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Apr 12

The Business Plan Is A Tool Not The End Result

A common mistake made by startups is to believe they have to write a 30 page business plan before doing anything (see blog postings Should you write a business plan – Part 1? and Should you write a business plan – Part 2?). And with so much invested in a plan like this, there’s a tendency to focus on adhering to the plan rather than focusing on building a successful business.

This may sound contradictory, i.e., it sounds like I’m saying don’t follow the business plan if you want a successful business. Of course this is not what I’m saying. What I’m saying is that for the business plan to represent a successful business model, it needs to be revised regularly to include what you are learning as you move forward with your business.

On many occasions KENOVA meet startups, usually 1 to 2 years old, that are having problems building traction with customers and investors. After investigation we find they are being persistent in the execution of their business plan, which is 1 to 2 years old. In most cases we’ve pointed out that the business plan is based on a flawed business model and needs changing, usually via a pivot. Unfortunately, too often they refuse to take our advice. Why? Because they are convinced the plan is good and the world just needs to catch up. Unfortunately without exceptions this is the wrong conclusion!

We always say the word 'startup' is a metaphor for learning, which means as a startup entrepreneur you should be measuring the results of your activities, especially in regards to customers, and recalibrating your business in light of what you learn. In other words, when you try something and you’re not getting the results you hoped, you should try something else.

This is especially important in the early stages of the startup, i.e., the first 1 to 2 years. Also known as test and measure, the practicing of trying something different if something isn't working should be at least a once a month event. During these informative years this approach should be applied to the business / revenue model(s), solution / product(s) and pricing.

The learning should then be translated into updates in the business plan. So, as in the principles of Agile Project Management, the end result is what counts, not the plan. So remember, the business plan is simply a communication tool to express to others your idea of a successful business; the successful business IS the most important artifact.


See the One Page Business Hypothesis (free online business plan template) to build the best initial business plan.

 

"This article may not be reproduced in whole or part without including the name of the author (James Naylor) and an acknowledgement of the fact the article was originally published in Shoestring Advice for Technology Startups (http://www.KENOVATech.com/blog). Any other use of this material is unauthorized and is a violation of law."

 

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