Well said. Business plans suck time and energy. They are usually required by time wasters (investors you should avoid anyway) and waste valuable time (when you could be iterating).
Perhaps not a Business Plan, but spending a day planning how you'll do business is a good idea and not one that "sucks time and energy".
Let's say [as a concrete example] you're going to open a hairdresser. You need to sit down and work out your fixed start up costs (shopfitting, deposits, licenses), your monthly outgoings (electricity, rent), and what you can expect in income. You need to know the location, the foot-fall, the number of employees, and add in contingencies.
All of that is going to take you a day or so to work out.
This is not a "Business Plan"(TM) with exponentially increasing graphs and 5 year projections, but it's a sound concrete Plan for a Business which lets you know if it's worthwhile starting off.
This is not a high tech Hacker News example, but much of the same fundamentals apply for any business or project.
Absolutely agree that working out cash flow is critical if you are going to spend significant amounts of cash, otherwise you are in danger of breaking the golden rule.
However, with your hairdresser example you can get started and JFDI by working freelance at another salon or doing home visits.
I think the problem with business plans is the "plan", as 37signals would say, a business plan is a business guess. What you're talking about is actual hard numbers that are relevant in the immediate future. Business guesses are pointless, mainly because, most of the time, you never ever end up where you "planned" you were going.
The trouble with the word startup is that it means different things to different people. Taken literally, it could mean any company which has just started up. That's not what the word usually means when used on HN, of course. I recall this pg essay http://www.paulgraham.com/startupfunding.html which notes the difference between being a band that aims to sell a million copies of a song versus a band that is content to play at weddings and bar mitzvahs. A hairdresser is more likely to be the latter than the former. It can still be a startup but it's not a "Startup".
I'd still take the position that a hairdresser could be a Startup (as well as a startup). There are a few well known brands that I expect originated in that fashion(!) and there's always room for further innovation.
"... I'd still take the position that a hairdresser could be a Startup (as well as a startup). ..."
I doubt it. Calling a hairdresser a Startup, is about as convincing as saying Detroit innovates in transport with efficient engine technology.
The key difference, despite its past, Detroit can create new innovative hi-tech products if requried. [0] I dare say it would be harder for hairdressers around the world to do so in a business that is not technology based.
Follow the Inspiring Stories under Getting Inspiration - most are not tech-startup focused. Also look at 'About Us' and read the bios. I'd argue that 'startup' for the government relates to any new small business, not just a tech/web focused one.
In our local HN echo-chamber terminology maybe not, but it definitely does count as one in the world that the original government backed site is targeting. In that case, "startup" is synonymous with "new business" and I personally don't disagree at all.
To steal Steve Blank's terminology, that's a business model, not a business plan. Every business has a model explicit or not. Not every business needs an explicit plan.
Totally. No matter how hard the government tries to help (#startupbritain, tech city east or whatever trendy name it is now) it keeps on sounding to me as a political pro on something that has already been happening for time. I mean come on David Cameron's face on the home page, what's that about?
It's interesting that Startup Britain had real entrepreneurs help. I'm interested to know how much though, did they actually propose the plan of what is being done or just had their names associated with it?
I guess i'm a little biased as I've ran startups and obtained the information they try to put across from better sources and what they offer for saving money means nothing for a tech startup perhaps others might find it useful. But things like Appsumo's recent lean startup bundle really showed how to save money or things like Amazon's free tier EC2 hosting.
The only thing that looks interesting to me would perhaps be the mentoring marketplace and the pledge matchmaker if they can make it work. Some of the other new features are already being done, why create yet another place to do this.
'best of web' just to go to delicious and search for the tag startups
'A calendar of enterprise related events' ha, upcoming? meetup? Lanyrd?
I used to spend about 3 days every year writing a business plan. Everyone used to tell me how much I need one to ensure the direction of the company is set.
