As it turns out, December is National Write A Business Plan Month, which I will confess to not knowing was a thing beforehand. While it may be one of the lesser known end of year holidays, it’s one deserving of attention and even a little fanfare, particularly for up-and-coming and would-be entrepreneurs. So in the grandest tradition of this venerable holiday, let’s take a moment and think about what makes a business plan work. This column has always been primarily focused on talking about the workplace and business issues that women confront as they progress through their careers, from navigating boys clubs to pregnancy discrimination to VC funding disparities to the She-cession, but there may be no more pressing topic than how women can create their own success, wield economic power, and make their mark by starting their own businesses. It’s been said in this space repeatedly: there is no greater predictor of women’s rights than women’s financial independence. So, with that in mind, let’s talk about the bedrock of starting a business: writing a business plan.
Now, this isn’t going to be a step-by-step guide or an outline you can fill in; goodness knows the internet is already chock full of them (I checked), and there’s little value in dumping yet more identical content on the web, save for the presumed clicks it might generate. So instead, let’s talk about business plans in a larger sense: what are they for?
American broadcast journalist Barbara Walters eats a sandwich as she works at her desk, New York, … [+]
The first thing a business plan needs to accomplish is to actually justify the existence of the business to the person writing it: you, presumably. Lots of plans are, in reality, little more than hyperbolic fantasies: we’re going to change the world, we’re going to make billions of dollars, everyone wants what we’re going to do, but that’s not a stable foundation on which to build your business. You need to challenge your assumptions when putting a business plan together and actually think through the nuts and bolts of what it’s going to take to run this business profitably. It’s not a mission statement or a vision statement. It’s a plan, and an important opportunity to evaluate your own ideas. What revenue streams can you expect? What expenses? What processes go into producing the product or service? Can those processes be paid for with the revenue stream, either immediately or down the line? Is there a market for this, and if so, what is it? Who else is operating in that space, and how can you do it better?
Answering these questions means asking them sincerely and from a position of skepticism. You should doubt your own plan, because if you don’t, you’re liable to overlook important details or gloss over them with the assumption that the pieces are all implied or that things will sort themselves out. They won’t. You have to figure it out first. Find the holes in your plan and fill them. If you can’t convince yourself that this is a viable strategy, you have no business trying to convince others. If you need evidence of that, look no further than Elizabeth Holmes and Theranos. Whatever plan she may have had certainly never answered the core question of what the company would do if the proposed technology wasn’t feasible, and remarkably few people asked. Unable to separate herself from the vision enough to squarely face reality, she sunk deeper into a hole of fraud and debt and ultimately prison. That’s a dramatic example, but it’s critical to underline the point of a business plan: sure, you might get lucky, but you can’t assume you will. So go in knowing exactly how to get from A to B to C, or the odds are you won’t even get off the ground.
It’s one of the biggest downsides of the last couple of decades, especially on the tech side, this sense that companies need to be driven by grand visions and high ideals more than by the meat and potatoes of actually building a business, something the “vision guys” like to leave to the “bean counters,” as if you won’t ever run out of beans. It’s the problem that gave us a decade of failed unicorn startups and spectacular collapses like WeWork and the aforementioned Theranos. It’s also something driven by a culture focused on exit strategies more than creating sustainable businesses; when the goal is to pump up valuation, sell to Google, cut and run, and go do it again somewhere else, there’s not a lot of incentive to figure out how the business is actually going to work. It’s not a plan that works. It’s not even really a plan at all.
A business plan has value beyond convincing funding sources to pony up the cash; it’s also an incredibly valuable recruitment tool that can show potential team members that this isn’t a flash in the pan, that there is a strategy at work, and your company will be viable. Again, some people can coast on vision, but we’ve seen repeatedly where that train stops: Ruinsville, USA. In the wake of the last few years, investors, talent, and other stakeholders are much more likely to interrogate your ideas than take them on your word alone. You need to give them something of substance to think about, especially in the earliest stages.
It’s not fun to poke holes in your own ideas, and it’s not fun writing a business plan. It involves identifying your blind spots, correcting your assumptions, and making an honest assessment of your capabilities—things that are challenging and even uncomfortable to do. The first person you need to convince is yourself, but that only works if you don’t go in assuming infallibility.
Build more wisely than quickly, and stay on solid ground.