Lose The Business Plan : Book Review

Business plans are never a true reflection of what goes on in a startup. Yet banks, funders and potential investors still insist on them. My mentor told me something very interesting recently, which also transformed the way I view business since that chat. His words were “don’t plan too much, take your product to market and let clients determine how you craft it to meet their needs”.

That message was also conveyed in Allon Raiz’s new book – Lose The Business Plan “What they don’t teach you about being an entrepreneur. Something I got prior to launch and Allon Raiz singed it. If you have been here before, you may have read a wish list of people I wanted to meet and talk to, Allon is one of those people.

The book begins with Allon citing a meeting he had with his mentor, who believed in him and continually invested in ideas that sometimes failed and others succeeded. While starting businesses and growing them, Allon Raiz realized his passion was in building businesses rather than running them. That was when he discovered the incubator business model, which he now runs as Raizcorp alongside a team of committed people.

Desire

In the first few chapters he got me hooked, not only with the bold title, but because of some of the things he mentions in the book with desire being one of them.

“Desire is almost the inoculation against the downside. It is desire that gives you the ability to carry on when sales are down and you’re not closing any deals.” – Page 28

Business Plans, as almost a prerequisite, are not expected to portray anything that resembles change and wanting to transform how things are done in business. Banks and funders are about the numbers, low risk and a graph that starts with funding and takes an upward curve. Realistically, startups have challenges and continually alter their offer to suit the market. And banks, though knowing this, expect small businesses to follow a similar path.

Most funding requests are measured as being viable by people who, themselves, are not entrepreneurs. Then comes the dreaded meeting with your would-be funder, where you put on your best behavior and leave the dream, the desire to change things back home.

I had sex last night

Keep your mind out of the gutter, at least till you’ve commented – what you do thereafter is up to you.

Sex, being a universal activity across different cultures is a test that Allon uses for research among groups of entrepreneurs he interacts with. In this test he requests the participants to write words they associate with sex.

His findings reveal “up to 10% of the participants in pairs have no words in common and the average correlation is less than 14%”. This he uses as proof that something as unique as your business, in comparison to a universal activity, requires you to get the masses excited about.

He also found over 500 definitions of the word ‘entrepreneur’, with the only link being “They see an opportunity, take a risk, and in doing so create value”.

It is then, for the purpose of this post, safe to say that no 2 people will have a similar path in their businesses and business plans overlook that.

3 Types Of Entrepreneurs

You may have found yourself in countless debates about who is an entrepreneur and who isn’t. The committed man down the road from you, who has been running the same supermarket for ages, is seen as an entrepreneur. You may not agree, but everyone is adamant he is. Allon settles that argument with these 3 different kinds of entrepreneurs.

And the types are . . . . .

  • The Subsistence Entrepreneur : Generally a one man band that has no real value, as it relies completely on the entrepreneur. It also does not make consistent profits.
  • The Lifestyle Entrepreneur : Similar to the subsistence entrepreneur’s business, this one cannot be sold without the entrepreneur. Inversely, it makes a consistent profit that is sufficient in sustaining the entrepreneur’s lifestyle.
  • The Growth Entrepreneur : This entrepreneur’s entity has value, and with time depends less on the entrepreneur. It also makes profits without the entrepreneur.

The Bottom Line

Allon Raiz wrote this book to get a point across and he manages to grip you quickly. Within the first few pages, you know if it’s something worth reading for you or not. He makes some valid points and in all of two sittings, I had decided to read the 154 pages again. Because it has some invaluable information, I would give it away except mine is a signed copy.

This book obliterates a lot of the misconceptions we tend to have about entrepreneurs and what makes them.

Which type of entrepreneur are you?

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Allon Raiz is the founder and CEO of Raizcorp, the only privately held, unfunded, profitable business incubator on the African continent, supporting in excess of 200 businesses.

Make contact with Allon on his website here, take a peak at Raizcorp and follow them on Twitter.

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Venture Capital Funding : What’s the real story?

It seems to me that, though small business develops exponentially in South Africa. And small has become quite huge lately. We still get into business with twisted intentions, and by twisted I’m referring to the intent for funding without a solid business model.

Vinny Lingham spoke at the last 27 Dinner about his accomplishments as an entrepreneur, which also included building ventures that later got Venture Capital funding. It is always inspiring to hear an entrepreneur who broke through the barriers to build something meaningful. Even more worthwhile was listening to him retell his own story.

As for the impression many people still have of funding being the foundation for a successful business. That is another story altogether. And the reason for this post.

“But it’s different for software companies and Venture Capitalists view business differently.” Oh, is it?

Any investor considers the viability of a business, not whether it is a software company or not. So that left me with the question, do we think investors/funders change strategies with varying products? Or, are there fewer entrepreneurs than innovative techies? In this case, developers turned entrepreneurs. Geeks who aren’t really entrepreneurs.

Before you throw tomatoes, cans and possibly yank your monitor from the rest of your machine. Hear me out a bit.

The basics of business remain the same, regardless of the product you are developing. Lately, however, there seems to be a lot doing the rounds about products being developed. Of course, there is a need for more innovative products.

And as Web 2.0 has taught us, the market trails far behind innovation. As the masses, we also only know what we needed long after someone has designed it. But a solid business model behind it is what translates to a Return On Investment. Not just the product, and that is what the latest software innovation is.

In an article written earlier this year about VC funding and the need to build sustainable businesses this was said. . . .

Those seeking funds are seeing higher scrutiny of their business models. “There’s less willingness to let it ride now than there used to be,” said Vytas Kislieulius, CEO of Collections Marketing Center, a software-as-a-service startup that runs a collections exchange. VCs are looking more closely at the customer sets of the companies they are considering investing in, Kislieulius added. “It takes so much more proof that there’s a real market and that there’s real customers.”

It is possible that I have old-school business thinking, but is there still space out there for sustainable startups?

Has funding clouded all business thinking into developing companies and waiting to sell-out to the highest bidder?

Image by Rainbow Sherbert on Flickr