burn your business plan

A business journal from the Wharton School of the University of Pennsylvania

Knowledge at Wharton Podcast

Why creating a business plan is a ‘waste of time’, may 24, 2018 • 23 min listen.

What entrepreneurs need is flexibility and innovation -- not a traditional business plan -- says economist and author Carl Schramm.

Economist and author Carl Schramm discusses his new book, 'Burn the Business Plan.'

The following is an edited transcript of the conversation.

Knowledge at Wharton: Why is a business plan unnecessary?

Carl Schramm: It’s the basis of much of the teaching about how to start a business, and so much of what’s taught is basically conjecture. My book is developed off 10 years of research that we did at the Kauffman Foundation. If you look at all our older major corporations  — U.S. Steel, General Electric, IBM, American Airlines — and then you look at our newer companies like Amazon, Apple, Facebook, Microsoft, none of these companies ever had a business plan before they got started. Empirically, it appears as if you don’t need a business plan.

Second, the business planning process is largely generated as a preview for venture capital. As I show in my book, from empirical studies, much less than 1% of all new startups ever see a venture capitalist. Much less than 1% of all new companies every year have venture backing of any kind. So, I largely view the creation of a business plan as something of a waste of time.

The third problem is that it seems to make starting a business somewhat like a cookbook. If you do this, and then you do this, and then you do this, the cake will come out okay. And that’s really not how it happens.

“Empirically, it appears as if you don’t need a business plan.”

Knowledge at Wharton: Let’s talk about age because many entrepreneurs are in their late 30s or 40s. These are people who made a shift in their career paths.

Schramm: Precisely. It goes to this question of, “What are we doing when we’re trying to teach high school kids?” Even grammar school children get courses and exposure to entrepreneurship. At the university level, it’s now a major in probably 3,000 colleges and universities. And the whole schema, including the notion of a business plan as the formal way to teach how to start a business in a college classroom, is geared to 20-year-olds.

Much of our mythology is that unicorn companies are started by people, like Mark Zuckerberg, who are in their 20s. But the reality is, the vast majority of people who start businesses are middle-career people who have been surprised by the fact that they actually had an idea, and their idea was good enough to build a business around.

Another thing wrong with how we write about entrepreneurship, how it’s taught, is that somehow people set out to be entrepreneurs as if they set out to be a dentist or an accountant. The vast majority of entrepreneurs were really amazed to find out that they became an entrepreneur. In my case, I was a professor at Johns Hopkins for 15 years, and then one day my research sort of slapped me in the face. I said, “Holy smokes, if I want to really make this work and actually change the world, I can’t do it by writing an academic paper. I have to start a business.”

Knowledge at Wharton: How should we teach our kids about entrepreneurship?

Schramm: I don’t think [the current curriculum] can be tweaked. I think it should be abandoned. I think it should be overthrown. Because if you look empirically at where entrepreneurs come from, if they have formal training, it’s not in entrepreneurship. It’s in engineering or the STEM subjects, the technical subjects.

Many, many more entrepreneurs come out of MIT because it’s an engineering and a technical school. Same thing for Caltech. Caltech doesn’t even teach entrepreneurship. At MIT, there’s one professor in the business program there who teaches entrepreneurship. But it doesn’t matter because if they didn’t teach it at all, these schools would be producing many, many new businesses all the time.

Knowledge at Wharton: You said not much funding comes from venture capitalists or angel investors. How are entrepreneurs getting the money they need to execute their ideas?

Schramm: One reason people can become entrepreneurs at midlife is they turn to their own savings, their own assets, to friends and families for loans. By the time you’re 40, which is the average age at which people start businesses, you’ve settled your student debt. You’ve got a house. You’re likely to have a spouse who has a job, which is a huge protection if you start a new company because she or he has health insurance and other benefits. So, most companies are self-funded.

Knowledge at Wharton: In the book, you also talk about the incubator. But you think the incubator isn’t having the desired effect that a lot of people are hoping for. Can you explain?

Schramm: Again, empirically, very few companies come out of these incubators. I was trained as a labor economist. I’m in the middle of writing an essay about incubators, and the premise is that as we turn towards 3% and 4% GDP, and much lower rates of unemployment and much higher demand for well-trained people, no one is going to want to spend time in an incubator. They can get a job. And that’s a really important part of the drama of becoming an entrepreneur.

In the book, I make the case that the most effective place to learn how to be entrepreneurial is to go into a big company. That’s where you see innovation happen. More innovation happens in big companies than, for example, university laboratories. It’s also where you learn all the skills that make a business work, where you’re exposed to what scale looks like in a business. This is critical and this is experiential knowledge. You can’t teach scale in a classroom. It has to be felt. You have to see it, to experience it.

“The vast majority of people who start businesses are middle-career people.”

Knowledge at Wharton: You give real-world examples in the book, including the story about vacuum cleaning company Dyson.

Schramm: Yes, Dyson is a fantastic story. James Dyson was an industrial designer by background, and he came to the view that vacuum cleaners had been a technology that hadn’t moved very far. He was using a vacuum cleaner and noticed that the more you used it, and the dirtier the dustbin got, the less power it had. This became the question that triggered his search.

Dyson built over 1,000 prototypes. He quit his job. His wife was a teacher, and he lived off a much more modest income. His wife did all the money-earning in the family. When he began to push his product out, no companies in the United States or England wanted any part of it. They resisted it because they were making a lot of money on selling paper bags for conventional, old-fashioned vacuum cleaners. He had to take it to Japan. When it became successful in Japan, American and British companies tried to steal his design. He successfully defended against that.