It's 80% bollocks, if you'll pardon my french. What you need to do is ship, measure and respond. The numbers in a business plan never reflect reality and there's too many things that you wouldn't see coming that'll affect you.
Where business plans come in useful is in getting your idea down and making sure you've done everything to confirm that it's a viable startup. Once you're up and running you should be reviewing what you're doing on a regular basis - you don't need a business plan for that.
I beg to differ, my most successful project to date has been a website I shipped for the sake of shipping, didn't ask anyone if they wanted it, didn't even think too much before doing it. Anyone I ask now whether they want it, they're quick to claim it's a waste of time that nobody wants to use, and yet those same people just can't get their hands off.
It probably all depends on opportunity cost. If it will take you three months to build something shippable, by all means, be damn sure somebody wants it. When the cost is not sleeping for two nights ... meh, just do it.
I expected anyone to tacitly understand that you of course are building something in the first place that you believe has a market, and have _some_ evidence for that.
But given that, I stand by the above. You are better off having a product you can iterate on based on real world feedback, rather than a theoretical construct that hasn't been tested.
As rwmj mentions below - avoiding the sums that sanity check the business could be an expensive mistake. Doing the sums is easy (and if you can't make up rough numbers, you ought to ask if you really know your domain).
I'm not advocating a full on business plan at the start - just a day spent roughing out the key numbers. Are there enough customers? What do they pay competitors? How much must you sell to break even? Do you know where your customers hang out?
That said - if your business has a significant cost of failure (e.g. buying big plant equipment, renting a lease, manufacturing, big design costs etc) then not doing planning is probably rather foolhardy.
What you need to do is research, ship, measure and respond.
FTFY. Research first, and make damn sure there's a viable market there before you sink time into the idea. This is essentially what a business plan is, a documented view of the market and how you're going to make money from it. Without it you're not really building a business…you're building an app.
> Research first, and make damn sure there's a viable market there before you sink time into the idea. This is essentially what a business plan is, a documented view of the market and how you're going to make money from it.
I'd disagree on a number of points. A business plan is something that gives you an idea of where you've been, where you're headed and what the strategic objectives over the next period (normally a year) are going to be, who's responsible and how that will be executed. For a first year, it's largely a case of documenting what you're going to do and how you're going to do it, feeding in from market analysis and all the other researchy stuff before you start.
The research is a fundamental part of shipping - you can split it out if you want, I don't, mainly for two reasons:
1. You don't actually have a startup until you ship.
2. See 1.
Likewise, writing a business plan without a business isn't quite a fools errand, but isn't the best use of your time because at that point in time you do not have a business, and the minute you do everything will change.
It's great to do the research, in most cases it's essential, the things you're describing (view of the market and how you'll make money out of it) are things that feed into the plan and are actually more important than the plan, not the plan itself.
I think we just have different definitions of "business plan".
My 2-10 hour and often single page 'business plans' involve diving head-first into the market and finding out who I'm going to sell to, how many there are of them, what competitors I have, what the ad rates are, etc. With this basic info I can take a grounded and unbiased look into the validity of the concept. You can have the best idea in the world, but if there isn't a market for it, there's not much point in pursuing it if your goals are financially driven. "Build it and they will come" and "Build something you'd want yourself" both aren't good enough reasons alone to sink any amount of time into an idea.
What you need to do is Observe, Orient, Decide, and Act.
The OODA loop has become an important concept in both business and military strategy. According to Boyd, decision-making occurs in a recurring cycle of observe-orient-decide-act. An entity (whether an individual or an organization) that can process this cycle quickly, observing and reacting to unfolding events more rapidly than an opponent, can thereby "get inside" the opponent's decision cycle and gain the advantage.
One obvious point - startupbritain is about general startups (there's no requirement for tech-only startups on their site). @jot's jfdibritain has a decidedly tech focus, it doesn't help with e.g. manufacturing (when someone wants to make something physical), retail (regular selling/buying like most of the country are used to) or other conventional routes.
