Business Plan
Wednesday, December 27, 2006 at 09:46AM 
Back at the end of August, when Nic and I started Foneshow, I wrote a business plan. It was PDOOMA, and I knew that when I wrote it.
All pre-beta business plans are a shot in the dark. Every VC in the world knows it. Most entrepreneurs know it. The point of writing the early plan is to see if you understand what the factors in your business are. The point is to see if you've got the right fields in your spreadsheet, not to pretend you're entering accurate values in those fields. The point is not to make revenue predictions and do break even analysis.
We didn't know enough then to write a business plan that was an accurate forecast of our business. Our assumptions were wrong. We hadn't talked to enough podcasters. We hadn't written any software yet (other than a quick hack demo). There was no back end at all. We had no idea what the operational requirements of the system were. We didn't know anything about the business realities of telephony or mobile.
Since then we've actually built a product (which is very different than the product we talked about in August). We've been talking to everyone we can to learn about the mobile world. We've talked to podcasters about their needs. We've launched to users, gotten their feedback and integrated the feedback into the product. We've watched how real people use the system.
Now that we have some empirical data it's time to take another crack at the business plan. I'll be immersed in Excel until the New Year.
FoneShow, PDOOMA, VC, being wrong, business plan, start up, startup 
Reader Comments (3)
I'll be praying for you ;-) Good luck with that. I never wrote a plan that worked for more than 90 days. This could mean I'm not that bright or, perhaps more likely (or equally), that things change so fast in a start up that plans don't really work.
Personally, I think young companies can waste way too much time on planning. I think the general direction is most important with daily, weekly and monthly objectives.
In my experience the usefulness of the business plan is largely depnerdent on how you define "business plan".
My business plans consist of a financial model and an assumptions document describing the model. Sometimes I'll write an exsummary to go with.
The model is really useful for "what if" scenarios. What does changing our conversion % do to our cash flow? If we grow at this rate, how much cash do we need? If our contention rate is 3% instead of 2% how much sooner do we need more DIDs and servers. How long can we put off hiring another saleman? How much can we spend on getting customers and still make a profit? All the important stuff is in Excel, not powerpoint.
I totally agree with you about wasting time if a b-plan is marketing reports and strategy outlines targeted at investors.
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