The best part of Dyson’s story is he never had outside investors. [Dyson] never wanted to be a public company. It’s a huge company now. He’s like most entrepreneurs. If your idea clicks and you can make it work, and you haven’t taken your company public — that is, you still control it — you’re going to work there for the rest of your life. They become places where your own creativity works, and you can keep at it. You can keep designing. Really, it becomes your life.

It’s an important point, particularly for people who are in higher education. Students in universities are programmed to think that somehow people who work in the government or in nonprofit or NGOs are somehow more creative. They’re like the people who take art and art history and design in college, or people who write music. They’re a different breed, and they’re really geniuses.

The reality is that 95% of kids graduating from college this year are going to work in companies. They’re not not creative. Look at our huge economy. That all happens because of people who are creative and gifted in business and the invention of things that help other people. And [taking] these things to market [requires] very, very creative skills.

Knowledge at Wharton: Would you say that passion and determination are two of the great qualities that a lot of entrepreneurs have?

Schramm: Yes, it’s true. Students in college are told to follow your passion and start a company. But a lot of times, the passion doesn’t make any sense. I’ve seen students who are passionate about having a web app for frying pans. I sort of make fun of it in the book. I’ve judged business plan competitions at the college level and seen the same idea come up five times. Invent a sensor for a frying pan, and it tells you on your phone when your eggs are cooked. Kids are passionate about that, but it’s not an idea that’s ever going to work. They’re making the simplicity of cooking an egg into a complex technical project.

Passion really clicks when you’ve got an idea and it starts to have market feedback. The thrill of it is when other people are saying, “What you came up with is valuable.” What they’re telling you is, “You created something out of your head that makes my life easier, and I value it. So, I’ll give my money to you for your idea.”

Knowledge at Wharton: Is Yeti one of those great ideas?

Schramm: Yeti is a fabulous story. It’s one of those things where those guys didn’t expect to be entrepreneurs. The idea snuck up on then. They love to go fishing, and they fell through regular Igloo boxes because they’re not all that well made. One of the two brothers said, “You know, what we ought to do is make a cooler that’s so sturdy, you could stand on it.” Yeti cooler came out of something just that simple.

Knowledge at Wharton: What are 20-somethings missing to be able to build that great company?

Schramm: They’re missing experience. If you really want to be an entrepreneur and you don’t have a really great idea when you’re 21, getting out of school, don’t fret. Just wait. What shall you do while you wait? Go learn stuff. The stuff you should learn is easiest learned in big businesses because you’ll go out there and watch the innovation process work.

I consult at several companies, and what I’m watching all time is these companies constantly trying to renew themselves with new, better products. They spend a lot of money on research and development. Anybody who’s working in one of these companies can see the constant iterative change that’s taking place. You actually get innovation into your normal daily routine. I think that’s one of the greatest things that you can learn.

The book points to the fact that many new companies come out of old companies. The entrepreneurs see stuff, and two routes are the way this happens. The companies decide that they’re going to stick to their core competency and reject a brand new idea. They often say to people, “if you love this idea so much, go do it with our blessing. You can have the intellectual property.” In some cases, like IBM, they actually finance the startups. That was the case with Cerner, the health care data company.

“More innovation happens in big companies than, for example, university laboratories.”

The other thing is a much more difficult problem. That is, people who go to management and say, “This is the better way to do it,” or “Here’s a new application or a new market, and we have all the technology. If we configure it differently, we can own and capture this market.” MBA-type managers often say, “no, we’re going to stick to our core competency. We don’t know how to do that. It’s not our karma, it’s not our destiny.” And frustrated employees walk out. I interview people like that in the book. They say again and again, “I could have made all this money for my old employer, but they just wouldn’t listen to me.”

Knowledge at Wharton: Are companies wasting their human capital?

Schramm: It’s happening in every single company. You’ve got creative people in there. They might be running a machine. They might be on the production line. They could be any place in your company. They could be at the loading dock. They see things, and they could do things differently.

One of my favorite examples that’s not in the book is container boxes. It’s one of the great logistics revolutions that permits all of our prices for consumer goods to be much, much lower than they would have been. The boxes on the back of a trailer that come off the trailer, go right on a ship.

That was developed by a truck driver in Newark, N.J., In the old days, when trailer trucks were inflexible, they were fixed. Every time you went into a yard or a loading dock, people had to go on the dock, take the stuff off and reload it. He said, “You know, it’s a big steel box. Why don’t you just take the whole box, the whole back end of the truck, and put it on a ship?” This is a truck driver who saw that. He gave us the container revolution that made a world revolution in logistics.

Knowledge at Wharton: There are some very well-known companies like Microsoft and Apple and Facebook that didn’t have a plan at the outset. But now they are working through a variety of plans.

Schramm: That’s right. They went and tried it. We have this drive in our society. I think it’s in human nature. We don’t think that important things happen by chaotic means. If you look around, there are academics and experts who are struggling constantly to make the process of starting a business somehow logical, planned, orderly. These are sort of cookbook approaches.

You don’t have the right answer at the beginning. You never have the right answer. The market changes, technology changes. Your customers’ tastes are changing. Price points change. Your competitors change. You’ve got to be at this all the time. And a lot of times, that’s a hidden assumption in all the advice that’s given to entrepreneurs. If you crack it once, you can go right to the bank. You buy a jet. You’re over with. You do a public offering, and you’re rich and out by 30.

That’s not the case at all. You start a business, that’s only the beginning. And it’s the beginning of trying to make it big because growth is what’s important. Scale is the critical issue. The only way you can get there is constantly reacting to the market and all the signals it’s sending as to what it needs.

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Why You Should Burn Your Business Plan: Interview With Former Kauffman Foundation CEO Carl Schramm

When you started your business, one of the pieces of advise you undoubtedly received from friends, mentors, or your college professors was to have a well written business plan.  Business plans have become essential for entrepreneurs who are looking to raise money to help fund their startups.  But what if business plans are actually hurting entrepreneurs instead of helping them?

