Business Plans...are they necessary?!

[MsNadi]

I'm not sure if any of you picked up the Business Week article "Brat Pack" - about the internet and .com whizzes under 30 who have created, managed and/or sold companies with valuations anywhere in the $30MM + range.

Many of them have received venture capital and seed money (some from each other) in the range of $1MM - $15MM WITHOUT having a business plan. And yea, I realize the internet Web 2.0 community building phenomenon is definitely not your typical side of business.

But I can't help but wonder - are business plans a necessary evil anymore?!

Has anyone experienced success in selling an idea/concept and receiving some degree of funding, without a business plan?!

[NewHorizons]

Having a business plan will make things easier for you in the long run. At least have an executive summary to show potential investors, employees, and to serve as a road map of where you want the company to be.

[MsNadi]

Yes, but aren't executive summaries nothing more than a 2-3 page snapshot of your business plan.... in other words, everything condensed into one?!

We've got a 7 page concept document that outlines everything from concept, to design and development, deployment and future extensions, but includes little by way of product pricing and forecasted financials. Is this sufficient?

And if Business Plans are so integral to understanding the direction and future vision of the business, why is it becoming increasingly more likely for venture/seed/angel money to be invested without a business plan?

I'm just thinking out loud... and wondering if business plans are one of those things, for a lot of us, that we do because we feel as though we're supposed, and because we've been told by some book that BPs are what entrepreneurs do. :shrug:

[akula]

Has anyone experienced success in selling an idea/concept and receiving some degree of funding, without a business plan?!

yes, i raised 100k like that for hotbusinessblog.com - but only because prior to that i had made some money for these people with another venture and matched their investment with my own money

what you're talking about are "back of the napkin" sort of deals

intel inc. is one famous example. the funding round was basically closed in a bar, because trust was not an issue.

[NewHorizons]

Yes, but aren't executive summaries nothing more than a 2-3 page snapshot of your business plan.... in other words, everything condensed into one?!

Yep that what the exec summary is. I'm not in a position to tell you what VCs, angels and other investor look for before funding a company.

Just put yourself in their shoes. They want to make sure you understand the market. A detailed BP just let investors know you took the time to do your research.

As long as an opportunity exist and your business model makes sense, a BP shouldn't hurt your chances of being funded. Not having one could though.

[riscphree]

why is it becoming increasingly more likely for venture/seed/angel money to be invested without a business plan?

Not sure where you heard that, but I would not take heed of it.

Business plans, if even short, are an integral part of organizing a business and shows your on top of your game.

[akula]

the only way to know if the entrepreneur understands the market, is if they are making money.

everything else is fanciful bullshit (with pretty pro forma statements)

Yep that what the exec summary is. I'm not in a position to tell you what VCs, angels and other investor look for before funding a company.

Just put yourself in their shoes. They want to make sure you understand the market. A detailed BP just let investors know you took the time to do your research.

As long as an opportunity exist and your business model makes sense, a BP shouldn't hurt your chances of being funded. Not having one could though.

[youngmarketplace]

Sure I know a few that dont have a business plan. I have 5 so far for all my things,average size is 32 pages. I love them, keeps everything together for me.

[NeeJam]

I'm not sure if any of you picked up the Business Week article "Brat Pack" - about the internet and .com whizzes under 30 who have created, managed and/or sold companies with valuations anywhere in the $30MM + range.

Many of them have received venture capital and seed money (some from each other) in the range of $1MM - $15MM WITHOUT having a business plan. And yea, I realize the internet Web 2.0 community building phenomenon is definitely not your typical side of business.

But I can't help but wonder - are business plans a necessary evil anymore?!

Has anyone experienced success in selling an idea/concept and receiving some degree of funding, without a business plan?!

Well if you don't wnat to have a blueprint of your business down on paper and you can revert back to it in the future to keep yourself on track then sure go ahead don't use one, but if your looking at this as the opposite make one. I'm not really sure they are required for online businesses really as the online market is changing rapidly with web 2.0 etc, unlike a bricks and mortar business, where the market obviously changes but it not really as rapid as its not like your high street where your business is on is gonig to build another 1000 shops overnight whereas onlnie that can happen, sites just spring up and take your market share and to compete you've gotta squeeze those profit margins to keep customers coming back to ya', or if you are a massive onlnie e-commerce company already with a large advertising budget and are a fortune 500 company(no hints: Amazon) then you'll probably do alright .

Hope this helps
n-james

[simplegreen]

I just got done raising 6 figures for the project me and my team are working on. Our business plan was 30+ pages long.

I HIGHLY advise you to put a lot of thought and time into creating one for your business. I'll be the first to tell you it sucked ass writing it but it's come back to help me many times. You'll all be seeing the site we've been developing for months here soon. But myself, from a technical aspect have had to go back and read certain portions of the buisness plan to make sure the development of what i was doing was meeting what i knew had to happen to be sucessful.

