Part 1: The Myth of the Business Plan

The Myth of the Business PlanWhen I went to business school in the late 90s, I learned in my MBA program that when you want to start a company, you need a business plan, and elaborate financial forecasts: lots of Word pages and Excel spreadsheets. The business plan had a fixed format and contained all aspects of your future business including sales, marketing, competition, hiring, etc. People spent literally months developing them. I always thought to myself: how the hell should I know all those details before I even start. Worse, for a market, which does not even exist today?

The guidelines for the financial plan where even better: you needed to calculate the revenue and profit streams for the next 10 years, and calculate the inherent value of your company measured on the future yield, minus a risk premium, and compare that to a safe investment. Wow! What the heck!

Could it possibly be that those famous business school professors actual never started a business themselves? And I thought those fancy binders presented by my classmates contained concepts I could immediately tell that they are flawed, broken, and produced by people who do not think like entrepreneurs.

Actually, I argued this case while winning first place in a business competition back in school. I did not make friends. Because I told my classmates that they suck AND I only won because I beat the grading system, which was legit, and people knew it. (I figured out the algorithm of the business emulator and knew what I needed to input to get the best output – spent the entire Xmas break figuring that out.)

Directly after school, I moved to the Silicon Valley fascinated by the Dot-Com boom. What I learned here was just the opposite. You had an idea, wrote some notes on a napkin, and if you had a team in waiting, somebody gave you an 8-figure investment. The appetite for investors to sink money into tech was mainly driven by the outrageous NASDAQ market, which again was driven by even more outrageous IPOs.

This made sense at the time as a lot of creative new ideas were produced and people were just excited to see what sticks to the wall. Lots of people lost money during those days, but we would not have been here today, if it would not have been for the Dot-Com times. I like to compare the Dot-Com days more to giant government efforts of the past like the Manhattan project and investment in society.

Let’s talk about today. What do you need if you want to start a business? Here is a bit of advice: forget about the textbook written by guys who never started a single company. You do not have to have an MBA to start a company. And do not waste your precious time with business plans.

Forget about what you have heard about the Dot-Com days. Those days are over. Sure, you hear about people raising even today insanely lots of money for the dumbest ideas, but this often has a background story, which is most likely based on established relationships. (SB)

Part 2… My recipe.

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