Everyone has a plan until they get punched in the mouth!
These are the words of former heavyweight boxing champion Mike Tyson on pre-fight preparations of his boxing opponents.
And the words are as relevant to boxers as they are to entrepreneurs who submit business plans for access to business finance.
Entrepreneurs use business plans mainly to raise business finance. The success rates of their efforts to raise finance are dismally low.
The main reason for this sad state of affairs is that most business plans…
- Are based purely on unproven assumptions
- Assume that it is possible to figure out most of the unknowns of a business in advance
- Dont address the main risk that the small business will not be able to repay the loan
- Projections of sales and profits are generally fictitious
- Disintegrate on interrogation and the entrepreneur gets a punch in the mouth
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The Good News!
Enter the lean startup methodology
Lean startups do not start with a business plan, they start with the search for a working business model. They do this by testing the assumptions that are made when we start businesses. They build a minimum viable product and take it to the market.
The actual reaction of the markets provides feedback which is then used to improve the product and service. Only when it has been proven that customers are buying the product and all the other elements of the business model are working together to create growth does the small business build a BANKABLE BUSINESS PLAN. This significantly reduces the main risks that funders face and therefore improves the chances of getting your business finance application approved.