The Secret Sauce of a Successful Venture

There are plenty of stories about failed ventures, of failed products and services that just did work in the marketplace. Equally, there are stories of successful businesses, and behind those stories are the stories of the intrepid founder whom led his/her company from obscurity to notoriety. 

So, it only makes sense to study and try to understand what separates the not-so-successful from the extraordinary.  Is it planning? Is successful exclusively dependent on the product or service?  Or, is success  determined by the quality of its leader?  From my research,  the answer is “all of the above”.

During my last post, I discussed author and Tufts University professor Amar Bhide’s opinion on business plans, calling it an antiquated process that trains entrepreneurs to develop a “one-size fits all” approach.   I would have to agree. As I begin to wrap up the final details of my venture planning, I have learned that while it is good to plan, flexibility, adaptability, and creativity are the most important qualities any venture (and its leader) can have.  One has to have the vision and gumption to react to market and consumer changes, for opportunities come in the most expected forms.

Another reason I have adapted Bhide’s strategy of flexible business planning is the fact that I do not want to actual document to dictate the direction of the business (business, after all, is a living, breathing thing) and become paralyzed by possibilities if they fall outside the scope of the original plan.  (Beth Comstock, Senior Vice President and Chief Marketing Officer of GE does a good job of explaining this here.  I’ve now begun to think of my venture as a dynamic entity,  open to change, so, when I am forecasting sales, I now have a tendency to plan for a multitude of products and services (I originally set out as a service-oriented business) to address my best assumption of marketplace trends. I want my business to be nimble enough to adapt to the future. Although the income projection section will probably always be the most important section investors will look at, I tend to think that the Mission and Backgrounder section will hold as much weight.

Business Plan Expert: Amar Bhide

There have been scores of stories about companies that have started without the use of a formal business plan, defied conventional wisdom and all odds, to go on to create not only successful businesses, rather, empires.  As a matter of fact, an Inc. 500 survey found that only “40% of business founders had written a formalized business plan before they launched their company, of the 40% whom said yes, only 12% said they had conducted formal market research, and 65% said their business had strayed significantly from the written plan”.  With stats such as these supporting the mantra of the creative and flexible entrepreneur whom forgoes the business plan, does this mean the mantra of the business plan is stale?

Economist Amar Bhide, a Tufts University professor, and author of The Origin and Evolution of New Business, Call for Judgment: Sensible Finance for a Dynamic Economy, and The Questions Every Entrepreneur Must Answer,  says that a “comprehensive analytical approach to planning does not suit most start-ups”,  Bhide proposes a simple structure asking the “entrepreneur to assess their personal goals, their strategy for how well the business achieves these goals, and then runs through how well you are equipped to execute this strategy,”  Bhide  also reminds individuals that their “businesses will require different strengths and skills from you as it grows, and illuminates how your role as the founder must evolve as the business grows.” Bhide adds that a traditional business plan does not reflect this sort of flexible strategy and that investors, which may range from a variety of institutions including billion dollar venture capital funds to friends and family, typically looks for innovation, value proposition and market analysis as benchmarks in a successful business plan/venture because it says that an entrepreneur has done his due diligence. However, in today’s complex, and technological advanced environment when things are changing rapidly, the time an entrepreneur would spend conducting extensive analysis to bolster a solid business plan would actually take away from opportunities the business could be seizing. Finally, Bhide says that a large portion of businesses today are started with the aid of venture capital, so there is little downside to being wrong – if a venture does not work out, it can be modified or the completely scrapped –without major consequences.  All in all, Bhide says the most critical asset that a business plan can demonstrate to a potential investor is adaptation rather than planning.

What do you think? Do you think the art of business planning is good or harmful to the nature of entrepreneurialism?