Don’t write a business plan, do this instead
While scanning Linkedin the other day, our team stumbled upon this awesome article written by Townfolio user Jon Sookocheff, a Development Officer at Invest Medicine Hat (View Townfolio), originally posted in the Medicine Hat News. This message greatly resonates with us so we wanted to re-share this post
Last week, I was called into a meeting to review a startup company’s business plan, in order to help determine a series of next steps.
The startup was a potentially disruptive new entrant into the recycling business and the business plan was a massive whopper, 98 pages of charts and figures pulled from databases and journals, a fantastic document that outlined company processes and procedures complete with an organizational chart, a strategic marketing plan, and, of course, an impeccable set of five-year financials.
As far as business plans go, it was perfect. Except for one small problem: A startup business plan never survives first contact with its customers.
And therein lies the rub. For reasons I don’t yet fully understand, common knowledge says that if you want to start a business, you have to write a business plan. And yet, for the vast majority of new business ventures, the opposite holds true. Thanks to the growing science called entrepreneurial management, we now know that if you want to start a business, you don’t need a business plan, you need a customer.
In the words of Steve Blank, the intellectual founder of entrepreneurial management, a startup company is not a small version of a large company. Rather, a startup company is a temporary organization in search of a scalable, repeatable, profitable business model.
Let’s say you want to start a ketchup company. You could write a business plan that has you competing head to head with Heinz. But unless you have tens of millions of dollars to lose, writing a startup business plan along these lines is a waste of time at least, counterproductive at worst.
According to the tenets of entrepreneurial management, it is much better to make some ketchup in your kitchen, head on down to the local farmer’s market, and sell your product to living, breathing customers. The feedback you gain will be worth its weight in gold.
After a couple of years at the farmer’s market, you’ll find yourself in a much better position to write your business plan, finance your dream, and open your provincially inspected food processing plant. You’ll have the customer base you need to take the risk and go big.
Indeed, it isn’t until after a business model has been discovered, through the process of customer development, that a startup transitions into an operational business, at which point a formal business plan is recommended.
I realize this sounds crazy, but a startup doesn’t need a business plan. A startup needs a customer. Someone with an interest in buying what’s for sale. Someone who is willing to sign on in spite of the risk associated with working alongside the startup. Someone who is willing to pay for the privilege of co-creating the startup and sharing in its long-term success.
So the next time you feel like starting a business, don’t write a business plan. Get out there and find a customer instead.
Jon Sookocheff is an associate with RAMECO Consulting Group, lead consultant with Invest Medicine Hat, and community manager at Compass Cowork Space. He can be reached at 403–905–0092.
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