Carl Schramm certainly thinks they’re hurting more than helping.  Schramm is the author of  Burn the Business Plan: What Great Entrepreneurs Really Do  (Simon & Schuster). He is a University Professor at Syracuse University and former president of the Ewing Marion Kauffman Foundation. Schramm has served in major corporate roles and chaired the US Department of Commerce’s Measuring Innovation in the Twenty-First Century Economy Advisory Committee. He was also a member of the President’s National Advisory Council on Innovation and Entrepreneurship.

Today we interview Schramm about why business plans don’t work, a few myths about entrepreneurship, and what it really takes to build a scalable business.

Welcome to StartUp Mindset, Carl. We’re excited to have you here.   For the readers who are not familiar with you, could you tell us a little about yourself and your entrepreneurship background?

My career is like everyone else’s whether they know it or not.  By this I mean, looking back it seems that every job expanded my view of the world, made me ready for unexpected new opportunities that I would never imagine were ahead of me.  I think some people are hard wired to be in a circumstance and ready themselves for things ahead even though they can’t be described or even imagined.

I think I was getting ready to be an entrepreneur long before I saw my first opportunity.  When I was 25 I was on the faculty at Johns Hopkins, never possibly thinking I’d be anything other than an academic economist the rest of my life.  Then, I was ambushed by the idea that became my first company.

I was 38 and decided that maybe my destiny was to be a business person.  Anyway I gave it a try.  I think I’ve been able to see opportunity looming ahead a bit better with every year I’ve lived.  I took the CEO job at the Kauffman Foundation really so I could direct research into how entrepreneurship connects to the larger economy.  Five years ago I was surprised once again — when I left Kaufman six or seven universities asked me to consider returning to a professorship.  I chose Syracuse because I wanted to concentrate on teaching undergraduates and to change the course of my own research from business to larger policy issues.

You’ve written a very good book called Burn the Business Plan.  Tell us more about the book and why you decided to write it.

I wrote Burn the Business Plan because, being at Kauffman and having overseen ten years of great scholars doing empirical studies, not case studies, of how entrepreneurs really start their business I became convinced that what we teach intending to prepare would-be entrepreneurs is mostly wrong, that is, the vision driving course work and government policy, including public support of incubators and accelerators, is not resulting in more entrepreneurs.

In fact, as I show in my book, the more we teach more students and the more support we provide, fewer entrepreneurs actually start companies.   In my book I call it the American “crisis” of entrepreneurship.  Of course, the slow down in businesses being started is worse in Europe.  While the numbers are difficult to assess, it does look as if entrepreneurship is rising in China.

Business professors, mentors, and coaches all say that when starting a business, you need a business plan. Why do you disagree?

The answer is simple: most companies start without business plans.  Not only long established major corporations like GE, Proctor and Gamble, IBM, American Airlines, Wells Fargo Bank, Kelloggs and Campbell Soup, but most of the companies we think of as “new” born in the age when we used the term entrepreneur and were conscious of why new companies were so important. There was no business plan for Apple, Microsoft, Oracle, Intel, Uber or Facebook.

So, my question back to professors, mentors and coaches is why would you prescribe something that is clearly not needed to start a business?  But, more importantly, why would someone slow down an enthusiastic entrepreneur for weeks or months going through the motions of planning.  Those who insist on plans know or should know, I certainly do as an entrepreneur and as an investor, that the best plan will last about one second after the doors open on a new business.  To do a twist on Von Molke’s theory about planning in war, a business plan will fail the minute the startup meets its first potential customer.  If it doesn’t the business is likely to fail.

You write that, nowadays, as more business plans are being written, there’s an increasing number of startups that fail. That’s surprising.  Why do you think this is the case?

There are several reasons.  The most important is that our economy has been operating in slow motion.  The “new normal” of 2 percent annualized GDP growth had a hugely dampening effect on entrepreneurs.  Of course, in retrospect this rhetoric reflected Washington’s view that European style industrial policy, which favors giant companies and banks, was the best way to manage the economy.

But, by its nature, protecting big industries, seeing some of them as too big to fail (think GE), is inherently a dampening force on entrepreneurship.  Startups exist to shake up and in some cases kill off sluggish giant companies that have become incompetent at innovation.

When government protects big companies its a sign to startups that the game is rigged.  Regulation serves the same purpose — it always favors established companies.  Put these two things together an its spell a hostile environment for entrepreneurs.

These days when people think of innovative entrepreneurship,  they think of a college kid wearing a hoodie coding the next Facebook while eating pizza in his dorm room.  We tend to think that entrepreneurship is a young person’s game. But in your book, you point out that is not the case. Can you tell us more about that?

Once again, I’ll let the facts tell the story.  The average entrepreneur is 39 years old when he or she starts their company.  There are several reasons.  First, most entrepreneurs have a great idea overtake them, they don’t go searching for an idea to start a business around.  Second, success climbs with age because older entrepreneurs have picked up a great deal of implicit knowledge about how business works.

The average entrepreneur has worked for someone else for more than ten years! Finally, middle aged entrepreneurs are more able to invest the needed first money into their startups.  One reason that favors the cohort 30 to 40 years old is that, on average, student debt is settled when people turn 39.  Why, in the face of these realities, we focus all our energy on encouraging college aged kids to start businesses in puzzling.  Colleges should be attempting to support aspiring entrepreneurs who are well along in life.

In your book, you mention that many very successful companies such as Procter & Gamble, General Electric, Amazon and Facebook didn’t have business plans.  Why do you think those businesses managed to succeed without a written plan?

