Entrepreneurs know that the first step to starting a business is gathering data, doing the research, and coming up with a business plan. Fill it with deadlines, projections, statistics, achievable milestones, and a healthy dose of jargon. This is the way business plans have always been approached. But what if it could be done differently? What if you could achieve success as an entrepreneur by burning your business plan?
Carl Schramm is a professor at Syracuse University and former president of the Ewing Marion Kauffman Foundation. He served in major corporate roles, and he was a member of the President's National Advisory Council on Innovation and Entrepreneurship. His new book is Burn The Business Plan: What Great Entrepreneurs Really Do.
I recently interviewed Schramm for the LEADx leadership Show, where we discussed his no-plan approach to start ps, and the myth of youth in new business. (The interview below has been lightly edited for space and clarity.)
Kevin Kruse: What's the big idea of your book Burn The Business Plan?
Carl Schramm: I was president of the Kauffman Foundation for 10 years. We built a research unit, economists for the most part, not business professors doing case studies. And what we found was radically different observations about who the entrepreneurial population is, and I think they're very useful for people to think about. So I guess in a sense, one of the biggest ideas in the book is that the average entrepreneur is 39 years old when he or she starts a business.
The second one, which I think is probably even more important, and you can't have one without the other, is that the average entrepreneur worked in business for 15 years before they started a business. Now, that is such a radical break with the stuff that's pumped out in the business literature. It's the stuff of academic business literature, and I made this point before, the reason is that business professors who study this, entrepreneurship professors, they study case after case, and you know, we have a confirmation bias.
A lot of people think, “Oh, I want to hang around with young people.” Well, that becomes a confirmation bias. You tell stories of youngsters or somebody who might be 35 who started their business when they were 21. So it becomes a narrative of youth. It was after I wrote the book that I actually looked at my own career and said, “Holy smokes, I started my first business at 38, just like the book says.”
Kruse: Should we burn the modern variations of the business plan, like the one-page Lean Canvas and things like that?
Schramm: I wrote a piece about how the plan isn't everything, and it basically attends to this question, “Why is planning useful?” And it's hard to say.
We all plan. If tomorrow you say, “I'm going on a picnic,” you go to the grocery store today and buy hot dogs. You're going to have kids, you buy a bigger house, a station wagon, and you give up your sports car. We do planning. It's endemic.
On the other hand, this ritual of business planning, I think that Eric Ries' books are critiques of business planning, but they get it wrong. What they basically say is the plan is ridiculous. They know that because they didn't write plans themselves. The founders of Apple and Facebook and Microsoft and Google and Uber? No business plans.
So why are we doing this? I think in a sense they're useful, we're going to do it anyway, but anyone could create a lean startup. I started five businesses. At the moment, I'm invested in at least a dozen businesses. I've never read a business plan for any one of them, and I never wrote a business plan. Does it mean that I don't think there's a course charted out for every one of the companies I started, or I would invest in a company where I couldn't see some vague way that they're going to be successful? Not to get to an exit. How are they going to be successful? The exit will happen. That's natural.
And that's one of the biggest critiques I have of business planning. You know, Procter & Gamble, General Motors or Wells Fargo, these guys started businesses that they would pass on to future generations. If you said to Mr. Procter and Mr. Gamble whenever they started business, “How are you getting out of this?” They'd say, “What are you talking about? We started this because it's a creative platform for our lives. We know how to make soap. We know how to make candles. We're helping people in the market. What could be better? And by the way, we're getting wealthy.”
Kruse: You say, “Be realistic about time and build your company as your life.” Tell me more.
Schramm: Part of the problem with business planning is that you get a calendar put in front of you. The formal business plan actually has a calendar, so you need this much money, and you'll hit these milestones. It's a management vocabulary, and we'll be out in five years at a 15 return on your investors' money.
These calendars can't work in business. Anybody who's run a business knows that. So that's the first thing, you have to be realistic about time. You're jumping off, and you don't know where this journey's going. I think that's one of the most difficult things with business plans is it actually puts blinders on, particularly if you've got investors who you've promised to pursue this line. I tell the story of Michael Levin in the book, who had to buy his investors out because he would've crashed and burned if he stuck on the business plan, and then suddenly, he realized that he had a software business, not a steel business, which was a huge revelation.
Regarding the next part, which I think is in a way the most important part, is that this becomes your life and your identity. Part of my life is I'm a professor. Part of my life is I'm an investor. Part of my life is I'm an author. What you do becomes your identity, and the notion that you're going to do this sort of walled off from your family and your hobby is unrealistic. If you're going to have a successful business, this is going to become you, and if you're lucky these become fantastic platforms for creativity.
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Starting a business doesn’t always have to start with a plan. You also don’t have to be a 20-something to attain success. Instead, live and breathe your business, and release yourself from the constraints of planning.
