That said; you can’t set up a business without one.
His company is a case in point. When the business plan for melbournecoffeereview.com was done in 2007, it was wrapped around the idea of creating a data base of cafes with premium listings.
“The business plan was around that and all the financials were around that with our expectations around cashflow, projections in sales and that sort of stuff,” Christo says.
“But within six months, we had decided we would publish our top 100 cafes and we suddenly became a publisher with advertising sales and publishing costs.”
“And our eye got taken off the ball because suddenly we were a publisher but we were under-resourced.”
“And then before the book even hit the store, we were an iPhone developer because we developed the application that tapped into our data base.”
Getting flexible
He now concedes that the original business model was not sustainable. But circumstances changed, and the company had to be flexible enough to shift its focus, taking the original idea and adapting it.
Despite that, he says getting the original business plan down was important.
“There is no possible way that anyone can foresee anything three months after the boots hit the ground. There is no possible way the business plan will reflect the reality going forward,’’ he says.
“It’s a good exercise to go through because it verifies the intellectual integrity, it verifies the team work, it verifies the ability to conceive business models and put together business cases because you have to sell this stuff.”
He says that despite the limitations of business plans, no start-up should be without one.
“The minute the boots hit the ground and things start happening, something will always happen that was outside the scope of the business plan,’’ he says.
“The benefit of the business plan is not the document itself. It’s the process and the thinking you have to go through. That’s why it is folly to get someone to do the business plan for you; that’s a waste of time and money.”
“The best thing you can do is undertake your own business plan but the minute you print it out and bind it, the reality will take shape.”
Market experiments
He says the business plan for a start-up is totally different to that required for an established business.
“A lot of the stuff you would find out in a normal business plan you won’t find in that. In a lot of cases, it’s about experimenting with the market, experimenting with business models, having enough cash reserves and cashflow to be able to accommodate a dead end,’’ he says.
“It’s very much a different business model.”
“The reality is that 99.9% of new start-ups will morph several times before they actually latch and are successful.”
“Whether it’s a widget, or a business service or a technology, it will change a significant amount of times before it takes. The business plan is always going to be one step behind.”
“The business plan as a concept is a lovely thing to have but in 99% of cases they end up gathering dust on the shelf.”
