Is a Business Plan Necessary?

From Guy Kawasaki's blog


Before you dedicate your life to crafting a business plan the length of a book, read these two paragraphs from the 1/9/07 edition of the Wall Street Journal in an article called "Enterprise: Do Start-ups Really Need Formal Business Plans"
A study recently released by Babson College analyzed 116 businesses started by alumni who graduated between 1985 and 2003. Comparing success measures such as annual revenue, employee numbers and net income, the study found no statistical difference in success between those businesses started with formal written plans and those without them...
“What we really don’t want to do is literally spend a year or more essentially writing a business plan without knowing we have actual customers,” says William Bygrave, an entrepreneurship professor at Babson College in Wellesley, Mass., who says he generally advocates “just do it.” Entrepreneurs must be nimble, and will be more apt to stick with a flawed concept they spent months drafting, he adds.I think that Prof. Musgrave’s study is so right. Here is the entire study if you’d like to read it. This is the plan’s abstract:
This study examined whether writing a business plan before launching a new venture affects the subsequent performance of the venture. The data set comprised new ventures started by Babson College alums who graduated between 1985 and 2003. The analysis revealed that there was no difference between the performance of new businesses launched with or without written business plans. The findings suggest that unless a would-be entrepreneur needs to raise substantial startup capital from institutional investors or business angels, there is no compelling reason to write a detailed business plan before opening a new business.
The phrase “unless a would-be entrepreneur needs to raise substantial startup capital from institutional investors or business angels, there is no compelling reason to write a detailed business plan” merits discussion. Most venture capitalists require a business plan as part of due diligence. This doesn’t mean they spend more than ten minutes reading the plan, and it certainly doesn’t mean that they believe it. :-) A great plan won’t make a lousy idea successful, and a lousy plan won’t necessarily stop a great idea.
Most of the plans that we see at Garage are too long and too detailed—to the point of reducing credibility. Here is my prior blog posting about business plans that you might find helpful. The gist of it is:
Perfect your pitch, then write your plan.
Use the business-plan exercise as a way to get your team on the same page.
Keep it short: ten to twenty pages.
Spend no more than two weeks writing it.
Don’t get obsessed with with details in your financial forecast because it should be one page long.
However, don’t draw the wrong conclusion from this study: “Analysis, planning, vision, and communication are unnecessary.” This isn’t true. What is true is that a business plan should not take on a life of its own. It is a tool—one of many that may help you get funded (or, more accurately, hinder you from getting funded if you don’t have one) and may help you get your team working as a team. But it is not an end in itself.

Ten/ Eleven Questions with Donald Trump,

An article from Guy Kawasaki's blog, an interview with Donald Trump...to me Question 11 is the crux to being an entreprenure...have a read.... I am no a fully paid up member of Mr Trump's fan club, but you have to respect his passion for making huge sums of money, it's a bit sad that his passion is money...

Slainte

Gordon

- Ten Questions With Donald Trump

Donald J. Trump is a graduate of the Wharton School of Finance and started his business career in an office he shared with his father. In August of 2006, Mr. Trump was voted by BusinessWeek magazine as “the world’s most competitive businessperson.”
In New York City, the Trump signature is synonymous with the most prestigious of addresses, among them the world-renowned Fifth Avenue skyscraper, Trump Tower, the Trump International Hotel & Tower, voted the best U.S. Hotel by Conde Nast Traveler, Trump World Tower at the United Nations Plaza, 40 Wall Street, and Trump Park Avenue.
In a departure from his real estate acquisitions, Mr. Trump and the NBC Television Network are partners in the ownership and broadcast rights for the three largest beauty competitions in the world: the Miss Universe, Miss USA and Miss Teen USA Pageants. He is also the star and executive producer of the hit television series, “The Apprentice,” which has received national and worldwide attention. In the summer of 2004, his radio program on Clear Channel made its debut and broke all syndication records.
Mr. Trump has authored seven books, all of which became bestsellers. Trump Magazine was launched in 2004, Trump University Online in 2005, and the Donald J. Trump licensing program. In 2006, GoTrump.com, an online travel agency, made its debut, as did Trump Productions in Los Angeles.
Question: If you, Bill Gates, Steve Jobs, Herb Kelleher and Larry Ellison got marooned on a desert island, who would end up running the place and who would end up as dinner?
Answer: We would find a way to order in and have a productive meeting at the same time.
Question: How long would Larry and Sergei, the co-founders of Google, last on your show?
Answer: That would depend on whether they were good team players and if they had an original idea or two.
Question: Would you fire your son or daughter?
Answer: Yes, if they deserved it, but fortunately they are well prepared for their positions, so I doubt they would ever merit being fired.
Question: What do you do to chill out?
Answer: Playing golf provides me with my version of chilling out, plus I develop golf courses, so it’s a productive way to spend my chill time.
Question: At the end of our life, what do you want to be remembered for?
Answer: As a builder who has enhanced the cities and communities where I have built and/or developed.
Question: What’s the difference between the Donald Trump on “The Apprentice” and the Donald Trump in every day business meetings?
Answer: Business meetings are more about negotiation skills whereas “The Apprentice” falls into the job interview or audition category. I have business meetings with people who are looking to do business, not people who are looking for a job. My attitude on “The Apprentice” is as an employer looking at possible future employees. I don’t look to mold any of my business associates.
Question: If you could apprentice with anyone in history, who would it be?
Answer: My father was a great mentor. He’d be hard to replace.
Question: Not many people make billions, lose billions, and then make billions all over again. How did you pull this off?
Answer: To me it was a blip, not a catastrophe. I knew I was destined to succeed, and I kept focused on that belief. I’m very tenacious...and I don’t give up.
Question: If you graduated from Wharton in 2006 instead of in the 1960s, what industry would you go into?
Answer: Real estate. I love it and it still exists as a career and as a viable passion.
Question: What do you think of two guys in a garage showing amateur videos selling out for $1.7 billion?
Answer: I’d say they had a great idea—my hat’s off to them.
Question: TV is TV, real life is real life: What’s the most important real-life advice you can give to an entrepreneur?
Answer: You have to love what you do. Without passion, great success is hard to come by. An entrepreneur will have tough times if he or she isn’t passionate about what they’re doing. People who love what they’re doing don’t give up. It’s never even a consideration. It’s a pretty simple formula.