Sunday, January 30, 2011

Your business plan is wrong

According to recent long term study the main predictor of startup failure in its first three years was the existence of a business plan. The second most highly correlated predictor of failure was following the business plan.
This makes sense intuitively. 

The business plan is your ideal of how the business will grow, how your customers will buy your product and so on. It’s like a teenager talking about their ideal partner. Basically it is a fantasy.

When you are failing to make sales as predicted, your savings have gone and your credit card is close to maxxed out then you will do anything to bring money in the door.

You are learning by doing. Through trial and error you are finding out how the market actually works, what customers really want, how much they are willing to pay, how good your employees are at delivering and so on.

Keep your objectives in mind, but don’t be rigid in following the plan.

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