Startups Don't Need A Business Plan
- Mar 31, 2023
- 5 min read
Written by: Toomaj Freydouny
It is a common belief that a startup requires a business plan to survive. However, upon researching this topic, one may find that the majority of articles advocating for a business plan for startups were written by individuals without firsthand experience as a startup founder. These articles were likely created for content marketing purposes rather than providing valuable insights.
While having a business plan can be beneficial, it is not always necessary for a startup to succeed. In fact, many successful startups have thrived without having a business plan at the beginning!
Having founded my first startup in 1999, I have experienced both success and failure in the startup world. Despite having sound achievements on my CV, I firmly believe that a business plan is not always necessary for a startup to succeed and in this article, I will provide detailed explanations for why this is the case.
When there is no history to analyze
Throughout my career, I have gained experience as an advisor and manager for both startup and established companies and currently, I am leading KUMMUNI – a fairly young proptech startup in Berlin. As someone with enough experience, I can confidently say that the biggest difference between the two is the lack of history in startups. Unlike established companies, startups don't have a track record to analyze. This makes it difficult to predict outcomes and plan for the future.
Analyzing data and the outcomes of previous plans is crucial for any business plan. Established companies have years of data to draw from, allowing them to make informed decisions about their future. Startups, on the other hand, must rely on assumptions and educated guesses. On the other hand, startups have their own advantages. They are nimble and can pivot quickly if something isn't working. Leading a startup is not an easy task. As a founder, you will face many unpleasant situations that will require you to change your tactics and even your entire business model. However, this is the beauty of running a startup! You have the opportunity to experience and test different approaches with less risk of damaging the business itself. Yet, this can be an entirely different story for an established brand!
Changing your tactics or business model can be daunting, but it is often necessary for the success of your startup. By being adaptable and open to change, you can better navigate the unpredictable nature of the business world. The ability to pivot and adjust your strategy is a key characteristic of successful startups.
You still going to need to have some plans!
While it may not be necessary to have a well-researched and conducted business plan, having a plan is still crucial. Without a plan, you may find yourself running around aimlessly and not making any progress. It is important to take the time to write a plan, even if it may seem boring. A business plan is not just a document to show to investors or lenders. It is a roadmap for your startup's success. It helps you define your goals, identify your target market, and plan your finances. It also helps you anticipate potential challenges and develop strategies to overcome them. By having a plan, you can stay focused and on track toward achieving your goals.
Little confused? Let me give you an example!
At the end of 2020, my partner and I were negotiating pre-seed funding with a small investor. They demanded a "real business plan" outlining our strategy and tactics for the next seven years before they would invest. As a newly founded startup without a history to analyze, I explained that any seven-year plan would likely be inaccurate and I was right! Just a month after meeting that investor, I have come to the realization that our current business model is not effective. Without significant changes, we are headed toward failure!
Since the beginning of 2021, we have undergone three changes in our business model and continue to adapt our tactics. Our ability to remain flexible has allowed us to stay competitive and meet the ever-changing needs of the market.
Our business model has undergone numerous iterations before we arrived at the successful one we have today. As the only proptech company in the industry that offers tenants the freedom to choose their furniture for their new place at no additional cost, KUMMUNI has gained significant recognition from both customers and investors alike.
Our unique approach has set us apart from our competitors and has allowed us to establish a strong foothold in the market. With our customer-centric model, we have successfully attracted a large customer base, which has translated into impressive financial gains for the company.
How to write a business plan for a startup?
Writing a business plan for a startup may seem daunting, but it's not as complex as one for established companies. The good news is that you don't need to have a lot of data to work with.
However, the bad news is that you may need to update your plan frequently as your business evolves.
When writing a business plan for a startup, it's important to focus on the essentials such as a clear and concise executive summary that outlines your business idea, target market, and competitive advantage. When it comes to creating a business plan for startups, it's important to focus on how you can establish a strong presence in the market, rather than how to survive in the market or how to increase the market share, because you don't have any! This means identifying your unique value proposition and understanding your target audience. By doing so, you can create a strategy that sets you apart from competitors and positions you for success.
As a startup founder, it's important to avoid making the biggest mistake of trying to mimic everything a giant company like Apple is doing. While it's tempting to follow in their footsteps, it's important to remember that what works for them may not work for you. One of the main reasons why mimicking giant companies' strategies can lead to failure is that they have a massive budget and resources that most startups simply don't have. Trying to replicate their marketing campaigns or product launches without the same financial backing can result in a lackluster outcome. You are short on everything: Budget, manpower, data, history, credit, and reputation.
Instead of trying to copy Apple or any other company, focus on what makes your startup unique and build your own path to success. Take inspiration from their successes, but don't try to replicate them! By staying true to your own vision and goals, you'll have a better chance of standing out in the market and achieving long-term success.
Last word
My first startup was a colossal failure due to my lack of experience. Despite spending months writing a detailed business plan, it proved to be invalid. Additionally, I invested heavily in PR and marketing before launching the product, which ultimately resulted in a disaster.
If you are a startup founder and you believe that I can be of assistance to you, please feel free to connect with me on LinkedIn. Lastly, I wish you the best of luck in your own entrepreneurial endeavors
About the author:
Toomaj Freydouny is an originally Iranian marketing consultant and scholar and serial entrepreneur from Berlin who has been encouraged by many other experts & academics on four continents. Tom is an ex-corporate consultant and served more than 60 well-known brands such as NICO, Toyota, Hyundai, Silicon Power, and Irancell MTN. In 2013, Trade World Magazine- Iran titled Tom “the most capable marketing person in the Middle East.” In 2014, Al Ries addressed him as “one of the few marketing people who have a complete understanding of marketing.” Currently, Toomaj is the CEO of KUMMUNI. KUMMUNI is a Berlin-based real estate Tech startup. The company with the help of technology, not only have overcome discrimination.
