The Business Plan Fallacy

by Deborah Mills-Scofield

The Business Plan FallacyAs I’m reviewing business plans from college grads I’m mentoring (as an alumnae mentor at Brown Univ ) and from Glengary , the VC firm I’m a partner in, this whole business plan process is getting to me. So much of what I see in biz plans is, pardon the phrase, BS. We all know none of us believe any of the numbers is the proformas, the market growth, etc., so why do we bother with all this stuff when we know it’s a joke? I don’t know, but here’s what I’d like to see in a biz plan for a change.

  1. The current, accurate, real, truthful view of the world – market(s) as it exists and will exist. If it doesn’t yet, why, what are the real needs, current and potential competitors (in/out of your market space). What have others tried and what has succeeded or failed and why. Tell me a TRUE story of the world you’re going into – you can use spreadsheets, analysis, etc…you should give me #’s, but tell me how this world really works, not how you’d like it to work.
  2. Clearly state your assumptions and hypotheses (e.g., if we do x, then y will happen; we can make A with $X in T months, we will take C to market and the market will do S) – how will these impact the market you’re going after or creating – and ideally, do it in a way that you can change the assumptions so they automatically change the outcome.
  3. Delineate your plan ‘management/mitigation’ story – since we know you’ll make mistakes in #2 above, what are you going to do when this happens? This has 3 critical areas: 1) how flexible is your management – can you adapt and shift if necessary? 2) how flexible is your product or service? Can it adapt or is it a binary choice? 3) if things really don’t happen as planned, are you done? Do you have other ways to go to market?
  4. People – you need the required resumes of course, but what matters more is their level of passion, commitment, heart/soul into the biz, attitude, abilities, history of executing, of doing, of making things happen.
  5. Money – how much do you need, what are you going to do with it, cash flow, P&L, balance sheets, margins, exits etc. – the usual stuff. But, what are you doing while you’re waiting for the money – are you still moving ahead? Are you able to straddle ramping up based upon funds? Investors want to see that you can still make progress while you’re waiting for funding or if you don’t get enough.

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Deborah Mills-ScofieldDeb, founder of Mills-Scofield LLC, is an innovator, entrepreneur and non-traditional strategist with 20 years experience in industries ranging from the Internet to Manufacturing with multinationals to start ups. She is also a partner at Glengary LLC, a Venture Capital Firm.

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  1. You forgot to mention

    /3 calculate the time and energy in creating the various busines plans/vc meetings and show it as a inputation cost on the energy you cold have spent boot strapping.

    /4 – profit

    🙂

  2. it’s a great coincidence I blogged something today also that relates to such a fallacy: https://www.jonathanmacdonald.com/?p=4967

    indeed, the advice you give certainly includes some of the other needs a business plan should include

    if I were to add one, I would add ‘purpose’….i.e., the reason that we are trying to do what we are trying to do

    on that note, it’s worth citing Liri Andersson here: https://www.liriandersson.com/?p=207

    what I would like to see in a business plan for a change is some BRAVERY

    some courage

    something that belies the NORM

    …to the courageous go the spoils.

  3. Dean,

    Great addition – I tell that to start-ups/early stage but forgot to put it in…that’s also part of the reason I suggest stressing family etc. before getting to formal angel & VC investing which has such a low ROT (return on time) – I shall add it – thank you again!

    Deb

  4. Jonathan,

    Another excellent point I omitted! I had ‘assumed’ that would be in the upfront part of the plan but should have been explicit. And you’re right – these days it should be ‘brave’ (depending on who you want funding from…there are some very traditional VCs out there you know). One of my most favorite start-ups I’m mentoring is Runa.org – and their purpose is outstanding! check out the story about them at the MIX – https://www.managementexchange.com/story-19

    deb

  5. Deb – loving that Runa story….thanks for the link…inspiring stuff!

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