Your Business Plan can be Your Best Friend or Your Worst Enemy

Your Business Plan can be Your Best Friend or Your Worst Enemy

            In the near future young entrepreneurs probably won’t even prepare formal business plans because they take too much time and they’re generally out of date immediately upon delivery. That’s just a measure of how fast things are changing in today’s hyper-competitive global marketplace.

In fact, personally, I’d rather be sent a demo URL and/or a prototype (minimum viable product) than a 50 page business plan (which I’m not gonna read in any case) because showing me what you’ve done beats telling me what you’re gonna do by a country mile. If you’ve got it, flaunt it. If not, come back when you do.

Given the ease of entry into most new markets, the growth of lean start-ups, and the relatively insignificant costs of most underlying technologies, the basic threshold for your product or service to be taken seriously by investors, vendor/partners or even prospective key employees has been raised significantly. Talk and type are cheap – show me something concrete that differentiates your business from the 40 other wanna-bes in the same space who also have good ideas.

But, by the way, the fact that a good solid business plan is less critical to the funding process and to the outside world in general these days doesn’t mean that it’s not a crucial document for you and your business. One of the great lines in Hollywood about screenplays goes like this: “the screenplay isn’t always the movie that gets made, but it’s what gets the movie made”. So you probably still need to go thru the drill to get some early funding, but it’s ultimately how you use your plan in your business and with your team that’s really critical.

Your plan’s value will depend entirely on how you develop and employ it – it can be a roadmap or a roadblock. At any moment in time, your business plan reflects your best informed guess at the future – it’s an educated guess and not the gospel.  And it’s going to change a million times as you progress because that’s what building a business is really all about – it’s evolving and advancing a central idea through continually changing circumstances.

You should use a business plan as a tool and a starting point to recognize and measure changes (so that you can react to them and adjust your actions accordingly) and not as an operating manual to run your business. It’s not a cookbook that you follow blindly as if it were set in stone. There’s a lot to be said for consistency in some cases, but trying to stick to a plan that was written in the past assumes that you’ve learned nothing in the ensuing time or from the unforeseen events that you’ve encountered. In fact, in times of rapid change, your past experience may be your worst enemy.

One of the greatest business shifts in recent times was quite a surprise to the public when it was announced. In March, 2012, the Encyclopedia Britannica announced that, after 244 years (but only 11 years after the founding of Wikipedia), it was discontinuing the publication of its print edition. At its peak, 120,000 hard-cover sets of the books were sold each year. But, no one at EB was really complaining because, and here’s the shocker and the surprise, the print editions at the time of the announcement accounted for LESS than 1% of their revenue. And instead of those 120,000 physical sets, about 500,000 households were now paying an annual fee for an online subscription which represented about 15% of EB’s revenue. And the lion’s share of their revenue came from the migration to and the ongoing sale of curriculum products (math, science, English, etc.) to customers around the world. They had quietly and quite efficiently responded to the entry of aggressive new competition and the advent of new low-cost delivery systems by changing their entire centuries-old business in less than a decade to a new, agile player in the information marketplace rather than the book market.

Too many businesses run into serious problems because they waste time trying to make the circumstances they find themselves in fit their plan instead of changing the plan to adapt to and respond to the new conditions around them. You can’t become so reliant on the numbers and assumptions in your plan that you lose sight of the facts on the ground and in the marketplace.  The fact is that the longer you benchmark or measure your progress to an irrelevant or outdated standard, the more time you waste and the more ground you give up to the competition.

A model or plan doesn’t necessarily get you to the truth – eventually the “math” stalls out and something more human and personal takes over – this is what makes the final difference between success and failure – call it intuition or faith or just the unstoppable courage of your convictions – the fact is that great entrepreneurs are pioneers and they embrace change so early in the process that their decisions will never be totally justifiable by the numbers. It’s the art of drawing sufficient conclusions from insufficient premises.

PP:  “You Get What You Work for, Not What You Wish for”