The reason seems obvious — entrepreneurs learn by doing.  The only way to become and entrepreneur is to try to start a successful business.  This is entirely experiential knowledge.  Procter and Gamble never thought at the outset about being anything other than two men building a soap and candle business.  Importantly, because the word entrepreneur wasn’t in use, they never saw themselves doing anything special.

They were just building a business that would point day by day to its own destiny; that would unfold positively or negatively in response to the founders’ assessment of opportunity and their ability to manage it.  Importantly, they were never seeing their new company as something that was transitory.  They built for lasting value.  The idea of an “exit plan” was about as easy for them to comprehend as imaging a man on the moor or an Internet where they could sell soap in nanoseconds to a householder in Guam.

The SBA reports that two-thirds of all businesses will fail within 2 years. Why do you think this is and how can entrepreneurs avoid becoming a statistic?

The reason is that as always, the deck is stacked against entrepreneurs.  Now, as I said, government has favored big companies even as it talks a great game about the importance of entrepreneurs.  It remains to be seen if the Trump Administration will be more friendly to entrepreneurs.  There is no evidence that the SBA is doing much of anything different.  The agency is committed to the same old tired formula of requiring formal business plans for loans and urging would-be entrepreneur to take formal training.

It has business counselors who have worked in federal service all their lives and know next to nothing of what its like to really take the risk of starting a business.  All this suggests that no matter what, starting a business is inherently risky.  The safest way to own a successful startup is really by buying a franchise developed by a successful company.  Of course, business schools and professors or entrepreneurship don’t regard franchises owners as “real” entrepreneurs.  Ask any franchise owner what his life if like and he will describe what being an entrepreneur is all about.

What growth advice would you give to a startup founder who wants to elevate their business past the survival stage?

This about the “survival stage” as the problem you have to solve today to make your business bigger and more profitable tomorrow.  Keep you eye on scale.  And, if when you have applied all your best thinking to a business and it is not responding, don’t waste more time.  Some dogs can’t hunt.

What one mindset or trait do you feel every entrepreneur must possess in order to become successful?

I think the key is  almost a definition of anti-planning.  What I mean is that every successful entrepreneur I know is somehow able to keep a plastic mind about what he or she is seeing in the environment in which they are competing.  All of us carry visions of how the relevant market our companies work in will behave in the long-term future.  It is hard to subject our vision to continuous adjustment.

This is not easy because it requires us to doubt what we think we know and the actions we have taken.  The whole notion of “pivoting” requires the ability to abandon one vision of how the future is likely to happen for another, all the while making critical decisions on very little evidence.  Entrepreneurs who hold fast to a plan, somewhat like a security blanket — “I believed this is the path to success back then, my investors believe it too, therefore I must keep trying this,” — are as like as not to fail.

The world is chaotic, customers are fickle, employees are not perfect, technology is unpredictable, and Black Swans keep showing up, commonly as recessions.  Great entrepreneurs sometimes seem to be the antithesis of great managers because they know that until their company is up and running, the path toward success is requires constantly adjusting any and every aspect of the environment they control.

For more information, please visit  http://carlschramm.com  and follow Carl on Twitter  @CarlSchramm  

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Ralph is the Managing Editor at StartUp Mindset. The StartUp Mindset team consists of dedicated individuals and is designed to help new, seasoned, and aspiring entrepreneurs succeed.

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Entrepreneurs: It’s Time To Burn Your Business Plan

Entrepreneurs know that the first step to starting a business is gathering data, doing the research, and coming up with a business plan. Fill it with deadlines, projections, statistics, achievable milestones, and a healthy dose of jargon. This is the way business plans have always been approached. But what if it could be done differently? What if you could achieve success as an entrepreneur by burning your business plan?

Carl Schramm is a professor at Syracuse University and former president of the Ewing Marion Kauffman Foundation. He served in major corporate roles, and he was a member of the President's National Advisory Council on Innovation and Entrepreneurship. His new book is Burn The Business Plan: What Great Entrepreneurs Really Do .

I recently interviewed Schramm for the LEADx leadership Show , where we discussed his no-plan approach to start ps, and the myth of youth in new business. (The interview below has been lightly edited for space and clarity.)

Kevin Kruse: What's the big idea of your book Burn The Business Plan ?

Carl Schramm : I was president of the Kauffman Foundation for 10 years. We built a research unit, economists for the most part, not business professors doing case studies. And what we found was radically different observations about who the entrepreneurial population is, and I think they're very useful for people to think about. So I guess in a sense, one of the biggest ideas in the book is that the average entrepreneur is 39 years old when he or she starts a business.

The second one, which I think is probably even more important, and you can't have one without the other, is that the average entrepreneur worked in business for 15 years before they started a business. Now, that is such a radical break with the stuff that's pumped out in the business literature. It's the stuff of academic business literature, and I made this point before, the reason is that business professors who study this, entrepreneurship professors, they study case after case, and you know, we have a confirmation bias.

A lot of people think, “Oh, I want to hang around with young people.” Well, that becomes a confirmation bias. You tell stories of youngsters or somebody who might be 35 who started their business when they were 21. So it becomes a narrative of youth. It was after I wrote the book that I actually looked at my own career and said, “Holy smokes, I started my first business at 38, just like the book says.”

Kruse: Should we burn the modern variations of the business plan, like the one-page Lean Canvas and things like that?

Schramm : I wrote a piece about how the plan isn't everything, and it basically attends to this question, “Why is planning useful?” And it's hard to say.

We all plan. If tomorrow you say, “I'm going on a picnic,” you go to the grocery store today and buy hot dogs. You're going to have kids, you buy a bigger house, a station wagon, and you give up your sports car. We do planning. It's endemic.

