Starting A Business? Why A Business Plan Isn't The Right First Step
You just came up with a new groundbreaking business idea. Maybe it’s a new unique storefront you plan to open up on Detroit Avenue. Or perhaps it's a mobile app that will have much broader applicability — with users from Lakewood, Ohio to Lakewood Colorado (and everywhere in between). No matter the idea, where do you start? If your first inclination is to get started writing a 20-page business plan, you may want to reconsider.
The era of the business plan being the leaping-off point for entrepreneurs is no more. While it may have been considered a commendable first step for those getting businesses off the ground in the past, it’s no longer the case. There are a few reasons why:
First, creating business plans can be a long and arduous process. Many business plans can extend to 20-30 pages and take weeks to develop. This, in itself, isn’t necessarily a bad thing. But given that most business plans are really just based off of assumptions and guesses of what could happen, all of that time could be better spent testing those assumptions.
Next, plans change. Especially when launching a startup of any kind, entrepreneurs are likely to quickly find out that their initial beliefs about customers accepting their value proposition, how their product should be priced, or even whether their products actually solve the problem they’re intended to could all be wrong. But then what? What is an entrepreneur to do when they discover that the assumptions that they just build their entire business plan around have been disproven? As Mike Tyson once said, “Everybody has a plan until you get punched in the face.”
So if business plans generally aren’t the best first step — what is? Should entrepreneurs not worry about planning and just take the leap with their startup idea? Of course not.
In these modern times, the business plan hasn’t gone away completely. The larger, oversized business plan does have a place — but much later in the startup process. The very first step for an entrepreneur, however, should be focused on validating the assumptions that they make about their business —and this is done through the Business Model Canvas.
The Business Model Canvas is a single-page plan that an entrepreneur can create to help them visualize their business and begin immediately to test and validate their assumptions. The first form of the Business Model Canvas was introduced by Alex Osterwalder — and includes 9 categories: Key Partners, Key Activities, Key Resources, Value Propositions, Customer Relationships, Channels, Customer Segments, Cost Structure, and Revenue Streams. Entrepreneurs can use the Business Model Canvas to not only plan their business, but more importantly — quickly validate the key areas of their business model. Ideally, they can do this not after the business has launched, but before they’ve even invested heavy resources into the business.
The Business Plan itself hasn’t gone away completely. It’s just been replaced by its much friendlier and much more useful relative — the Business Model Canvas — as the best first step an entrepreneur can take when they have that new groundbreaking business idea.
Want to learn more about leveraging the Business Model Canvas? Join Startup Lakewood for a free informational session on Tuesday, July 25th at 6:30pm at the University of Akron-Lakewood campus located on the corner of Detroit and Warren. You’ll leave with an understanding of how to create your very own Business Model Canvas and will have what you need to begin testing and validating immediately.
Do you already have a business idea in mind? Then consider applying to the 2017 Lakewood Ideation Challenge — a business model/pitch competition with a prize package worth over $1,000. Applicants are encouraged to submit a Business Model Canvas as well as a plan to validate their business model, and chosen Finalists will pitch their ideas live at The Winchester on Tuesday, August 22nd in front of a live audience which is open to the public.
Learn more about the Startup Lakewood session and Lakewood Ideation Challenge at StartupLakewood.com.
Mike Belsito is Lakewood's Entrepreneur in Residence and is Co-Director of Startup Lakewood.
Mike Belsito is Lakewood's Entrepreneur in Residence and is Co-Director of Startup Lakewood. Mike is the Co-Founder of Product Collective, a community for product people and organizers of INDUSTRY: The Product Conference.
Mike is Author of the book, Startup Seed Funding For the Rest of Us, one of the top startup books on Amazon and serves as an Adjunct Professor of Design and Innovation at Case Western Reserve University.