A relatively common question we get revolves around business plans. A good amount of our customers asks us if we can write a business plan for them, and we always respectfully decline.
I believe a startup should NOT write a business plan. It's a terrible waste of time for the founders in the early stages of the company when they should be focusing on validating their business premises.
We are going to look into why the business plan is an outdated way to approach starting a business, and how new frameworks like The Lean Startup are a much more effective way to build companies.
"A document setting out a business's future objectives and strategies for achieving them."
If you look at most business plan templates available online, you are often looking at a 20-40 page document that touches on The Opportunity, Problem, Market Size, Execution, Sales Plan, Company, Team, Financial Plan...
Well, guess what, a pitch deck touches on every single one of those topics; the difference between a pitch deck and a business plan is that a pitch deck can take a few hours to write (less than an hour if you use that a really awesome tool we've mentioned before). In contrast, a business plan will take you days and days of writing, proofreading...
An angel investor or venture capitalist evaluating a startup for a seed round is not going to sit down and read a 40-page document. They want to know that you are on the right track. They want to confirm that you have a plan to grow the business, but that doesn't need to be a 20-page document.
Any starting business is built on assumptions. On the assumption that this product or service is going to appeal to these users. The assumption that these marketing tactics are going to be effective in converting them. Yet, all of these assumptions might be wrong, and it's the CEO's job to test these assumptions fast, and if the premises incorrect, pivot the company in the right direction as fast as possible.
In the end, it's a race against time. How many iterations of your product, audience, and marketing/sales strategy can you go through before you run out of time? For a startup, time = Funding/Money.
If you had to spend two weeks putting these assumptions on paper, proofreading them, and styling that business plan, you literally wasted two weeks of precious time. You could have run two audience experiments at that time and find out right away, instead of just 'planning.'
That's my problem with business plans, in a nutshell. They take too long to write. You should spend that time validating instead of planning.
This mentality comes from the framework most startups these days abide by, laid out on The Lean Startup by Eric Ries. It's a fantastic book any entrepreneur should read, and we'll be giving away a few- so stay tuned on how to get them.
The methodology that the book proposes is the Build - Measure - Learn cycle.
- First, you BUILD an iteration of your product. That may be an MVP, a website, a version of your app or service.
- Then, you MEASURE. You throw this iteration to the world and measure its success. That may be conversion rate, sales, click-through rate. You need to understand if your premise is correct and if it has a measurable impact on your company performance.
- Finally, you LEARN. You study the results, understand if they were positive or negative, and create a new premise based on them. Once you are done with this analysis, you BUILD again.
Every key aspect of our business was built this way.
We first launched a simple landing page to figure out if people would be interested in this pitch deck, AI design product. We measured conversion rate, compared it to our expectations, and then built our next iteration, which became our first beta.
Every single marketing campaign we do is a Lean Startup product. We come up with a new campaign, "BUILD" it as fast as we can, MEASURE it, LEARN, and then improve on it.
Our last relevant iteration was our pitch deck consulting service. We had a theory that many startups who were using our product to build pitch decks would benefit from a real human assisting them. We didn't know.
Instead of running market studies or business plans, we BUILT a quick landing page, threw some traffic in there, and MEASURED results.
When I say build a landing page, this was a few-hour project. The first few leads were landing directly on my cell phone, and I used to handle both the sales, quoting, writing, and design stuff. This is as lean as you can get.
Only when we LEARNED that this business made sense, that the economics worked, and that we could scale it, we went back to BUILDING a new iteration, with a much more elegant page, sales and nurturing process.
We had the answer to this question in less time than it would have taken us to write a business plan, and that's the moral of the story.
We've also built countless lean startup experiments that have failed, by the way. But that's the point, we MEASURE fast, LEARN that we were wrong, and carry on.
A pitch deck is The Lean Startup version of a Business Plan.
To write a compelling pitch deck, you also need to have figured out your Total Addressable Market and your Go to Market Strategy. The difference is the pitch deck fulfills the purpose of pitching this to an investor without requiring the extended version.
More importantly, the reality for any company is that they are going to be wrong about their assumptions in the early stages. Their pricing might change, or their 4-page sales plan might not work at all, so they need to be able to change course as fast as possible.
On your pitch deck, you should be passionate about your expansion strategy; you should believe in it, and show your metrics to prove whether it's working or not. Still, everybody in the room knows your success will depend on your ability to come up with new strategies and deploy them faster than your competition.
Another pair of fantastic tools that can help you replace a Business Plan is the Business Model Canvas and the Lean Validation Board. Both of them can help you figure out the answers to these questions.
Make sure you can answer these key questions about your business.
Most of the companies we work with are missing one of those questions, which makes it really hard to define the type of investor they need to look for.