At last night’s Digital Media Marketing class, one of our guest lecturers, JB Rudelle, serial entrepreneur and current CEO of criteo.com, gave his perspective on startup business plans: they’re good for two things, self-assurance, and convincing other people to leave their comfy jobs and join your cause.
This sentiment very much reflects the presentation given by Eric Hippeau a few weeks back – the pitch that intrigues Eric is simple, understandable, answers a few basic questions, and that’s it. With regards to disruptive innovation, it seems perhaps there’s a paradigm shift with respect to the use of business plans.
What’s in a Business Plan?
A startup’s business plan is supposed to detail the vision, value proposition, revenue and expense models for the next 5+ years, competitive (SWOT) analysis, management team resumes, and operational details that when combined define how a new company is going to launch.
In my limited experience (case studies and Stern group projects), the business plan is a fairly lengthy and involved document. It’s one of those reports where you fudge the margins and flood with diagrams in a hope it then meets the minimum page requirement.
Plan vs Pitch
The business plan is often used to support a pitch for venture capital financing, for example. Yet, as noted, it seems that more often than not, common wisdom dictates that the business plan is a tool for the entrepreneur, more than anything else. Writing a comprehensive plan requires answering the tough questions, and having such a plan is evidence that those questions have been considered, even if the answers might be crap. Consider noted entrepreneur Steve Blank’s comments on business plans: “they’re a waste of time.” Stern Marketing Professor Jeffrey Carr once noted to me that having a business plan is all well and good, but having it just allows for checking off that box that says you have it – that you, the entrepreneur, have done your homework.
I wonder whether things have changed since 2005, or whether this perspective is held by just a minority of the VCs in the industry. There’s so much literature and in the news as of late similar to Ready, Fire, Aim, that maybe in the new attention deficit era of modern technology, taking the time to write or read a lengthy business plan is too disruptive to the idea itself; that is, by the time the analysis is done, someone else who skipped the writeup has already beaten you to market (though whether it’s a with a better product is a different but very much related question).
