Management science used to tell us that we needed to plan carefully and intelligently for any new business venture, document our assumptions clearly – and then execute.
As a professional accountant I’ve always been leery of projections – or as we like to refer to them “FOFI” (i.e. future-oriented financial information). The thing is, accountants built their reputation for honesty on the accurate reporting of historical information. What’s more we’re pretty good at that.
Steve Blank – the well-respected academic and entrepreneur out of California said it very eloquently:
No business plan survives first contact with customers
The thing about projections is that, especially in the case of a new business, they’re almost always wrong. For a startup trying to commercialize a new technology in a new market space, projections are almost always wildly over-optimistic.
In fact most investors in early stage companies discount projections heavily – or more likely just ignore them.
Some years ago I watched a video put out by Sequoia Capital. In it Jim Goetz (the founder) said essentially that you may be wasting your time writing a 120 page business plan – since the projections are almost always wrong…
If you like what you’ve heard here is a link to the complete Youtube video…
But in spite of the fact that they are inaccurate – and most experienced investors discount or ignore them – sometimes my clients still need to prepare them. So what is the answer?
From my perspective at least, the answer is STRATPAD
Originally developed for the iPad – StratPad is a web-based business planning tool that most entrepreneurs can learn to use in the course of a one day workshop. Which means it costs lest than having your CPA or your management consultant write it for you – and more important, keeps the entrepreneur at the centre of the process. Since is a business plan is really a living document, management needs to keep it up-to-date, or at least re-visit it on a regular basis. If you outsource your business plan that means you always have to outsource your plan….
And you’ll never own it!