On the other hand, this ritual of business planning, I think that Eric Ries' books are critiques of business planning, but they get it wrong. What they basically say is the plan is ridiculous. They know that because they didn't write plans themselves. The founders of Apple and Facebook and Microsoft and Google and Uber? No business plans.

So why are we doing this? I think in a sense they're useful, we're going to do it anyway, but anyone could create a lean startup. I started five businesses. At the moment, I'm invested in at least a dozen businesses. I've never read a business plan for any one of them, and I never wrote a business plan. Does it mean that I don't think there's a course charted out for every one of the companies I started, or I would invest in a company where I couldn't see some vague way that they're going to be successful? Not to get to an exit. How are they going to be successful? The exit will happen. That's natural.

And that's one of the biggest critiques I have of business planning. You know, Procter & Gamble, General Motors or Wells Fargo, these guys started businesses that they would pass on to future generations. If you said to Mr. Procter and Mr. Gamble whenever they started business, “How are you getting out of this?” They'd say, “What are you talking about? We started this because it's a creative platform for our lives. We know how to make soap. We know how to make candles. We're helping people in the market. What could be better? And by the way, we're getting wealthy.”

Kruse: You say, “Be realistic about time and build your company as your life.” Tell me more.

Schramm : Part of the problem with business planning is that you get a calendar put in front of you. The formal business plan actually has a calendar, so you need this much money, and you'll hit these milestones. It's a management vocabulary, and we'll be out in five years at a 15 return on your investors' money.

These calendars can't work in business. Anybody who's run a business knows that. So that's the first thing, you have to be realistic about time. You're jumping off, and you don't know where this journey's going. I think that's one of the most difficult things with business plans is it actually puts blinders on, particularly if you've got investors who you've promised to pursue this line. I tell the story of Michael Levin in the book, who had to buy his investors out because he would've crashed and burned if he stuck on the business plan, and then suddenly, he realized that he had a software business, not a steel business, which was a huge revelation.

Regarding the next part, which I think is in a way the most important part, is that this becomes your life and your identity. Part of my life is I'm a professor. Part of my life is I'm an investor. Part of my life is I'm an author. What you do becomes your identity, and the notion that you're going to do this sort of walled off from your family and your hobby is unrealistic. If you're going to have a successful business, this is going to become you, and if you're lucky these become fantastic platforms for creativity.

Starting a business doesn’t always have to start with a plan. You also don’t have to be a 20-something to attain success. Instead, live and breathe your business, and release yourself from the constraints of planning.

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Planning, on the other hand, is predicting. And writing a business plan for a business you have yet to live out is all about relying on the past and using what you already know to make future decisions. Well, that just sounds wrong.

Staying alert

Planning doesn't leave much room for improvement or improvisation. Your business plan (which is likely already irrelevant the day after you write it) rarely unfolds exactly as outlined, and that's probably a very good thing!

Business plans often distract you and prevent you from noticing or paying attention to things you didn't see coming – things that could help or could harm your business.

Planning doesn't leave much room for improvement

You become so focused on sticking to the plan, that it becomes easy to miss or ignore opportunities that you didn't foresee. And, often, anything that deviates from the plan becomes a no-no, when it could be the best thing for your business.

What's worse is that planning makes you feel in control of things that are often completely out of your hands, which is a scary place to put yourself. Learning, adjusting as you go and being open to feedback is more important than stressing over staying the course.

Can't plan for everything

To put it differently, if you asked an expectant mother to write a plan for raising her child and checked back in with her a few years later to see how her plan was going, she'd likely laugh and tell you she used it as a stand-in napkin for baby barf. You simply can't plan for everything, including (and probably especially) your business. So why not give yourself some credit; chances are you're smarter and savvier than a stapled document.

I'm not saying to hell with business plans!' per se, rather I'm encouraging you to see them for what they are: loose and totally non-precious predictions. There's nothing wrong with being organised and having a loose notion of the future, but don't make a long-term plan your bible.

Instead of wasting time typing out a lengthy plan for the next decade, make short-term, scribbled guesses, seek feedback, research and focus on daily, weekly or even monthly goals – bite-sized plans of action you can test and tweak.

Learn as you go and embrace the fear of the unknown, because the only thing worse than the chaos of living and learning is following a dated map while you're blindfolded.

Illustration: Żaneta Antosik Words: Sabrina Smelko

Since graduating from her illustration course in 2012, award-winning graphic designer and illustrator Sabrina Smelko has amassed a client list that includes Cadbury and The New York Times.

This feature first appeared inside Computer Arts 237: Pick the Perfect Typeface .

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Burn The Business Plan: What Great Entrepreneurs Really Do

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T1 - Burn The Business Plan

T2 - What Great Entrepreneurs Really Do

AU - Schramm, Carl

PY - 2019/1/8

Y1 - 2019/1/8

N2 - Business startup advice from the former president of the Ewing Marion Kaufmann Foundation and cofounder of Global Entrepreneurship Week and StartUp America, this “thoughtful study of ‘how businesses really start, grow, and prosper’...dispels quite a few business myths along the way” (Publishers Weekly).Carl Schramm, the man described by The Economist as “The Evangelist of Entrepreneurship,” has written a myth-busting guide packed with tools and techniques to help you get your big idea off the ground. Schramm believes that entrepreneurship has been misrepresented by the media, business books, university programs, and MBA courses. For example, despite the emphasis on the business plan in most business schools, some of the most successful companies in history—Apple, Microsoft, Google, Facebook, and hundreds of others—achieved success before they ever had a business plan.Burn the Business Plan punctures the myth of the cool, tech-savvy twenty-something entrepreneur with nothing to lose and venture capital to burn. In fact most people who start businesses are juggling careers and mortgages just like you. The average entrepreneur is actually thirty-nine years old, and the success rate of entrepreneurs over forty is five times higher than that of those under age thirty. Entrepreneurs who come out of the corporate world often have discovered a need for a product or service and have valuable contacts to help them get started.Filled with stories of successful entrepreneurs who drew on real-life experience rather than academic coursework, Burn the Business Plan is the guide to starting and running a business that will actually work for the rest of us.

