

Are Business Plans a Waste of Time? - dpapathanasiou
http://online.wsj.com/article/SB10001424052748703312504575141832683785168.html?mod=WSJ_hpp_sections_smallbusiness

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michael_dorfman
It's very hard to argue with this:

 _"Now I'm not suggesting that, just because your company needs a business
plan, you necessarily need to hire a high-priced MBA or consultant to write
it. What I am advising is that you take the time to map out your strategy in
words and numbers so that you can figure out for yourself where you want your
business to go and how you're going to get there. You'll be glad you did."_

~~~
patio11
If I'm going to sit down and spend a few hours writing a work of fiction, mine
will have a dragon in it.

I can't even begin to describe how many things I "knew" were wrong, and
moreover were so disastrously wrong that if I had been committed to them would
probably have killed the business. In addition, the things that have really
helped me out were not even on my radar screen when I started.

~~~
michael_dorfman
I don't think that writing a business plan implies being "committed" to it, or
sacrificing agility, nor does it mean putting away the radar screen once the
plan is written.

Eisenhower famously found that "that plans are useless, but planning is
indispensable." And for many people, the act of writing things down
facilitates the process of analysis.

I think that history has shown that you, Patrick, have a perpetually up-to-
date mental business plan available to you in a non-written form;
unfortunately, not everybody is able to do the necessary calculations in RAM.

~~~
patio11
So in a business plan you might do something like, e.g., crunch some numbers
to guess market size, right? Let's see what happened when I tried that, using
the facts and model available to me in mid-2006:

[http://www.kalzumeus.com/2006/06/29/guestimating-market-
size...](http://www.kalzumeus.com/2006/06/29/guestimating-market-size/)

I analyzed, alright. The conclusion I came to -- total addressable market size
of 1,500 -- is so ludicrously wrong that it embarrasses me. For added irony,
note how I express skepticism that I would actually be able to sell _as many
as_ 1,500 copies.

On the plus side that blog post probably took me twenty minutes to write and I
never actually acted upon it. (By, for example, shelving the software as not
being lucrative enough -- I mean, _I did the math_ , clearly it was doomed as
a moneymaking proposition.) I don't think most business plans are that cheap
and I don't think most folks promptly set fire to them after printing.

~~~
revorad
From this page - <http://www.bingocardcreator.com/stats/sales-by-month> \-
your total sales to date are around $76,700. At $30 a piece, that's ~2500
copies sold. That's not so bad I think, considering you arrived at your
estimate of 1500 by pulling quite a few percentages "out of your
hindquarters".

~~~
tptacek
He came up with a _TAM_ of 1500, not a sales projection of 1500. Normal
products capture small fractions of their total addressible market.

~~~
revorad
But if you know there are other products in your space, how can you ignore
those numbers when you come up with a TAM? Surely, he didn't _invent_ bingo
software?

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ccc3
Increasingly it seems that "entrepreneurship" is becoming synonymous with
"internet software startup," which I find very troubling. It's critically
important to recognize that web startups are in a unique position compared to
almost every other type of business.

In a web startup it can often take roughly the same amount of time to make a
first version of the product as it would to write a business plan. When time
to make a product or a plan are equal, the relevant question becomes obvious:
Will I learn more from making and testing V1 or from making a business plan?
But there are very few other business categories where there is parity between
the resources required to write the business plan and the resources required
to create the product. For example, I work on electro-mechanical systems which
often have multi-year development cycles. In our case the relative cost of a
business plan is very low, even if we only gain 10-20% additional knowledge
about the venture.

The value of a business plan is also likely to be tied to the volatility of
the market that the business is entering. Web-based businesses are outliers in
terms of market stability as well. Given how quickly the web is changing, a
plan would likely contain outdated information before it was even completed.
But if you're starting a restaurant the costs are much more stable and there's
no reason you couldn't figure them out before spending any money.

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wmeredith
Business plans are only as much a waste of time as any other sort of plan is.
Yes, things change; that doesn't mean you shouldn't think out your strategy. I
think a more important thing to say would be that _inflexible business
planning is a waste of time_. But that's not good link bait. In fact, it's so
well known it's pretty much just a platitude. (Maybe I'm onto something here;
reword platitudes into controversies and blog...)

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replicatorblog
She says:

"Slick slide decks with little behind them rarely get funded."

Sequoia says:

"We like business plans that present a lot of information in as few words as
possible. The following business plan format, within 15-20 slides, is all
that's needed"

I'm sure it varies by industry, but I know more successful people who followed
Sequoia's business plan strategy over hers.

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JangoSteve
Business plan? Maybe a waste of time. Executive summary (i.e. ~5 page-
equivalent of a business plan)? Well worth it. But the value is in writing it,
not in having it. At the very least, write it and then throw it away so that
you don't get tunnel vision. Definitely don't go trying to farm that part out.

I hear a lot of people say they don't have any sort of executive summary or
formal plan, because they think it's a waste of time. That's a convenient
excuse to build something without having to think it through. That's fine if
you're just building it because you enjoy it, but don't try convincing me it's
a serious business.

On the flip side, I've also seen plenty of "idea" people who have only a
business plan and nothing more, and then they spend all of their time trying
to find someone to build it for them. That's even worse, because at least the
builders, though they may not have a viable business, have something of value
to show for their work.

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GavinB
Making a bunch of guess about market size and revenue in five years is pretty
much a waste of time. That doesn't mean that you don't need to plan. You want
to have everyone in agreement about a few key points:

What product are we making? Who is paying for it, and how? What is our
marketing plan? What is our budget and what are our costs? How long is our
runway? What is our attitude towards future acquisition and investment?

Writing these things down can be a worthwhile exercise. If nothing else, it
will get the founders considering the issues.

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mikeryan
I have a business plan for my small services business. It was a bit of a
twofer - I used it as a final project for my MBA as well.

I've never shown it to any investors, but the process of doing it was pretty
invaluable. I learned so much more about my industry, the competitive
landscape and gained a real appreciation for my costs and potential cash
flows. I think there's a ton to be gained from the process of writing a plan
(even a simple 10 page plan) almost moreso then the plan itself.

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macco
Short answer: I don't think so.

Longer answer: Business plans are valuable instruments. Their size and their
form can differ - it is a difference to launch a web service or a biotect
company. The first you can start with little money and your personal time -
little plan, maybe only a few ideas on a napkin. The latter needs tremendous
amount of money, maybe billions - big plan, over 100 pages. IMO a business
plan is a strategy instrument, that like any other strategy has to be adjusted
the whole time. Maybe it is better to not write a business plan, but to
develop a business plan - like you do with your software!

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barnaby
Yes.

I wrote a biz plan and raised funding, then learned NOBODY read it. Focus on
the demo and the slideshow, skip the biz plan.

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c00p3r
Yes, If they being written by amateurs like coders or cooks and no if they
being written by experienced and trained practitioner like an acting business
executives. Coders should code, executives execute. =)

~~~
c00p3r
All the down-voters never have read a business plan written by coders. =)

~~~
olefoo
Apparently the number of posters on this board who are both technically and
managerially accomplished escapes you. People are not their labels, someone
who codes is not necessarily a coder. Programming is a human activity, and
most business people do things that look like programming even if it's only
within the confines of their favorite spreadsheet environment.

