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Before You Write a Business Plan
By Vivek Wadhwa   |   Thursday,July 30,2009   |    3 Comments
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First, you need to test your product or service with potential customers, and define your business model.

Before I launched my last startup, I prepared a business plan exactly as I had been taught in business school. I was determined to lure professional investors, and I thought the key lay in creating lofty financial projections and carefully documenting the details. If all went according to my 40-page plan, my software company would be worth billions in five years by capturing just 1% of the market. My CEO friends told me that this was one of the most professional business plans they had seen. Yet it didn't take me long to realize that it wasn't worth the paper it was printed on. It bore no resemblance to the company I finally built. I don't think that any of the 100 people I sent it to read more than the executive summary.

True, the analyst reports that I read to prepare the market analysis section provided valuable industry insights. And the process of creating the sales and marketing section forced me to think much harder about how I would achieve my goals. But the two to three months I spent creating the plan would have been better spent if I had instead focused on building my product and speaking to potential customers to understand their needs.

Over the years, I have mentored dozens of entrepreneurs seeking venture capital or angel investment in their new companies and reviewed hundreds of business plans. They all seem to be the same. A startup business plan is always a good piece of fiction filled with great ideas. No one really believes what he reads in them. What venture capitalists look for before they make an investment is a proven product with strong market demand and an experienced management team. And angel investors usually invest in vision and enthusiasm.
Validating Your Idea

To prepare a business plan that will lure professional investors, you need to first focus on testing your product or service and defining your business model. Because the truth is, all you really have at the idea stage is an idea. It is best to first validate it and make necessary changes based on what you've learned before you write the plan. Here's what you should consider doing first:

1. Write down your thoughts on the product you want to build and the needs you want to solve. You'll be detailing your hypotheses.

2. Validate these hypotheses with as many potential cust
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Reader's comments(3)
1: Awesome article. It will help me a lot, as I'm a newbie.

Thanks Vivek

Sanjay S Nair
sanjay@sanjaysnair.com
Posted by:Sanjay S Nair - 9th May 2011
2: Great article. Having founded and led two startups for over 16 years and closing the fund for a third one, I can relate to every bit of what Vivek has written.

All said and done, founding a startup is NOT a rocket science. It needs discipline, dedication, perseverance, hard-work and belief in the idea and oneself.

Thanks Vivek for writing this good article.

Ram Ayyakad
ayyakad@gmail.com
Posted by:Ram Ayyakad - 25th Nov 2010
3: good things
Posted by: - 31st Mar 2010
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