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Pawel Brodzinski on Software Project Management

Top 5 Reasons Why Business Plans Suck

Recently I wrote why business plans are important when you think about starting a company. OK, having a business plan doesn’t automatically mean you have a good business plan. What most often makes a business plan a piece of crap?

1. Undiscovered environment.
You haven’t checked competitors and products which exist on the market. You think you’re unique but you haven’t really checked. You can end up with a great plan to discover and conquer virgin land. Unfortunately it’s already overcrowded. This is by the way the major reason why my last business plan sucked.

2. Business model not clear.
There are people out there who are your potential clients. Do you know how to reach them? And when you reach them do you have a plan how to convince them to pay for your crap… I mean product? This is a tricky part for technical people because it usually takes some marketing to achieve a goal. And we don’t even like a sound of m-word, do we?

3. Price as differentiator.
If the only thing which differentiates your product from others is price, well, as far as you don’t own a factory in China that’s a problem. Price is the easiest thing to be changed by your competitors. They can kill you in a couple of months and don’t even sweat.

4. Made-up numbers.
In every business plan you need some numbers. You can make them up on the fly. “We’ll have $100,000 costs so we need $150,000 income. Let’s write it down. Looks fine.” Sure, it looks nice indeed. However you can expect a visit from Mr Reality who will adjust your income plan a bit. He’ll take away 0 here and 1 there and your real numbers will suck.

5. Personal bias.
When we play with our own idea most of the time we aren’t objective about it. We imply everyone would use the service/product/whatever because we’d use it. That reminds me an old discussion with a friend “would you pay more for a taxi if you were guaranteed a taxi-driver was nice?” I would, but somehow I’m yet to see a taxi company which would use “we’re friendly” as a slogan.

Whole Entrepreneurs Time series.

in: entrepreneurship, software business

4 comments… add one

  • Paul Marculescu January 16, 2009, 8:54 am

    Witty post :)

    Personally, I don’t think there aren’t new ideas anymore, but new approaches. :) Maybe I’m wrong, but I often get inputs like this from my friends: “I have this great idea about a tool to mingle with feeds.” “Did you try Yahoo pipes?” “Damn it!”. The first thing I do when I get an idea is to check how it was already approached.

    The price issue is tricky. Charge too low and you might be considered “cheap”, charge too high and you might get rich. :)

    I’m curious, why did you put the same photo with the guy talking on the phone in your last 4 posts?

  • Pawel Brodzinski January 16, 2009, 9:54 am

    Most of ideas we have aren’t unique. If they were each of us could have tens of different businesses. There aren’t enough niches out there. At least niches which can make a profitable business.

    Pricing is a huge topic to cover, but that’s not an area which I have much expertise in. My point is that your product must have other differentiators than price. In given example Joel gathered different community than 37signals and that was something he could exploit.

    The guy on the picture is my happy-entrepreneur a face of entreprenurs time series. But maybe you’re right – I should mix pictures in different posts.

  • Secure network setup India January 20, 2009, 5:43 am

    Pretty Interesting to know that you have done research on the business plans that sucks.. Have you faced this problems initially in your planning??
    I think if a person is fresher, his plan has to suck because of lack of experience. With experience he will know what to do and what not…

  • Pawel Brodzinski January 20, 2009, 6:10 am

    My writing bases mainly on my experience and this post is no different. Yes, I faced above issues with a few of my business plans. And yes, I failed a few times too.

    While I think the more experience you the bigger are chances of success I don’t think a plan of freshman must suck. If you look at today giants they launched their first businesses (not necessaily the firs idea) and look where they are. Maybe their plans were good enough or maybe they were just lucky but if I had to guess I say the former is true.

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