Bounding the Unknown Unknows in Startups
Every once in awhile, I receive a FedEx from an entrepreneur I haven't met. Inevitably, this mail contains a modern rarity - a business plan. Ten to twenty pages describing the idea, the genesis, the business model, the team and its structure, customer acquisition strategy, sales model and other key details of the business. A plan for how to start a company, and a defense of the idea.
Business plans used to be de rigeur, an essential part of starting a company and raising capital. Over the last decade or so, business plans have declined in importance, replaced by a Keynote presentation that dazzles with high resolution images and Helvetica Neue Light font.
There are many good reasons for the transition to more visual sales pitches for companies. The most important: Founders can engender excitement with them in a way a 20 page comb-bound document simply can't.
But in that transition, we've lost something - the act of reflecting upon all the different aspects of building a company.
Why does an opportunity exist now to create this company? How quickly can the business grow revenue? How much capital will the company require to attain different milestones? What are the competitive axes and who are my competitors? How much gross margin can the business generate?
In addition, a business plan makes plain all the current team's assumptions. Its creation is the best time to discuss, debate and argue the core strategy of the company.
As a former product manager, I understand the allure the perfect product mirage. All I need is a great product and the rest will take care of itself. For a few companies, that might be the case.
But most won't enjoy that kind of fortune. In which case, a well researched plan bounds the unknown unknowns that inevitably will surprise founders as the business evolves.
?? Tech whisperer, helping companies launch ??
7 年Those features still exist. They are simply split into other documents like the Manifesto and IM. You still have to present all the same data but you have to dazzle the investor first. My least favourite phrase these days is TL;DR.
stay nimble and keep your elbows in.
III, CMU SV : : Author: Leadership Lessons with The Beatles : : Cofounder, Retail Solutions (Now part of Circana) : : Mentor : : Author, "Roots and Wings": : DTM : : Non-Profit Board Experience
7 年Well said! I would add that the "bounding of the unknown unknowns" should be about the "most likely to happen" and not some remote possibilities, and a plan to address them.
Ironically, today if you tell prospective investors about all of the pitfalls and challenges you might run into, they're much less likely to invest. Ten years ago, knowing a lot about your market to anticipate challenges and being able to paint an accurate picture was a sign that you had what it took to succeed and increased your chances of closing a round.