AB - Business startup advice from the former president of the Ewing Marion Kaufmann Foundation and cofounder of Global Entrepreneurship Week and StartUp America, this “thoughtful study of ‘how businesses really start, grow, and prosper’...dispels quite a few business myths along the way” (Publishers Weekly).Carl Schramm, the man described by The Economist as “The Evangelist of Entrepreneurship,” has written a myth-busting guide packed with tools and techniques to help you get your big idea off the ground. Schramm believes that entrepreneurship has been misrepresented by the media, business books, university programs, and MBA courses. For example, despite the emphasis on the business plan in most business schools, some of the most successful companies in history—Apple, Microsoft, Google, Facebook, and hundreds of others—achieved success before they ever had a business plan.Burn the Business Plan punctures the myth of the cool, tech-savvy twenty-something entrepreneur with nothing to lose and venture capital to burn. In fact most people who start businesses are juggling careers and mortgages just like you. The average entrepreneur is actually thirty-nine years old, and the success rate of entrepreneurs over forty is five times higher than that of those under age thirty. Entrepreneurs who come out of the corporate world often have discovered a need for a product or service and have valuable contacts to help them get started.Filled with stories of successful entrepreneurs who drew on real-life experience rather than academic coursework, Burn the Business Plan is the guide to starting and running a business that will actually work for the rest of us.

KW - entrepreneurs

KW - innovation

KW - small businesses

SN - 9781476794372

SN - 9781476794358

SN - 1476794359

BT - Burn The Business Plan

PB - Simon & Schuster

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Burn The Business Plan: What Great Entrepreneurs Really Do Kindle Edition

How would you like to get business startup advice straight from the man who co-founded Global Entrepreneurship Week and StartUp America? Well now you can. Carl Schramm, the man described by The Economist as 'The Evangelist of Entrepreneurship', has written a myth-busting guide packed with tools and techniques to help you get your big idea off the ground. Carl believes that entrepreneurship has been completely misrepresented by the media, business books, university programmes and MBA courses. He believes that the perception of what it takes to start a business no longer matches the reality - which is bad news for everyone because it stops great ideas coming to life. Burn the Business Plan punctures the myth of the cool, tech-savvy 20-something entrepreneur with nothing to lose and venture capital to burn, showing that most people who start businesses are juggling careers and mortgages just like you. Burn the Business Plan is written to encourage you to get started. It demystifies the entrepreneurial process portrayed on television shows like Dragon's Den . It doesn't rely on largely irrelevant stories of overvalued tech startups, nor does it build on the largely mistaken narrative of a linear path from cold start to great success that is the essence of business planning, as taught in universities. This is the guide to starting and running a business that will actually work for the rest of us. Burn the Business Plan is for regular people who just want practical, real-world advice on how to start and run a successful business. It shows you how to avoid the common mistakes and what you need to do to put your enterprise on track for success.

• Print length 289 pages
• Language English
• Sticky notes On Kindle Scribe
• Publisher Nicholas Brealey Publishing
• Publication date January 18, 2018
• File size 442 KB
• Page Flip Enabled
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About the author, excerpt. © reprinted by permission. all rights reserved., product details.

• ASIN ‏ : ‎ B0118V2BLA
• Publisher ‏ : ‎ Nicholas Brealey Publishing (January 18, 2018)
• Publication date ‏ : ‎ January 18, 2018
• Language ‏ : ‎ English
• File size ‏ : ‎ 442 KB
• Text-to-Speech ‏ : ‎ Enabled
• Screen Reader ‏ : ‎ Supported
• Enhanced typesetting ‏ : ‎ Enabled
• X-Ray ‏ : ‎ Enabled
• Word Wise ‏ : ‎ Enabled
• Sticky notes ‏ : ‎ On Kindle Scribe
• Print length ‏ : ‎ 289 pages
• #1,850 in Startups
• #2,912 in Business Systems & Planning
• #5,658 in Strategic Business Planning

About the author

Carl j. schramm.

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Burn Your Business Plan!

Back in 1995, when I co-founded an Internet marketing company, NetMarquee Inc., one of the first tasks my partner and I took on was to write a thorough business plan in order to raise money for our new venture. After all, isn’t that the first lesson you learn in any course having to do with starting a business? Isn’t that what the business media recommend in hundreds of articles and books?

My partner and I sent our plan around to venture capitalists and met with several to make presentations. No money came of this effort, and at several points during 1995 we contemplated giving up on the venture. But we had recruited a board of advisors with broad experience in growth-company strategy, finance, and marketing, and the members advised us to spend less time massaging our business plan and more time making sales. The financing will come later, they suggested.

So we made a few sales, enough to stay afloat through 1996. In 1997, when we made a major change in our strategy and product offerings, and sales failed to grow as quickly as we expected, we decided to try the financing route again. This time, we figured, financing should be easier to obtain, since we were fairly well established.

Once again, our advisory board told us not to bother. Professional investors don’t want to back a company that actually needs money. They’re like bankers in that they like to support companies that don’t necessarily need the funds. Get out there and promote yourselves and make more sales, they advised us, in what was becoming a regular refrain.

Banking on the Plan

But we were stubborn. We dusted off our old business plan from a couple years back and spent many hours rewriting and updating the document. We went off seeking financing and, once again, it was thumbs down. Down certainly described our feeling, since it seemed that every new Internet-related venture in the world was obtaining financing. The numbers would suggest that, as the amount of venture capital – a seemingly substantial $7.7 billion in 1995 — had grown to $16.4 billion by 1997, according to the MoneyTree Survey, sponsored by Price Waterhouse Coopers, Venture Economics, and the National Venture Capital Association.

