Sound Advice: Kawasaki on Business Plans (or the lack thereof)

business plan

One of my (and many others) favorite bloggers is Guy Kawasaki. He was one of the early Apple employees, and was charged with evangelizing all things Apple – did a good job I’d say.

He’s since moved on to the world of VC, and – fortunately for us – is very candid and transparent about what it takes to not only to get the attention of investors, but – more importantly – he makes clear that success in getting VC attention/money is reliant upon the same things that are required for success in business. That is, among other things, one needs to have a great idea, be a great marketer, and have great strategy.

The question is, given all of the “greats” above, does one need a business plan? Well, according to Kawasaki’s blog, the answer is, maybe not.

Now before you go throwing away all of those “how to write a business plan books,” take into consideration that the main point of the post (which was drawn from a Babson College study) is not so much that you don’t need a business plan, but rather that you shouldn’t spend all of your time creating a business plan instead of going out and finding customers (evangelizing).

Additionally, says, William Bygrave, entrepreneurship professor at Babson, business plans can cause some entrepreneurs to adhere too long to a plan, at the expense of being nimble and changing with the circumstances.

Also, Bygrave states that, “unless a would-be entrepreneur needs to raise substantial startup capital from institutional investors or business angels, there is no compelling reason to write a detailed business plan.” I think the key word here is “detailed.” I believe that’s a nice way of saying, “TOO DARN LONG.” I’m a big believer that the vast majority of business plans are simply too long. If you can’t sum up your idea, and capture a reader’s interest in ten pages or so, you may not have an idea.

Taken together, the above caveats act as more of an argument for better business plans rather than no business plans. Essentially, you need a business plan for two potential reasons:
1. Because you’re looking for money. No serious investor would consider investing in someone who doesn’t have a business plan.
2. Because you need to concretize and map out the ideas that are in your head so that they can become actionable.

Of the two, I think the second is the most essential. However, this concretization and mapping out doesn’t really have to be a business plan, per se. It’s really more of a strategic plan, in which you:
1. identify your mission, vision, and values, which should then lead to
2. identifying your customers, which then leads to
3. determining your strategy to reach your customers, which then leads to
4. determining the costs involved in doing so contrasted against the income recieved from doing so (i.e. financials).

Of course, the above is an oversimplification, but it’s an outline of sorts. It’s not, however, a business plan in the conventional sense.

So, I think it’s wonderful that people like Bygrave and Kawasaki are creating a dialog about business plans. Business plans certainly need to be reconsidered in light of the fact that their efficacy seems to be questionable a lot of the time.

My only fear is that people will believe that they don’t need any kind of plan. It’s that type of thinking that is largely responsible for getting the record business in the state it’s in.

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