All too often entrepreneurs and new startups focus time and energy crafting a wonderful generic Business Plan with expectations of success. Just add water, fill in the blanks and hey presto the Plan and business it supposedly represents is ready to fire. High-fives everyone. Business Plans for a startup do not guarantee business success, viability or relevance beyond the entrepreneur’s creative writing, the plan’s untested guesswork or the first wave of customers.
A Startup Business Plan is nothing more than a story representing a collection of unproven assumptions when done well may enable borrowing from a bank. What is missing is understanding and proof of a Business Model, customer’s needs and the value proposition by which the business intends to engage and interact with potential customers. Cash maybe king for existing business – at prestart phase proving your Business Model is King. Startup resources are best spent testing the business idea and collecting valuable data that validates business potential and reality.
Validating your Value proposition and customers before you launch will save money, heart ache and failure. And while relevant to all startup types it particularly applies to online startups. Recently we assisted a new online business who had invested $32K with web-marketers to launch a new online health related business. After 12 months the business had not generated one dollar return on investment. Reviewing the business plan that secured bank finance and after our usual 21 mentoring-questions it was clear no testing or validation existed and the website offerings was not what customers now wanted. Oops. Customers care little for a business idea unless it provides compelling solutions to their problems and needs. Another client post-Christmas ready to spend $23K on a full bells and whistles online directory has heeded advice to validate his model and customers as a first step. Our mentoring focused developing a lean feature site for $9K investment to validate the model, develop customers and answers of what the value proposition should be.
Business planning is vital and should focus answering the critical questions that prove a scalable and viable business can be created from your idea. Writing a plan remains part of the “planning process” but should not be developed, written or relied on as a road map before the essential proof and validation of a model is revealed. Unless you are prepared to research and test your idea and offering out in the street with potential customers your chances of failure is real and the flash Business Plan no more benefit than writing down a good story.