sense and no one should
expect me to be at this stage. Enough data doesn't exist to make good guesses
now. Generating it is exactly why I am approaching an angel and trying to get
to demo and beta.

~~~
andrewce
Then figure out, in terms of expenses and whatnot, what you'll need to get to
demo and beta and beyond (should this prove feasible).

From there, it gets trickier, but if you've built a good product that relieves
some need without causing too much additional pain, you'll (possibly/probably)
be fine.

Shouldn't data exist in the form of direct competitors? If there aren't any,
then does this market exist? (It's entirely possible that it does, and no one
but you sees it yet).

Data should also exist in the form of knowing roughly how many people could
benefit from your product (and who might consider it a step up). If you're
basing this on a market need, then that population should be at least a
somewhat knowable quantity.

~~~
throw-away
Oh, I was expecting a more general discussion about business plans so I didn't
put in too many details. I have talked to quite a few customers during our
customer dev and some of them really like the idea. They think this innovation
will increase their revenue but no one is sure by how much (and there is of
course the risk that we are all wrong about it or the idea needs pivoting
before it does that). It also involves a little bit of hardware so I need
about the amount of money an average yc company gets from yc to get to the
demo from here. I can do some other somewhat related projects to slowly raise
that money but that is just wasting time. Ideally I should just get on it and
get the demo out and deployed. Once we see what effect if at all it has on our
customer's sales and how much it cost us to get that, we can iterate, price,
figure out the revenue and generally write a business plan we could honour.

So, basically my angel's roi is not clear and a convertible note with a
reasonable discount sounds ideal but the system here is the system and I don't
want to waste time fighting it. I will put in a business plan to get talking
to the right guys and then try and convince the right angel to ignore it and
do a convertible note and hopefully all will be well in the world again. This
will have the unfortunate side effect of polluting my mind with fake figures
and expectations which I wish I could avoid but that's just part of the game
at the moment.

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stevejalim
At the risk of sounding incredibly patronising... re: "I will make up
something." If this means you'll hack together some kind of bullsh_t business
plan just to keep people happy, I'd be _very_ careful who I actually showed it
to. They'll be taking that plan as what your genuine intentions, expectations
and forecasts are, which may well not match the reality of what you are
actually doing. If money's at all linked to a BS business plan, you're in for
a world of hurt.

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biznessapps
I think a business plan is required almost immediately. It's just the size
that differentiates. If it's for yourself, a single page or paragraph can do.
It just helps founders focus on what they're trying to do. For me personally,
it helps. If your looking for funding, then of coarse a larger business plan
will be needed. I really think it just depends on the person or the situation.
But like I said for me personally, I like to map my ideas on paper and have it
easily read by others.

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amorphid
A startup founder in San Francisco told me that if an early stage investor
needs a business plan, it's a really lame investor.

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Asa-Nisse
When you're in business class.

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shareme
It should be re-named Customer Plan!

Imagine yourself in a room full of potential customers. Describe the product
to them and why they may need it making sure to anticipate their questions
before they are asked , etc.

That is the first part. The second part is imagine the same room full of
investors. Now expand the first part by describing how the business model to
bring it into the world works.

Do not think of it was along plan made by some 500 fortune company. Think of
it as a conversation about how your business works and will work.

The hardest part will be the model if there are very few competitors or no
competitors. Its not a daunting challenge but a chance for you to take control
and write the story.

