The following post is from an upcoming study by Endeavor’s Center for High-Impact Entrepreneurship (C-HIE) on key success strategies for start-ups. The study is based on interviews with 55 High-Impact Endeavor Entrepreneurs from 11 countries. In honor of Global Entrepreneurship Week, we’re sharing five of our favorite “Rules for Becoming a High-Impact Entrepreneur” from this study, with input from some wise Endeavor friends. The full report will be available soon.
Forget what your professor said: some of the world’s most renowned entrepreneurs never wrote a formal business plan. These entrepreneurs argue that, while there is significant value in thinking about the fundamental aspects of a new business, being overly-committed to a paper copy of a business plan stifles an entrepreneur’s flexibility, making it difficult to adapt to challenges and to respond to new opportunities. When starting a company, you can’t be tied to a business plan.
At the 2011 Endeavor Entrepreneur Summit, Scott McNealy, the Co-Founder and former CEO of Sun Microsystems, spoke to Endeavor Entrepreneurs about the need to be flexible with a business plan.
“If you’ve gone to business school, you learn ‘gotta have a mission, gotta have a vision, gotta have strategies, gotta have objectives, and tactics.’ You write this all up and it’s called a business plan. And that’s a necessary component of what you’re doing. Now the problem is, you shouldn’t do it in hard copy; you should do it online because it’s going to change. And I tell everybody who comes into any startup that I’m involved in, things are going to change above, below, and around you faster than any other place you’ve ever been. And be prepared for that, and to accept change. You know, I don’t think that Apple knew that word processing was going to be their number one market, I don’t think IBM realized that Lotus 123 would be the reason people bought their computer at the start, I don’t think that eBay knew that Beanie Babies was going to be the thing that happened, and I don’t think that Google got started knowing that Page Rank search, selling words to the highest bidder every day was going to be their business model. So you gotta be prepared to get lucky, to be opportunistic, and have that plan.”
Data from Endeavor’s Center for High-Impact Entrepreneurship confirms that many High-Impact Entrepreneurs never wrote a business plan.
Seventy-one percent of the best entrepreneurs that C-HIE interviewed – those whose companies have grown at an average rate of 20% or greater over the last three years – did not write a business plan. And, amongst all of the entrepreneurs that C-HIE spoke with – both those that started with a paper business plan and those that started with a mental business plan – eighty percent made some change to their businesses design during start-up. These results suggest that entrepreneurs need to lay out a rough concept of future strategy; however, they should not put on paper what will likely change within minutes.
Endeavor Entrepreneurs and sisters Nadia and Hind Wassef didn’t write a business plan when they founded Diwan Bookstore in Cairo; they merely mapped out a basic outline of what they wanted to sell. In retrospect, they believe that if they had created a business plan, the low forecasted revenue figures might have actually dissuaded them from their entrepreneurial ventures. Instead, they opened their first bookstore based on an initial concept, and then made adjustments before opening additional locations. Nadia explained: “I never wanted a formal business plan. We just had a hunch and a very rough business plan in our heads. There was something fantastic about having the fluidity to make mistakes and having an open heart to learn from them. By far the most valuable investment we’ve ever made is our mistakes. And, if we’d had a rigid business plan, we probably would not have allowed ourselves to explore and make mistakes.”
“Exploring” and adapting their business plan seems to have been the right choice for Nadia and Hind. Today, Diwan Bookstore has ten stores in Cairo and employs over 200 people. During the 2011 Arab Spring, Nadia and Hind quickly responded to the revolution by incorporating it into their business plan: they held lectures at Diwan stores, offering Egyptians a place to congregate and discuss during troubling times.