Startup Best Practices 25 - Bounding the Unknown Unknowns

Intel’s Business Plan

Every once in a while, I receive a FedEx from an entrepreneur I haven’t met. Inevitably, this mail contains a modern rarity - a business plan. Ten to twenty pages describing the idea, the genesis, the business model, the team and its structure, customer acquisition strategy, sales model and other key details of the business. A plan for how to start a company, and a defense of the idea.

Business plans used to be de rigeur, an essential part of starting a company and raising capital. Over the last decade or so, business plans have declined in importance, replaced by a Keynote presentation that dazzles with high resolution images and Helvetica Neue Light font.

There are many good reasons for the transition to more visual sales pitches for companies. The most important: Founders can engender excitement with them in a way a 20 page comb-bound document simply can’t.

But in that transition, we’ve lost something - the act of reflecting upon all the different aspects of building a company.

Why does an opportunity exist now to create this company? How quickly can the business grow revenue? How much capital will the company require to attain different milestones? What are the competitive axes and who are my competitors? How much gross margin can the business generate?

In addition, a business plan makes plain all the current team’s assumptions. Its creation is the best time to discuss, debate and argue the core strategy of the company.

As a former product manager, I understand the allure the perfect product mirage. All I need is a great product and the rest will take care of itself. For a few companies, that might be the case.

But most won’t enjoy that kind of fortune. In which case, a well researched plan bounds the unknown unknowns that inevitably will surprise founders as the business evolves.

Published 2017-04-07 in best-practices 


I am partner at Redpoint. I write daily, data-driven blog posts about key questions facing startups. I co-authored the book, Winning with Data. Join more than 20,000 others receiving these blog posts by email.

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