Why business plans are a waste of time but planning isn’t
Every experienced (internet) entrepreneur nowadays knows that business plans in itself are pretty useless. Usually investors are also getting it and a (long) business plan is not required for talking to them.
Especially for early startups that holds very true. One obvious reason is that early startups are still trying to figure out what their business is. Consequently the business idea itself might very well be changing quickly (pivot would be the appropriate buzz term here).
However, when you are confidently in between pivots and want to raise money, get advisors or whatever, it often is useful to have a short deck. Its purpose is to explain to others which problem you are solving, how you are going to solve it and why you are the right team for the job. Especially when approaching VCs this is usually a pitch/sales deck to get them “dreaming” about how big and financially interesting your venture could get. Also it is a great basis for discussion.
However, a business plans value diminishes as fast as that of a weekly magazine. It doesn’t usually hold much long-term value and quickly becomes outdated and inaccurate. Everybody around the table knows that. If not, you are talking to the wrong people.
When business plans are crap can’t I just skip the whole planning part altogether and just execute?
Some people – especially from the Lean Startup crowd – might preach according to the Nike slogan “Just do it”. And I agree, execution is truly important. However, planning is a very valuable process. It gets you to think things through.
I consider planning to be more than just milestone or resource planning. To me planning has to do with the thinking part of building a startup. Typical questions are: Am I on the right track? Where do I go from here?
When starting a new startup, planning is about “where to go”. Even more than that. The first and most important question to answer in a “planning session” is: Do I really want to go there? Is this worth spending time and effort on?
It’s not hard to do something in life. There are endless possibilities. The hard part is deciding which one to pursue. In order to do that, planning (aka thinking) is invaluable.