Don't just create a fantasy plan — build a business model

Sidnee Peck, director of the Center for Entrepreneurship, provides words of wisdom for a questioning business owner.

By Sidnee Peck  |  Director, Center for Entrepreneurship

Question: I'm struggling with my business plan because I don't know with confidence what my business should look like.

Answer: Business plans seem to have some sort of universal appeal and mystery. I'll be very clear on my opinion here. I hate business plans — mostly due to the fact that so many hopeful business owners use the business plan as a shield from doing real work and actually starting a business. The business plan is safe. A lot of things can sound tempting and alluring on paper that may never work in real market application.

Instead of business plans, I hope the business modeling message continues to make its way across industries and generations. You should certainly identify the core aspects of your new business and you should make plans, identify milestones and explore the financial capabilities an idea has.

But you should not spend significant amounts of time writing down the fantasy of your proposed venture. You should build it. When someone important to your model (usually a bank or an investor) asks for the business plan …then write what you know. You'll have so much more information and be significantly more confident with what you communicate.

Then where do I start?

Identify the problem, solution and target market. This is so easily overlooked and so important. Use the Value Proposition Canvas available online through Strategyzer (for free) as a guide. Do not move forward until you know these things. Be detailed. Demonstrate extreme focus with your market segment and solution.

Identify your assumptions. What have you assumed by reading articles, having individual experiences and opinions, or talking to family and friends? Unless you've truly validated, it is an assumption. Test your idea on people. Steve Blank of Stanford has a great video series through Udacity.com (course: How to Build a Startup) that is free and walks you through this whole process.

Build it! Once you have identified and started testing your assumptions, you should build a minimum viable product and start showing it to people. Keep in mind, if you have something that may be protectable by a patent, please seek legal input before this stage so you know if it is time to file a provisional patent. Gather feedback on the benefits. Do not focus on detailed features at this time. You just want to get the major aspects right.

Do it all again! Once you have gotten feedback from a reasonable number of users, tweak your product to reflect that feedback and show it to new potential customers as well as the people who were excited the first time. They may be your first paying customers.

Once you have validated your entire business model – including risks associated with the market and the technology – evaluate if you need funding. If you do, then write an executive summary and create a pitch deck. Show that to potential funders or other advisers. Based on feedback there, then and only then…write your business plan. If you do not need outside funding and are ready to launch, you do not need a formalized business plan yet. Spend time on strategy and the tactics needed to acquire customers and run the company. You can always formalize your plan when you need it.

These steps are overly simplified to get you started. A lot of planning that goes into building a company (trademarks, contracts, insurance, licenses, bookkeeping, taxes, and so on) that you should address once you know you have a model worth pursuing. That is the most important part. The rest can be managed.

First published in The Arizona Republic, March 30, 2015.