22. January 2018
Business Plan Is Not Alfa-Omega of Business
A business plan is like an imaginary voyage on a ship. Rescue boats and trained personnel give people a sense of security, but they cannot guarantee that in case of a shipwreck, everyone will come home safe and sound. Like any plan, the business plan is just a guideline that helps entrepreneurs orient themselves in a rapidly changing environment. It is good to have it, but it is worthless to rely on it. Our CFO Martin Vápeník and Head of Captaworks Petr Zavoral told us more about how to work with a business plan.
How should a good business plan look like?
Petr: A good business plan should be structured, simple, achievable and measurable. Elevator pitch usually works well in the beginning. Over time, the plan is being developed and updated. The format does not really matter; it can be a text, a graphics, or even a comic if it expresses main thoughts.
Martin: From a financial point of view, the business plan is a comprehensive reflection of every area of business, including financial projection, team, competition, marketing, trade, and product logistics. Since the world of startups is changing so fast, it's a live document. That's why it's important for the model to be flexible from the very beginning so that changes can be integrated.
Who should create it?
Petr: The whole team should be involved. People should enjoy creating it and be willing and happy to discuss it every few months or so. It sometimes looks like running a business is only about a business plan, but it's not like that. It's just a tool. If you make it creative and build a story around it, then it's credible for the team, the customers, and the investors.
Martin: I agree that it should be a creative process for the whole team. Everyone, whether they are doing marketing, accountancy or sales, should comment on their respective area for which they are responsible. People should feel that they are involved in the plan because eventually the outcomes impact their daily work and life.
I already know how the plan should look like. Can you now tell me how to do it?
Petr: There is no single guideline. It depends on the type of business, its size, and composition of the team. A business plan for a tiny startup will look completely different to the one of Amazon. If you are searching for inspiration, I strongly recommend looking at the business model canvas or Tim Berry's The Plan-As-You-Go Business Plan book.
Martin: I believe the most important thing is to start thinking about why I am doing the business. My “Why” is not that I'm developing an app because I'm enjoying it, but because there is a higher goal. Apple communicates their products perfectly to customers. When iPod came in, they did not sell it as a gadget for techies, but as something that allows anyone to have “1000 songs in your pocket”. When I tell people that I have developed a super-duper app, they say, "Okay, but why should I want it?" Once you figure out your “Why”, start looking into the financial model.
Everything is constantly changing in the startup world. Is planning not counterproductive?
Petr: I think it's just the opposite. When you are planning something, you are preparing for change. It's more about the process of planning than about having to comply with everything that is written on some paper. Many people only rely on one version of the plan, but one should always have a plan B. I recommend working with multiple scenarios – an optimistic one, a pessimistic one, and an optimal one. The real business is somewhere within this range. Just be prepared for potential risks.
Martin: Of course, you can do business without a plan. Google did not have a business model or a sales strategy for a long time. They had a great service that allowed them to become successful. Later, they came up with ads which started to earn them money. The business plan is not Alpha-Omega of business. It's a helpful tool that guides the project, people, and the team. Sticking narrow-mindedly to a plan just because we planned it does not make sense. The business plan is there to help you reach your goals, not to limit you.