Why Startups No Longer need a Business Plan : Under30CEO Why Startups No Longer need a Business Plan : Under30CEO
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Why Startups No Longer need a Business Plan

| December 20, 2013 | 3 Comments

Business Plan

The taxonomy of a startup has shifted over the past decade. As entrepreneurs leave behind traditional paradigms of “business” and foster an environment conducive to sustainable and equitable growth. The picture emerging from the exploration of traditional structures, formal and informal, is that the nature of the startups and its interaction with consumers, besides being very complex, is somewhat bleak. Business plans, until recently, have been a foundational factor to starting any type of business. The plan was meant to lay out what you hoped to accomplish and follow it step by step. That’s no longer the case, and here’s why.

Long-established school of thought persisted a startup, create a business plan with all aspects of commerce (marketing, sales, operation, and so on) and all that needed to be done is proper execution.  The quest for a homogenous plan-of-action can no longer be seen as valid based on two core beliefs – startups spend most of their time searching, researching, and making changes while larger companies spend time executing secondly, a business plan assumes that you know exactly what to anticipate and what problems you’ll be facing.

Business plans usually model themselves after larger corporations; however startups are not smaller version of large companies. The coherence between business plan and a startup creates a dichotomy between risk, organizational structure, and future planning. Startups don’t fail because they lack a sound business plan; they fail due largely in part to the lack of understanding of customer risk. In other words, there was no formal process on searching for what the customer’s needs are. Even so, there was no plan on how to go about actually gaining those customers. Traditional tools therefore, are irrelevant for the first couple years of a startup but you do need them later.

Furthermore, assuming you know exactly what to expect is tantamount to business-blasphemy. First couple of years of business are completely unpredictable, new things are arising and things change. There is no way you can plan for it therefore, a business plan becomes irrelevant. Don’t worry too much about business plan and focus on action-items that will generate revenue.

Why Startups Fail

As mentioned earlier, startups don’t fail because they don’t have a sound business plan, they fail (in my opinion) for two reasons: first, the startup is focused on what the founder(s) have an understanding of and not what market demands are. What this means is, Nazily has tremendous knowledge of fashion design and starts a fashion company, but everyone in her area wants interior decoration. Secondly, there was no formal process on searching for what the customer’s needs are. This is called “customer development.” There is a simple method to corroborate your startup. Research and Build. Research by asking people what their thoughts are and if they will buy from you. This will lead to potential clients and validate your startup. Company building will begin one you have done your market research and confirmed your startup.

Building your Startup

“Entrepreneurship is the search for a business model.” What’s your business model? The answer should be “how your company plans to create value for itself while delivering products and services.” To clarify, “value” means what are you trying to solve. Customers don’t care about 24×7 support or a 2 year guarantee (initially), they want to know what pain your company will solve for them. Keep in mind, needs are different than problems. If you have a product or service that solves a “need” your market is drastically reduced.

Your startup should be designed to search for repeatable and scalable delivery-model. Repeatable: The sales and marketing processes that are repeatable and scalable, meaning same thing that works today, works tomorrow, next month, and year. Scalable: put a dollar in and get two dollars out and you’re not losing money on a consistent basis.

Conclusion

Just one thing is certain, you will question everything! You will question why you’re doing this. You will question your ability to run a business. You will question God for the hard time. Most importantly, you will question yourself – if you are doing the right things, if everything you’ve done is wrong. But this is where winners are born. Life until I started my company was simple and easy, since then; I have had sleepless night, stress, and, at times, was unable to pay my bills. But I always knew all this hard work and effort will pay off and it did. I just kept going, never looking back, I kept my eyes on the goal. I lived a miserable couple of years and found myself at a place that I’ve earned. There is no such thing as luck! I did more than other people, I did things where people said no it’s too much work. I kept going where others said you’d fail. Business plans don’t mean anything; the only thing that matters is you. You and what you say to yourself when things are going bad. Define yourself; are you a winner or a loser.

Nabeel M. Saleheen is the Co-Founder and CEO of Alegix, a multinational brand of companies comprising of: IT, Telecom, Social Media, SEO, Construction, Home Warranty, Investments, and Staffing. Nabeel started his first company at the age of 16. Since then, he went on to start two technology firms, a real estate investment firm and a nonprofit for under privileged college students.

Image Credit:  Shutterstock.com

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Category: Entrepreneurship

  • Herb Albinus

    You are dead on right! This article is great and it also illustrates why
    small businesses fail if they stick to a strict rigid business plan.
    If you don’t roll with the punches daily, your out in a nano second.
    Banks don’t understand this concept and by requiring this rigid business
    plan they basically make you project a false plan. We moved our company
    from the West Coast to the East Coast and our customers are completely
    different. If we didn’t change our plan immediately we would have gone
    under.

  • Andrena

    Great article! I couldn’t agree more with everything that you said.

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