Maybe the sites aren't trying to achieve the same thing?
Even with manufacturing, you can still make a prototype and "sell" it (in the form of promised orders or the like) before committing to significant capital outlay, contracts, factories, filing patents, designing a logo, etc. There are a lot of Kickstarter projects that have done well with this approach, such as http://www.kickstarter.com/projects/danprovost/glif-iphone-4...
In retail, you can hire a concession, work out a deal to temporarily use someone else's space, or get a market stall. Anything to prove you can sell whatever it is you want to sell before committing to premises, branding, and the like.
There are cheap, scrappy ways to prove the market in most areas without significant capital outlay, unless you're into pharmaceuticals, energy, or similar areas with sky-high infrastructure or standards costs.
I agree with the sentiment of JFDI Britain, however it depends how you "JFDI" ... if you can bootstrap and do it all yourself, then fine, JFDI. However if you want to attract finance from Angels, VCs or even get loans from banks you'll need some kind of justification and that requires a business plan.
I'm a firm believer that a business plan changes as soon as you get any money (and the earlier stage the business is, the more guesswork and unrelated to reality the business plan is). However by doing a business plan, it shows you've thought about how the business is going to work.
Building a business around technology and going "we'll build it and they will come" is in the most part, complete b*llocks. You need to show that you've at least thought about how revenues will be generated, if you haven't why are you running a business. Unless you're a charity (or a not for profit) your only reason for running a business is to generate shareholder value. That may sound corny, but that's why companies have shareholders!!!
So JFDI is fine, but prove it's fine and that it's not just tech for the sake of it.
Many angels do not require a business plan and other sources (such as customers) are even easier to get money from. Few angel investors will invest in a business that has a plan and nothing else to show.
JFDI Britain is about taking the first steps. It's not focused on technology businesses. It's not about "build it and they will come". It's about getting on with creating something of value, making sure it is of value and making money from it. Once you have done that and can repeat it you have a business and you can chose to grow it however you like.
There are very few businesses that need a significant amount of cash to start but many that need it to grow.
Actually, I beg to differ. Most angels do require business plans. The only exceptions I have seen are the really smart investors particularly in the tech space.
36 comments
[ 3.0 ms ] story [ 82.1 ms ] threadLet's say [as a concrete example] you're going to open a hairdresser. You need to sit down and work out your fixed start up costs (shopfitting, deposits, licenses), your monthly outgoings (electricity, rent), and what you can expect in income. You need to know the location, the foot-fall, the number of employees, and add in contingencies.
All of that is going to take you a day or so to work out.
This is not a "Business Plan"(TM) with exponentially increasing graphs and 5 year projections, but it's a sound concrete Plan for a Business which lets you know if it's worthwhile starting off.
This is not a high tech Hacker News example, but much of the same fundamentals apply for any business or project.
However, with your hairdresser example you can get started and JFDI by working freelance at another salon or doing home visits.
I doubt it. Calling a hairdresser a Startup, is about as convincing as saying Detroit innovates in transport with efficient engine technology.
The key difference, despite its past, Detroit can create new innovative hi-tech products if requried. [0] I dare say it would be harder for hairdressers around the world to do so in a business that is not technology based.
[0] Sebastian Blanco, "Detroit 2011: Li-Ion motors says hello to first Wave sales, promises Inizio by mid-summer" http://green.autoblog.com/2011/01/11/li-ion-motors-wave-sale...
It's interesting that Startup Britain had real entrepreneurs help. I'm interested to know how much though, did they actually propose the plan of what is being done or just had their names associated with it?
I guess i'm a little biased as I've ran startups and obtained the information they try to put across from better sources and what they offer for saving money means nothing for a tech startup perhaps others might find it useful. But things like Appsumo's recent lean startup bundle really showed how to save money or things like Amazon's free tier EC2 hosting.
