Kaushik Gala: Do you need a Business Plan?

galatime.com - Kaushik Gala

Note: The views & opinions expressed in these essays are strictly my own, and not those of any entity I may be associated with as an employee, consultant, promoter, investor, etc.

Do you need a Business Plan?

(Last revised March-2012, Send comments to galatime@gmail.com)

Of your two sources of cash (investors and customers), neither really cares about your business plan:

"Nothing slows down a VC as much as a comprehensive business plan." - David Cowan

"No business plan survives first contact with a customer." - Steve Blank

"The only thing on which entrepreneurs waste more time than their business plan are business plan competitions." - Anonymous.

Yet, you need to have one. Not a 50-page thesis, but a 4-5 page document or a set of 10-15 slides. Brevity forces clarity of thought, which in turn requires deep understanding of the critical factors for your business. If your business plan is able to concisely convey these, you're well ahead in the game of raising venture capital.

For science/technology entrepreneurs in India, creating a business plan has a side-benefit. Since GoI funding is useful during the early-stages, the effort you put into your plan can be re-used to write funding proposals for various schemes. The trick? Modularize your documents, use appendices liberally, then drag & drop!

Your plan must be frequently revised, as you learn about customers, market segments, product economics, pricing, etc. To handle this uncertainty, use finer (monthly) granularity for the first 12-18 months, but coarser (annual) for 3-5 years out. Use real-time, operational feedback to revise your monthly estimates; and let investors gauge the potential opportunity using the 3-5 year estimates.

Perspectives

Khosla Ventures' B-Plan template: The original Sun Microsystems plan!
Elements of sustainable companies & writing a B-Plan, from Sequoia Capital
No one wins in a B-Plan competition.