If you are starting a new company or creating a new business within an existing company that is truly unique in the market place … my recommendation is to NOT have a business plan.
NO, I am NOT advocating a “see what sticks” approach.
A truly new and innovative business cannot be “planned” in the first 12-18 months. Talk to any successful company that pioneered a disruptive/innovative business model … I bet you they preserve their 1st year business plan as a symbol of how clueless their planning was and how they grew in spite of the plan. (If some one says they hit their plan +/- 20%, you want to investigate if it was truly disruptive/unique)
Let’s see … what a typical investor or CFO expects from a business plan:
– Predict P&L with +/- 20% accuracy for the next 12-18 months … to manage investments and cash flow
– Link sales projections with market potential and market share … so they are “realistic”
– Pin you down to certain revenue targets and manage you (ab)using those
– Assume you will a seasoned player of corporate budget games … (where budgets are created to earn high bonus irrespective of true success or failure)
All of the above objectives will distract the leadership team of a new company and send them off in the wrong direction.
So, if you have built a business plan for your new business … be afraid.
Traditional business plans are useless. Instead a new business should “plan to learn what value proposition creates loyal and profitable customers”.
Sure, a new business can be valuable enough to be sold at a high valuation for building any one of the three things I listed … “value proposition”, “loyal customers” and “profitable customers”. But, my recommendation on what to focus in the first 12-18 months for a sustainable business model in a truly unique business still holds.
(To be continued)
Sridhar Turaga's blog 