The only thing that looks interesting to me would perhaps be the mentoring marketplace and the pledge matchmaker if they can make it work. Some of the other new features are already being done, why create yet another place to do this. 'best of web' just to go to delicious and search for the tag startups 'A calendar of enterprise related events' ha, upcoming? meetup? Lanyrd?
It's 80% bollocks, if you'll pardon my french. What you need to do is ship, measure and respond. The numbers in a business plan never reflect reality and there's too many things that you wouldn't see coming that'll affect you.
Where business plans come in useful is in getting your idea down and making sure you've done everything to confirm that it's a viable startup. Once you're up and running you should be reviewing what you're doing on a regular basis - you don't need a business plan for that.
Coding should be done quite late, after validating the market need, that people are willing to pay, etc.
Unless your time is worthless, of course.
Because you were lucky in this instance does not make that good advice for others to follow. (I'm not saying it's bad advice either, just...)
But given that, I stand by the above. You are better off having a product you can iterate on based on real world feedback, rather than a theoretical construct that hasn't been tested.
FTFY. Research first, and make damn sure there's a viable market there before you sink time into the idea. This is essentially what a business plan is, a documented view of the market and how you're going to make money from it. Without it you're not really building a business…you're building an app.
I'd disagree on a number of points. A business plan is something that gives you an idea of where you've been, where you're headed and what the strategic objectives over the next period (normally a year) are going to be, who's responsible and how that will be executed. For a first year, it's largely a case of documenting what you're going to do and how you're going to do it, feeding in from market analysis and all the other researchy stuff before you start.
The research is a fundamental part of shipping - you can split it out if you want, I don't, mainly for two reasons:
1. You don't actually have a startup until you ship.
2. See 1.
Likewise, writing a business plan without a business isn't quite a fools errand, but isn't the best use of your time because at that point in time you do not have a business, and the minute you do everything will change.
It's great to do the research, in most cases it's essential, the things you're describing (view of the market and how you'll make money out of it) are things that feed into the plan and are actually more important than the plan, not the plan itself.
My 2-10 hour and often single page 'business plans' involve diving head-first into the market and finding out who I'm going to sell to, how many there are of them, what competitors I have, what the ad rates are, etc. With this basic info I can take a grounded and unbiased look into the validity of the concept. You can have the best idea in the world, but if there isn't a market for it, there's not much point in pursuing it if your goals are financially driven. "Build it and they will come" and "Build something you'd want yourself" both aren't good enough reasons alone to sink any amount of time into an idea.
http://en.wikipedia.org/wiki/OODA_loop
Why not create other kinds of businesses through this approach?
In retail, you can hire a concession, work out a deal to temporarily use someone else's space, or get a market stall. Anything to prove you can sell whatever it is you want to sell before committing to premises, branding, and the like.
There are cheap, scrappy ways to prove the market in most areas without significant capital outlay, unless you're into pharmaceuticals, energy, or similar areas with sky-high infrastructure or standards costs.
edit> and indeed what does it need access to my account for?
I'm a firm believer that a business plan changes as soon as you get any money (and the earlier stage the business is, the more guesswork and unrelated to reality the business plan is). However by doing a business plan, it shows you've thought about how the business is going to work.
Building a business around technology and going "we'll build it and they will come" is in the most part, complete b*llocks. You need to show that you've at least thought about how revenues will be generated, if you haven't why are you running a business. Unless you're a charity (or a not for profit) your only reason for running a business is to generate shareholder value. That may sound corny, but that's why companies have shareholders!!!
So JFDI is fine, but prove it's fine and that it's not just tech for the sake of it.
JFDI Britain is about taking the first steps. It's not focused on technology businesses. It's not about "build it and they will come". It's about getting on with creating something of value, making sure it is of value and making money from it. Once you have done that and can repeat it you have a business and you can chose to grow it however you like.
There are very few businesses that need a significant amount of cash to start but many that need it to grow.
JFDI is the proof.