I’ve seen many situations where founders planned businesses the wrong way. Here are two real examples, with fictitious names:
- Pamela Perfection. Pamela was holding back tears when she came to me. Months earlier, she had started a fashion accessories line, and her products were flying off the shelves at the chicest boutiques in NYC. Then she hired a group of bankers to write her a business plan, and raise capital for her. But by the time we met, all she had to show for it was an 80 page, spiral-bound Private Placement Memorandum (“PPM”) that she couldn’t even begin to decipher. No investors. No slide presentation. And no money left to fill customer orders. Pamela had wasted time on the wrong kind of plan, at a critical juncture.
- Wally Wingit. I met with Wally at the suggestion of a considerate friend in Venture Capital. Considerate because Wally had completely blown his presentation to the VC, and the VC was nice enough to give him a point in the right direction. A tech prodigy, Wally had spent months developing a whiz-bang Facebook application. Unfortunately, he spent 20 minutes giving the VC a demonstration, but failed to articulate critical elements of the business, such as his business model and marketing plan. He had heard stories about founders raising millions with a plan sketched on the back of a napkin, and hadn’t taken the time to develop his business plan.