Our choice at this stage was stark: Find ways to grow the business without financing or fold up the tent. We took the first choice, and lo and behold, the business began to gain traction. We engaged public-relations professionals, and they succeeded in getting several of our most successful corporate clients written up in business and industry trade publications – with mention of our agency as the key force behind these clients’ online success. Those write-ups got the phones ringing with new prospects, several of which turned into clients that generated additional sales.

Even as the business grew, though, we were vigilant about monitoring our expenses and aggressively collecting receivables. We got a kick out of the stories of venture-backed Internet startups purchasing fancy $1,200 conference room chairs. Our conference room chairs were mostly desk chairs we wheeled in from vacant workstations for meetings, and then wheeled back out when meetings ended. At one point, we partnered with another agency, with venture backing, which confided that many of its receivables were six months or more past due. Once again we had to chuckle, because we had become obsessive about phoning clients on day 31 if invoices weren’t paid, and thereby maintaining a healthy cash flow.

By 1999, we were operating profitably at $2 million annual revenues, with nearly 20 employees. The amount of venture capital being invested nationally had soared to an astounding $55.5 billion, but we paid little attention, as our interest in outside financing had dropped significantly. (Venture capital availability would soar even further in 2000, to a peak of $85.5 billion.)

Rethinking the Plan

My point in recounting our financing experience is twofold. First, the venture capital route is closed to the vast majority of businesses that seek it out – even during good times. While it might have seemed back then that nearly every business that wanted it was receiving venture capital, the reality is that most entrepreneurs have the same experience my partner and I had: their carefully crafted business plans are rejected out of hand by venture capitalists. Second, it’s often amazing what you can accomplish without the financing you are convinced is essential to stave off failure.

As for the rest of the story: our success in 1998 and 1999 attracted the attention of a publicly held company that was seeking the expertise we offered in developing and managing online content, and in December 1999 this company acquired NetMarquee. Even though an acquisition is really an investment situation, the acquirer never asked to see our business plan; it only wanted to see financial projections under several different scenarios.

I came to realize then that in three potentially significant financing-related events for our company, namely seeking financing in 1995 and 1997, and then selling the company in 1999, a written business plan had been of absolutely no use to us. You might say, “Well, just having gone through the process of writing a plan probably helped you grow the business.” I wish I could say that, but I have doubts about that as well. The written plans we put together assumed faster growth based on having received funding. The plan we actually followed was a slow-growth plan that wasn’t part of our write-up.

The realization about planning was especially important to me, since prior to launching NetMarquee, I had authored two widely read books about how to write a business plan: Business Plans That Win $$$: Lessons from the MIT Enterprise Forum (with Stanley Rich) and How to Really Create a Successful Business Plan . After we sold NetMarquee, I decided to revisit the whole subject of business planning. I spoke with entrepreneurs who had obtained financing, and I surveyed venture capitalists to learn the real role of business plans in raising money. I confirmed my experience as an entrepreneur. A lot of potentially deserving entrepreneurs never get their plans funded, and many others that do obtain funding actually do so without ever writing a business plan.

Act, Don’t Plan

I decided to write a book challenging the preeminence of the written business plan, with the same title as this article: Burn Your Business Plan! What Investors Really Want from Entrepreneurs . It argues that entrepreneurs should focus their company-building efforts on such tasks as creating a Web site that communicates their business model, obtaining publicity, keeping the finances under control, and making sales before thinking seriously about writing a business plan.

According to the conventional wisdom, we’re now in the third year of tough economic times. Business is quite difficult in many industries, and financing seems to be unavailable to young companies. Yet it’s interesting to note that during the first three quarters of 2002, venture capitalists have invested nearly $17 billion, more than all of 1997, which at the time seemed like a great year.

Increasingly, though, I am convinced that the key to the success of most young businesses is to ignore all the venture capital statistics and admonitions to write business plans, and instead use all the creativity and diligence you can muster to tend to your business. Put another way, you should be doing, rather than writing about what you will do.

We will keep fighting for all libraries - stand with us!

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How a great business plan will maximize your risk of failure

The business plan is a great execution tool. Yet, requiring a business plan during the early stages of idea development might maximize the risk of failure. Large organizations in particular still require business plans. That is an error. In this post we outline three reasons why companies should drop business plans in favor of a more rapid and iterative approach.

While business plans are less and less common in the startup world, they persist in large corporations. In large companies it’s not uncommon that a team of several people spends a couple of weeks developing a business plan. They will first spend time on market research. Then they will craft a detailed plan with an impressive financial spreadsheet looking 3-5 years ahead. Finally, all of this will be summarized in a beautiful slide deck to convince top leadership or investors of the brilliance of the idea.

Great business plans can look so good and have such convincing arguments that it becomes hard to doubt them. Unfortunately this false illusion of security may also maximize the risk of failure (or waste time and money at the very least). No company wants that. Let’s look at three reasons why requiring business plans is a bad idea.

1) Getting too granular too early = you risk wasting time

One of the dangers of writing a business plan is to spend too much time refining an idea before it is really proven. Unfortunately, “no business plan (however smart it looks) survives first contact with customers”, as Steve Blank the initiator of the Lean Startup movement likes to say.

Rather than refining an idea at the early stages, you should test it immediately and evolve it based on market feedback. Otherwise you risk wasting time working on refining an idea that nobody cares about. The problem is that you’ll only realize that much, much later. 

TIP: Keep your early ideas very rough (e.g. on one page with the Business Model and/or Value Proposition Canvas) and immediately test them. Gradually refine your ideas with increasing  evidence.

