Reason #1 – How do you research new?
Traditional business planning 101, talks about getting the market research right before you do anything else. Trouble is, how to you research new? Innovation, the mainstay of the entrepreneur’s actions, is by definition, something that does not currently exist. What was the size of the desktop computer market when Bill Gates decided to put one on every desk? He saw what did not exist which is why it was impossible to research and document.
Besides, entrepreneurial opportunities mostly emerge in markets of great turbulence and change making it nearly impossible for things to stay still long enough to be researched. Entrepreneurs gain their best market research from actually launching in a semi-test mode and then adapting to the market as it responds to their new venture’s offer.
Reason # 2 – It’s all going to change anyway
The traditional business plan asks us to sit down and plan out the next 3-5 years and describe in detail the evolving sequence of events. Those of us that have actually launched multiple new ventures know that you are flat out getting the first 3-5 month right, let alone the next 3-5 years. This was also verified by the study Professor Amarnath V. Bhide conducted into entrepreneurial firms, where he discovered that less than 14% of entrepreneurial ventures actually found their sustainable growth path on the one they expected at the outset. This revelation is contained in his book “The Origin and Evolution of New Businesses”.
Experienced entrepreneurs know that there are just too many variables in resources, market acceptances, product development and the entrepreneur themselves to predict meaningfully and in detail the traditional 3-5 year business plan’s outlook. Again, the experienced entrepreneur will rely more on their ability to adapt to the changing environment as it evolves around them, rather than carry out the detailed instructions of an operational plan fundamentally created in ignorance.
Reason # 3 – Opportunities won’t wait
Make no mistake, it is going to take you about 3-6 months to write a traditional business plan. Now, if your opportunity is prepared to wait around for you to complete that task then good, but more than likely the opportunity you are researching has already been exploited by another entrepreneur who understood that ‘timing was everything’.
Entrepreneurship is all about the trigger point where commitment is required or the opportunity is lost. Those rushing for the pen to write will soon find that their ‘window of opportunity’ is very fleeting and without the timely and pro-active action, it is lost forever.
Reason # 4 – It’s already happening anyway
If you are a serious contender for actually launching a new venture, and not just a dreamer, then in part you already have a business launch in play with your prototypes, your trial offers to in-house customers and in the gathering of your network of contacts that you have identified will get you launched.
Most entrepreneurial text books agree that over 70% of successful entrepreneurial enterprises are started by current domain experts who have directly experienced the pain of a particular problem for which they have come up with a solution. They have less need for a traditional plan because they are more than likely to use their insider knowledge and experience and strategic alliances to firstly evaluate the opportunity and then to take it to market via their highly accessible distribution channels.
Reason # 5- It’s too ridged and doesn’t represent how entrepreneur’s think
There is very little flexibility in a traditional business plan. It’s presented as a one-size-fits-all when clearly it does not. Too much of the traditional planning approach is skewed towards an existing business going forward and is not well structured for an ‘idea whose time has come’, as it is for the entrepreneurial venture. It is a corporate tool fundamentally created under a risk avoidance mind-set where as an entrepreneur’s outlook in the planning process is from a risk management one.
Reason # 6 – Entrepreneur’s know and accept the ‘affordable loss’
The ease of business entry via the internet has made the cost of being wrong of little consequence. Through the medium of eBay, on-line marketing and the like, products and services can be tried and tested in the ‘real world’ prior to any significant commitment of resources. This allows for the process of modification and adaptation of the business model to meet the market needs ‘on the fly’ and so creates a far more commercially proven business plan (proof of concept) than the traditional generally untested but written ones.
Reason # 7 – It’s a poor selling option
I am yet to see a photocopy salesperson dump the 100 page manual on the desk of a prospective buyer and think it is a Star 1 strategy for making the photocopy sale. It just would not work. Why then do we think that a 50 page traditional business plan document is going to achieve a different result. Even significant purchases that we make like buying a car, we simply want to know maybe the top 5-10 key issues, and in finding satisfaction on these we make the sale. All the while, the car’s manual remains in the glove box unread until we have well and truly driven the car from the yard.
Reason # 8 – What does it prove anyway?
Too many new venture hopefuls concentrate on creating the perfect business plan where they should be concentrating on creating the perfect cash flow. As a proof of concept tool, there are far more convincing methods that you could adopt. (A web site collecting email addresses of interested buyers for your product, a prototype already in the market under limited release, customer lists and testimonials, embedded release with a key strategic partner, customer and supplier support). It is actually very likely that the planning process is actually counter-productive for the entrepreneur because it can create a certain paralysis from too much analysis. What’s needed, and what most successful entrepreneur’s supply – is action. Doing it. Making it happen.