Obsidian Launch | Business Plans Are a Huge, Fat, Stinkin’ Waste of Time

Business Plans Are a Huge, Fat, Stinkin’ Waste of Time

Obsidian is very fortunate to receive inquires and applications from aspiring entrepreneurs every day. And the number of inquires is only increasing. Nothing makes me happier than seeing so many people looking to start a company.

Among the many questions people ask, almost no one asks about how their business plan should look. Or even if they should have one. Instead, everyone assumes it is a standard part of business, and that you must have one in order to launch a company. Let me tell you a little secret… I don’t read them. Nor does any VC or Angel. And we are all smart enough to know that you won’t read it either, once you start your company.

The traditional business plan includes tons of research, a dream team of advisors, and the mandatory pessimistic projections. Shoot with this thorough approach and these ultra-realistic numbers, and you can easily achieve your plan of making at least $100M in revenue with $50M in profit within the next 5 years. And all you need to capture is 1% of the market.

If every business plan came through, everyone on this planet would be a billionaire. But that’s far from the case. The reason is that business plans are never used as intended, nor do they ever achieve the stated expectations. This is what really happens:

Your business plan is completed and shared with a few others (like investors and partners.) They may flip through a few pages, and possibly even skim over some of it, but no one will ever read it.
You put a spiral bound copy, that you had assembled at Kinko’s, on the shelf within arms reach of your desk and wait for the phones to ring.
The phones are awfully quiet, and the dream team is not much more than, well, a dream. They sure as hell aren’t working as hard as you are to get business rolling. The business plan sits there.
Months later, you are doing whatever it takes to bring business in the door. Screw the plan, this is survival mode. The business plan starts collecting dust. But you don’t even notice because what good are pretty pie charts when all that matters is getting business in the door. Now!
One year later, the business plan has taken on the awkward bent shape it has been permanently shelved in. The dust on it is thick enough to write your name in.
Five years later, your business is nothing like you expected it to be. Your business has melded into something different than you envisioned. Definitely different from what your plan documented. The product or service might be the same, but the numbers are surely way different. Usually way less. You open the business plan for the first time in five years. You chuckle at some of the ideas, are shocked that you actually executed on others and are slightly ashamed that such pessimistic numbers could have been so God damned optimistic.

The problem with business plans is that they provide way too many details, require projections of things that just can be predicted and try to take into account all the factors, missing on almost all of them. But rest assured, there is a much better approach to planning and it can be done with three simple documents. With The Three Sheet Strategy, you create three simple documents to grow and guide your business much more effectively than a business plan ever could. With a Prosperity Plan, a Quarterly Plan and Daily Metrics you can dynamically navigate your business to the ultimate successes you desire. In short, here is what they are and how they work:

Prosperity Plan – This is the overall goal and core guidelines you will abide by as you grow your company. It defines what you see as your company’s ultimate success. This could be five, ten or even twenty years out. No matter what, this has to be a document that you believe can become true. It must be something you truly believe is possible, and are committed to do whatever it takes to get there.
Quarterly Plan – Now that you have a page (or two) that clearly defines your company’s grand success, you need to start marching toward it. Unlike a business plan, all that matters is what you are going to do now, in the immediate term, to make the most momentum toward your Prosperity Plan. You have to put all your attention into making the most strides this quarter, the next ninety days. Then, at the end of the quarter, you reevaluate where you are in comparison to where you want to go (Prosperity Plan) and develop the next quarterly plan that will provide the biggest momentum toward the Prosperity Plan. With the constant forward movement and quarter realignment, your chance of achieving your Prosperity Plan becomes much more realistic.
Daily Metrics – In an analogy to driving a car, the Prosperity Plan would be your MapQuest directions. You only need to check this before you start your drive and at major turning points along your way. The Quarterly Plan is like the windshield. Ninety eight percent of your driving time is spent navigating out the windshield, paying attention to everything on the road up to the next turn. The Daily Metrics are the gauges in your car. What the fuel level is (cash on hand,) speedometer reading (sales trend,) the RPM (productivity,) oil pressure (morale,) and so on. A daily check, the proverbially quick peak down from the windshield to the gauges, will instantly tell you a lot about the current health of your company. And you’ll know by taking quick, daily checks when your fuel is low and it’s time to pull over and fill up.

The conventional business plan is a dinosaur; way too much detail stretched over an unfathomable amount of time. Your success is determined by having a destination for your future and by focusing all your attention on the road immediately in front of you. Spend 98% of your time making the most important progress towards your destination as you can during this quarter. Check regularly, but quickly, at the key Daily Metrics that matter, and will indicate your overall health. Then each quarter, pull your company over, recheck your Prosperity Plan destination and execute on the next Quarterly Plan.

The Three Sheet Strategy is the best way to grow your business and to achieve the success you have planned for yourself. Instead of a spiral bound booklet that collects dust, you now have three short, highly effective sheets that guide you as your business grows. Give it a try. You might be surprised to find that you can grow your business as effectively as you drive a car.

Posted by Mike Michalowicz

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Comments:

Lisa Umbach
Posts: 1

Not Really
Reply #1 on : Sun June 22, 2008, 09:24:49

I disagree completely. A business plan is absolutely critical to a company's success. It is a plan after all. Starting any endeavor without a plan is a platform for problems. I have been in entrepreneurial academia for over 20 years, and have never seen a business succeed without a business plan. Conversely, I have seen many fail without.

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