2) Selling an idea & plan to leadership or investors  = You risk getting locked-in

Where it starts getting dangerous is when a team sells their top leadership or investors a polished and refined business plan - before rigorously testing the underlying business model and value proposition(s) in the market.

When leadership or investors buy and finance a plan they expect that success is a mere execution problem. They expect that beautiful and detailed spreadsheet in the business plan to materialize exactly how you projected it. In other words, you just got locked into a plan that was entirely made up. You are forced to execute an idea that is yet to be proven. If you want to change direction later on, it will be difficult to convince leadership because you sold them something else.

TIP: Don't sell leadership a polished and refined business plan. Sell them an opportunity and a rigorous process that will turn your idea into an executable business model by producing market evidence. Show them how this approach will minimize the risk of failure, as opposed to a business plan which maximizes the risk of getting locked into one direction that is yet to be proven.

3) Hiring based on an idea & plan = you risk premature scaling

The biggest risk of business plans is that they may lead to premature scaling. This happens when you hire people and spend money on key resources based on a plan rather than market evidence. In other words, you get into "execution mode" before you fully finished the "search" for the right business model and value proposition(s). We wrote about this in a recent post on how Great Execution of Bad Ideas Kills Businesses . 

This type of premature scaling of great looking business plans can lead to enormous financial losses. My "favorite" examples are Flo TV by Qualcomm ($1+ billion loss) or  Better Place , a startup that aimed at getting people to use electric vehicles ($850 million loss).

TIP: Don't invest in execution until you have strong evidence that your idea will work. Otherwise you risk premature scaling and running out of money.

Burn your business plan before it burns you

At Strategyzer, we are no enemies of business plans if they are used purely for execution purposes. Unfortunately we've seen too much damage from business plans used during the early stages of idea development - particularly at large organizations.

There is no place for a business plan when you are still searching for the right business model and value proposition for your idea. It's simply the wrong tool for the task and it might even lead to maximizing your risk of failure.

Business plans should be replaced by a more dynamic approach until you have sufficient evidence that your idea will work. Only then should you consider crafting a business plan. Until then, we suggest you burn your business plan before it burns you.  

Does your organization still require business plans? What's the impact?

About the speakers

Dr. Alexander (Alex) Osterwalder is one of the world’s most influential innovation experts, a leading author, entrepreneur and in-demand speaker whose work has changed the way established companies do business and how new ventures get started.

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Burn Your Business Plan!: What Investors Really Want from Entrepreneurs Paperback – 1 April 2003

• Print length 178 pages
• Language English
• Publisher Lauson Publishing
• Publication date 1 April 2003
• Dimensions 15.88 x 1.27 x 22.86 cm
• ISBN-10 0970118155
• ISBN-13 978-0970118158
• See all details

Product details

• Publisher ‏ : ‎ Lauson Publishing (1 April 2003)
• Language ‏ : ‎ English
• Paperback ‏ : ‎ 178 pages
• ISBN-10 ‏ : ‎ 0970118155
• ISBN-13 ‏ : ‎ 978-0970118158
• Dimensions ‏ : ‎ 15.88 x 1.27 x 22.86 cm

About the author

David e. gumpert.

David E. Gumpert grew up on the South Side of Chicago, in South Shore and Hyde Park. In the years since graduating the University of Chicago, he has attended Columbia Journalism School and worked as a reporter for The Wall Street Journal and an editor for the Harvard Business Review and Inc. magazine. He has also authored ten nonfiction books on a variety of subjects—from entrepreneurship and small business management to food politics. His most prominent titles include How to Really Create a Successful Business Plan (from Inc. Publishing); How to Really Start Your Own Business (Inc. Publishing); Life, Liberty and the Pursuit of Food Rights (Chelsea Green Publishing), and The Raw Milk Answer Book (Lauson Publishing).

He spent ten years in the 1990s and early 2000s researching his family's history during the Holocaust. The result was a book co-authored with his deceased aunt Inge Belier: Inge: A Girl’s Journey Through Nazi Europe (Wm. B. Eerdmans Publishing).

He spent much of the last half-dozen years going back to his own roots in Chicago to research and write the historical novel, Gouster Girl. While some of it stems from his own experiences growing up in South Shore and Hyde Park, he also conducted significant additional research to complete the book in late 2019.

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How Burnout Became Normal — and How to Push Back Against It

• Kandi Wiens

Seven strategies to get back to a healthy baseline.

Slowly but steadily, while we’ve been preoccupied with trying to meet demands that outstrip our resources, grappling with unfair treatment, or watching our working hours encroach upon our downtime, burnout has become the new baseline in many work environments. From the 40% of Gen Z workers who believe burnout is an inevitable part of success, to executives who believe high-pressure, “trial-by-fire” assignments are a required rite of passage, to toxic hustle culture that pushes busyness as a badge of honor, too many of us now expect to feel overwhelmed, over-stressed, and eventually burned out at work. When pressures are mounting and your work environment continues to be stressful, it’s all the more important to take proactive steps to return to your personal sweet spot of stress and remain there as long as you can. The author presents several strategies.

If we’re exposed to something repeatedly, it seems we can become desensitized to almost anything. An event that once evoked shock can come to seem routine; what once prompted alarm can eventually inspire no more than a shrug.

• Kandi Wiens , EdD, is a senior fellow at the University of Pennsylvania Graduate School of Education and the author of the book Burnout Immunity : How Emotional Intelligence Can Help You Build Resilience and Heal Your Relationship with Work (HarperCollins, 2024). A nationally known researcher and speaker on burnout, emotional intelligence, and resilience, she developed the Burnout Quiz to help people understand if they’re at risk of burning out.

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