The modern business plan (by Seth Godin)
I’m a big fan of Seth Godin. I recently signed up to get his daily blog entry sent to me by email – these are often just thought bullets, but sometimes he writes a longer piece that’s very insightful and incisive.
A few days ago, he suggested a new approach to business plans. I have long been a critic of the type of strategic sessions that companies engage in – taking management teams away fr a few days to come up with a tweaked “vision”, “mission” and “purpose” statement, and a long list of strategic objectives. Watch a video of me having fun with this at a conference.
Seth, in fact, talked about this recently as well, saying:
But you’re not saying anything – [this] is the problem with just about every lame speech, every overlooked memo, every worthless bit of boilerplate foisted on the world: you write and write and talk and talk and bullet and bullet but no, you’re not really saying anything.
It took me two minutes to find a million examples. Here’s one, “The firm will remain competitive in the constantly changing market for defense legal services by creating and implementing innovative and effective methods of providing cost-effective, quality representation and services for our clients.”
Write nothing instead. It’s shorter.
Most people work hard to find artful ways to say very little. Instead of polishing that turd, why not work harder to think of something remarkable or important to say in the first place?
But, back to his thoughts on business plans, Seth suggest that we abandon the traditional headings in our plans, and develop them under five new ones.
It’s not clear to me why business plans are the way they are, but they’re often misused to obfuscate, bore and show an ability to comply with expectations. If I want the real truth about a business and where it’s going, I’d rather see something else. I’d divide the modern business plan into five sections:
The truth section describes the world as it is. Footnote if you want to, but tell me about the market you are entering, the needs that already exist, the competitors in your space, technology standards, the way others have succeeded and failed in the past. The more specific the better. The more ground knowledge the better. The more visceral the stories, the better. The point of this section is to be sure that you’re clear about the way you see the world, and that you and I agree on your assumptions. This section isn’t partisan, it takes no positions, it just states how things are.
Truth can take as long as you need to tell it. It can include spreadsheets, market share analysis and anything I need to know about how the world works.
The assertions section is your chance to describe how you’re going to change things. We will do X, and then Y will happen. We will build Z with this much money in this much time. We will present Q to the market and the market will respond by taking this action.
This is the heart of the modern business plan. The only reason to launch a project is to change something, and I want to know what you’re going to do and what impact it’s going to have.
Of course, this section will be incorrect. You will make assertions that won’t pan out. You’ll miss budgets and deadlines and sales. So the alternatives section tells me what you’ll do if that happens. How much flexibility does your product or team have? If your assertions don’t pan out, is it over?
The people section rightly highlights the key element… who is on your team, who is going to join your team. ‘Who’ doesn’t mean their resume, who means their attitudes and abilities and track record in shipping.
And the last section is all about money. How much do you need, how will you spend it, what does cash flow look like, P&Ls, balance sheets, margins and exit strategies.
Your local VC might not like this format, but I’m betting it will help your team think through the hard issues more clearly.