If written effectively, a business plan can serve as the blueprint for a startup's success. It's a roadmap that guides founders from A to B, a tool for wooing investors, and a way to keep fast-growing teams focused. Forget the debate about whether you need one or not. (You do.) The more relevant question is what to include and what to leave on the proverbial cutting room floor.
While there's no magic formula, there are certain elements that all great business plans should have—and those that should be avoided at all costs. In recent years, those on the receiving end of these documents have seen what you might call buzzword creep, empty rhetoric that serves as a distraction from otherwise good ideas.
As a serial entrepreneur, investor, and chief architect of "the Super Bowl of investment competitions,” Rob Adams has poured through tens of thousands of business plans over the years—and has seen the good, the bad, and yes, the ugly. “There's this tendency for smart people to want to say a lot in a short time,” he says. “If you do that, you sound confused, like you don't know what’s important. Part of a good strategy is knowing what not to do.”
With that in mind, I recently sat down with Adams at the 30th annual Global Venture Labs Investment Competition (where I have served as a judge for several years) to identify these clichéd, hackneyed business-plan killers. Use them at your own risk.
1. Conservative Forecast
“Every business plan says its forecast is based on conservative assumptions. And every business I've seen has not hit its plan. Let me clarify, when I say forecast, I'm talking revenue. Everyone gets their expenses right. Get your revenue right—and you shouldn't say conservative. Your team should believe that the plan is doable. It should not be overly aggressive in an effort to raise money and not overly conservative to sandbag. You should put out what's firmly possible. Everyone involved with startups knows revenue is always wrong.”
Rob Adams speaking at the Global Venture Labs Investment Competition.
2. Forecast Assumptions
“That's code for ‘I'll miss my forecast and then go back and blame it on the assumptions. The assumptions were wrong.’ No, you were wrong. That's kind of like hiding behind your mom's skirt.”
“Everybody says they're a game-changing technology. True game-changing technologies don't set out to be game-changers. Apple never positioned anything as game-changing. They were fast followers. They let everyone figure out what the market was and then they came in once customers were educated, with better solutions. They didn’t invent the mouse, the smartphone, the tablet—they just fast-followed and did better design. So if you claim that, it's just a boastful empty comment.”
“Pivot means change direction. Somehow it's become an MBA’s word and it's code for ‘we’re not sure the current strategy is going to work.’ Even with the tacit understanding that all businesses change when they understand the needs of customers, you don't want to sound like you don't know what you're doing.”
The audience at the Global Venture Labs Investment Competition.
“Disruptive technologies have a real definition. So what's a good example? I would say smartphones disrupted the wristwatch business because we have a whole generation of kids who look at their phones and know it's always going to be accurate and never need to change a battery. So nobody knows they’re going to be disruptive—they become disruptive by forces beyond their control. Smartphone cameras are another example. Everyone pooh-poohed smartphone cameras when they first came out, but now they're almost as good as SLRs. No one knew it would be disruptive, but they stuck with it and it worked. So don't claim you're disruptive ahead of time.”
6. Solutions Provider
“It's too generic. It's like saying your car comes with physics—of course you're a solutions provider. It's just a generic, empty, junk-food statement.”
“That's just so moronic. It's like saying, ‘I have a beer in a glass, it comes from a tap, and it comes to my table—it’s an end-to-end solution!’ End-to-end is just an empty statement. What does it mean?”
8. Mass Customization
“Everyone says that about everything. In theory, mass customization is like taking what a tailor does with a custom-made suit and doing it at an automated factory. Cars aren't mass customized—they're semi-custom. Custom-made shirts are usually really semi-custom. Why? There's no such thing as mass custom. It's an oxymoron.”
9. Competitive Advantage
“If you're going to use it, know what it means. Look up Michael Porter and read about it. What do you do that nobody else on the face of the planet can do? Operational efficiency is not competitive advantage. You’ve got to have some technology, some domain knowledge, some actual competitive advantage—a secret formula, a trade secret.”
Rod Kurtz is the editor-at-large of OPEN Forum.
Photos from top: Thinkstock, Courtesy of Steve Moakley Photography