Entrepreneurs Should Stop Writing Business Plans

Last week, I was asked to teach an undergrad course at DePaul in the fall called Business Plan Development. I’ve taught it several times before, the last being in 2008, and it had been one of my favorite courses to teach because it’s an elective (read: students actually want to be there).

I also enjoyed teaching it because at the time I firmly believed that business plans were an important part of the entrepreneurial process. Today, however, I’m not so sure.

  1. Industries and markets are changing so fast that business plans aren’t obsolete the moment they get printed; they can become obsolete while being written.
  2. The lean startup movement has changed the way new ventures develop. Rather than starting a company and creating a product to take to market, entrepreneurs are now going to customers with a minimal product to see if it’s even worth starting the business.
  3. Investors don’t care about business plans anymore. They may want a 5-10 slide deck or one-page summary (like the terrific ones created on Gust.com), and most importantly, to hear that you actually know all there is about the business.
  4. Many startups (especially in the web and mobile space) don’t even have a revenue model when they launch so financial projections aren’t just irrelevant, they’re impossible.

Don’t misinterpret what I’m saying. I still believe the business planning process is important, just as I did several years ago when I first wondered about the relevance of business plans. It’s just that the planning process steps, timing, and pace have changed, resulting in a need for the output to change.

In fact, the elements of a business plan force the entrepreneur to think through areas he may not have otherwise. Investors still expect entrepreneurs to have responses to many of the sections that that go into a conventional business plan. Lean startup addresses most of the items in a business plan, just in a different order and for different reasons. And once a revenue model is settled on, much of the business plan becomes extremely important.

So while the elements and process behind business plans still matter, the actual documents don’t, and I think we should stop teaching old-school business plans as a result.

But because I love challenges, I agreed to teach that course this fall, and can’t wait to do so.

4 comments

  1. Ameet Mehta (@AmeetM)

    While I somewhat agree that “business plans [become] obsolete while being written”, I believe in writing one – the process has a lot of offer. The Lean Startup Methodology fails to address many elements of the understanding the market, at a macro level – size, competition, trends etc.

    As we start our next venture, we are making a conscious decision to write a business plan, mainly to understand the space we are in, and then move forward and validate our assumptions using the lean startup methodology.

    Your Thoughts?

  2. pittrader1988

    I think there is a difference. As an entrepreneur, you need to create a road map. That road can change, but you better have an idea of where you are going. Business plans focus that. Especially the numbers-even though the numbers never add up they force the business to think about allocating resources.

    For presenting to investors, I agree, get to the point-a short slide deck is perfect. If the investors don’t get it after that, they aren’t investing. If they are excited, they are going to probe deeper-hence the first business plan…

  3. Pingback: A Recap of April Blog Posts | ramanations

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