I think the size of your business plan is in direct proportion to how big yoru project is, but when we teamed up with http://www.ratemyprofessors.com (a multi million dollar company) and they said seriously do a business plan. I didn't really question. Bottom line, with a good detailed "PLAN" you can go back when your kneed deep in shit and are lost in what you're doing and see what you want the end result to be and how to get there. Also we didnt go with VULTURE capital. We own most of our company.

btw im so sick of hearing the term web 2.0 most people have no idea what it means

[MsNadi]

Aside from knowing you've done your homework (which I still am not entirely sure a business plan does) I agree with and like the concept behind knowing what YOU are trying to accomplish. I"m sure we all can attest to this fact - you've got an idea, and you think you've got it nailed down, but as you begin the design, development and deployment of that idea, it starts to take a new life-from. Things that were considered extensions suddenly become necessary, and "scope creep" tends to take effect.

What's your shtick with Web 2.0 - aside from the fact that you seem to imply some intimate knowledge of the subject?!

Be assured, Web 2.0 will slowly become one of those internet buzz words that will be vastly misused in the main stream as online communities and user-driven content becomes increasingly viable business model.

[simplegreen]

I dont really have a shtick against the principles, server side technologies has been big for years now. MySpace has proven a great principle. I just hate buzz words. Kinda like "solutions" back in 1999, I remember sitting at my desk at a dot com and saying to my guys... if i hear someone say solutions one more time im gonna start firing people lol obviously i didnt but people are using web 2.0 as a dividing line between "old" and "new" when really it's a evolution of ideas that has been in place since the early 2000's. So every "entrepreneur" starting up a forum today is claiming to be starting a web 2.0 idea and it's just silly.

not a dig just a peave

[MsNadi]

Do you think its in any way related to the business-related waves that follow (or stem from) these ideas? In other words - the 90's was the dawn of the consultants (amongst other things) - people with such invaluabel experience, focuses and experience, that it was to a company's advantage to hire them and let them do their dedicated-resource thing rather than acquiring the same knowledge, experience and focus inhouse. Consultants - all about "solutions" (cuz what's a consultant if they can't solve your problem, right)?

Just a thought.

I hate the term "solutioning". It's not even a word - I know what it means and I know whats implied when its used...but "solutioning". Aaaaargh. And that's my shtick.

I see Web 2.0 becoming a standardized term (for those not engrossed in its development) as just another term to separate the old and new internet business models. Away from traditional e-commerce and towards user driven content/commerce.

How would YOU explain Web 2.0?

[simplegreen]

Personally I see Web 2.0 is companies and ideas that survived the dot com bubble burst back in 2001. Concepts that have proven to evolve within it’s own domain. For example.

Web 1.0----------------------------Web 2.0
Advertising.com / Double click----------------------------google adsense
Netscape----------------------------Google
IE----------------------------Firefox
Paid software----------------------------Free OpenSource
Paper news papers----------------------------Web based news i.e. cnn
Social networking happy hours----------------------------Myspace

All of which are good examples. I don’t really believe they are ideas that stem from these, I think it is the evolution of these ideas as the WWW progresses. I guess it’s one in the same if you look at it from a high level but on a detailed level it’s not.

Harnessing Collective Intelligence, blogging, wiki’s forums. How long have these things been around? He’s a good example, I ran a forum I recently sold that was specific to Honda motor corp. In that forum we had a section that allowed users to write DIY’s do it yourself articles that showed other users how to perform maintenance. As they posted that, those topics and those write ups were displayed dynamically on the front side of the website, out of the forums and spider-able via google etc. So you draw on the collective smarts of your users to provide relivant, dynamic and specific content to produce income, and rank the site higher.

My point of all of this is this. Forums have been around for how long? How long has blogging been here? And CNN? Hell I’ve gone to career networking events for years before myspace.

These are ideas that evolved from what they were before, it’s not a set space in time that defines Web 1.0 from Web 2.0. For me that term would better represent a infrastructure upgrade more than an ideal.

I personally think it’s the non educated in development that blow this word up more than what it was supposed to represent. It’s like saying we’re Man 7.0 (homo erectus, cro mang.. , etc

[fattony]

Web 1.0----------------------------Web 2.0
Advertising.com / Double click----------------------------google adsense
Netscape----------------------------Google
IE----------------------------Firefox
Paid software----------------------------Free OpenSource
Paper news papers----------------------------Web based news i.e. cnn
Social networking happy hours----------------------------Myspace

LOL, u got that off tim oreilly.

I must agree tho that web 2.0 is becoming an increasingly annoying buzz-word. People have no real idea of its meaning and are just using it because VC's love it. Heres the rest of that article which is actually a very good one IMO. It really clears up the difference between web 1 & 2

http://www.oreillynet.com/pub/a/orei...20.html?page=1