It’s Day 1 of the new term at B-school. Class: Entrepreneurship. Assignment: Come up with a business idea and make it happen.
I was off and running. I began writing and writing and writing some more, diligently trying to put all my ideas to paper to create THE PLAN. I had this friend in class who decided to start a yoga apparel line. So while I was STILL writing, writing, and re-writing, she’d already built her website, printed her business cards, found a manufacturer and was creating her first prototype. And me? I couldn’t let go of THE PLAN. By graduation in May she’d fully launched her business, while I spent 8 more months grinding away, before my business idea had enough traction to launch.
It took me awhile to learn the importance of executing (read: the “GO”) — not the execution of half-baked ideas — but the execution of reasonable customer propositions. As an entrepreneur, you have to find the balance between the “think and plan” and the “GO.” You have to have the guts to jump off the cliff. But, before you do, there are some practical considerations:
Beyond the IDEA, you need to think about:
- Your venture’s financing needs: What kind of business do you have? Is it capital intensive, or not? You will need a budget and a financial game plan to meet that budget. Make sure you have a sharp pencil and accept that you will not see a salary for a long while. Gone are the late 90’s when VC firms would throw money at a good idea, a brain trust, and not much more than that.
- The team: What are the critical skill sets you need to attract for the first phase of your venture? A good first step is to think about your strengths and weaknesses and to try and hire a team that will complement your abilities.
- Product development: If you are building a new product, whether it’s a software as a service product or a new cereal brand, you need to think about the most effective ways to build the product. Will you build in-house capabilities, which can be expensive in the beginning? Or will you outsource the production, which can carry quality control issues? When applicable, will you test the market with a prototype so you can gain valuable market feedback quickly? Or will you immediately develop the full version? (…which might be necessary in cases such as a new cereal brand.)
- Marketing. How will you land your first customers? These days, before you can raise outside capital, you typically need to have at least Beta customers, and preferably some revenues, as well. Think carefully how you will achieve this on a shoestring budget. (It can get tricky!)
With that said, the sooner you can hit the “GO” button on a reasonable customer proposition, the sooner you will have customers, the sooner you will have revenues, and the sooner the first version can become the second version can become the third version and so on. So, to answer the question, do you need a business plan to launch a business? You need to think through all the important questions such as financing, first hires, product development and marketing; but no, you don’t need a 50 page glossy document.