In the course of a year, I see anywhere between 30 to 40 business plans and talk with 20 to 40 entrepreneurs about their ideas, pre-business plan.
As a judge in the Minnesota Cup, I see an additional 15 to 20 more business plans. To top it all off, I’m teaching a course at the U of M this Fall on – you guessed it – business plans.
I love new ideas. I love the passionate entrepreneurs behind them. I love ideas that change markets, industries and people’s lives.
But I hate bad business plans. Not the writers. Just the plans.
Why are they so bad? There’s a lot of underlying reasons that I’ll go into later, but today I want to share what I hope will not only dramatically improve the odds of success for your idea, but also start to reduce the number of bad business plans out there.
If I have one request to all would-be entrepreneurs, it would be this: once you think you’ve got this amazing idea that you now want to pursue – DON’T WRITE A BUSINESS PLAN. Yes, that’s right – put the pen down before someone gets hurt. Fight the urge to craft the mother of all business missives and take a moment to answer this simple question:
“How do I really know this is a good idea?”
Do you? If so, what tangible evidence can you offer? Beyond crazy devotion to the idea, do you have something you can point to that answers this question?
Most business plan writers don’t. Here’s the missing step – before any plans get written, you need to validate your idea. In doing this you’re simply trying to gather enough credible data and evidence to support the viability of your concept. It doesn’t have to be measured in thousands of data points (which wouldn’t hurt) – it just needs to be believable and “directionally” correct.
Here are some simple, effective ways to validate your idea:
- Create a prototype/mockup: it doesn’t have to be fancy, just able to communicate the essence. Remember, the iPod prototype was made of cardboard and a lead fishing weight to get a sense for what it would feel like in someone’s hand.
- Talk with people: ideally, the people who have the pain you’re trying to solve. But talk to others – suppliers, “experts”, competitors, retailers, etc. Ask lots of questions and get tons of insights about the problem you’re seeking to solve.
- Challenge your hypotheses: “Why won’t this work?” Design all your activities to objectively test your idea for legitimacy. Be ruthlessly honest because if you don’t, investors will.
- Reflect: once you’ve gathered everything, ask – “Does this idea still make sense?”
If the answer is “yes”, and you’ve got the data to back it up – then, and only then, should you start writing the business plan. The good news is that, armed with these insights, most of the business plan will write itself. More on that later…