Start a business or a business plan?

You have come up with a brilliant idea and you want to start a business. You believe you have found a real market and your business is going to make you lots of money. Now what do you do? I have three examples – live ones – of starting businesses.

The first business is looking for someone to produce a business plan, raise money, get premises and systems and off he will go. At least that is what he believes. The market he is entering is about as competitive as it gets, but I suspect he may have found a nice niche.

The second is a company which started several years ago. They had identified an opportunity and they needed technology. They put together a plan, raised some £5 million over time before I ran into them. At that point they wanted to raise a little more money to ‘tweak’ the technology a bit further and then take the market by storm. The interesting comparison was that at the time they started (at least) two competitors also started. 

The third started trading a few years ago and never had a real business plan, nor any investors or debt. It continues to develop and expand its range.

So what is the right way? I suspect it is a little of each. A plan is always helpful, but there is a risk you over-plan. This risk is increased at considerable, when you bring in advisors. Advisors charge by the hour without the risks you run. Before you know it you can have fantastic plans, debts and you are still going nowhere – in fact you may have no money left to go forward.

Years ago I was raising a modest sum of money for a company I was in charge of. Advice galore mostly to raise £50 million or more, give away the product and then miraculously you would get very rich. I could not understand the model, raised the modest amount I needed (with some difficulty) and the company flourished. Dozens of companies around me had followed the external advice – it was called the Dot Com boom – and bust.

What happened to my examples?

The first company is starting in the next couple of months. Not quite at the scale envisaged and he has wisely decided on a much more modest scale than initially planned. No debts, limited risks and time to learn and develop. I hope he finds he is successful so he can build it on actual rather than planned success.

The second company never ‘turned a wheel’ – they over planned and over developed their product. The two competitors are now turning over hundreds of millions and their poor initial product has developed and grown. The product is still not at the level my friends envisaged, but the companies work, sell, are cash positive and going from strength to strength.

The third one is growing steadily. It could probably do with some planning now to get a better focus, but it is profitable and debt free. Above all, it has the freedom to manoeuvre with the market.

My conclusion: get going as quickly as possible, plan, but do not over-plan. It is your drive that makes the business, not the Excel spreadsheet. Planning is not the same as running your business. The more actual revenue you are producing, the more convincing your business plan will be.

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