If you're taking time to carefully perfect a business plan to help ensure your company's model is sound and that it will be a success--stop. That's the word from William Hsu, c0-founder and managing partner at start-up accelerator MuckerLab.
Hsu, who's been both a successful entrepreneur and an executive at AT&T and eBay, says that starting a company is "a career for really irrational people. In all probability, whatever the idea is will fail. Building a reality distortion field is how entrepreneurs convince themselves and their employees that this is a good idea."
With that in mind, he advises:
1. Think people, not ideas.
A great team trumps a great idea every time, Hsu says. "None of us is perfect, and entrepreneurs are usually great at a couple of things, such as having vision and being willing to take risks." Entrepreneurs--especially tech entrepreneurs--come in one of two flavors: Either they're like Steve Jobs, visionaries who understand the market but aren't technically proficient, or they're like Steve Wozniak, technical geniuses who don't understand how to market to customers.
In either case, having great team members can fill in any areas where the entrepreneur lacks strength, he says. "We look for three things in a potential start-up: market, team, and concept. The team is by far the most important element, and the second is market. The idea itself is the least important."
2. Think speed, not perfection.
"Whatever hypothesis you have about the market, it's probably wrong by definition," he says. "One out of every 30 venture start-ups succeeds--and that's after getting funded. What that means is that entrepreneurs need to take a product to market as fast as they can in any form, even if it's 10% of the original vision. They have to test it to see if it's a market fit, if it resonates with customers, and is something they'd eventually pay for."
Then, he says, pivot and reconfigure on the basis of that market response. "You have to iterate as fast as you can. I don't mind if a batter has a .100 average--a 10% success rate--if the batter gets 10 or 20 at bats. The more chances you have, the better. So the team that can execute the fastest and build the most relationships with customers by listening to them will win."
Because of this need to iterate quickly, Hsu advises building an in-house team that will have all the design, technical, and product capabilities you need. "You don't want the entrepreneur outsourcing these types of functions, because it means there will be a cost in dollars to each new iteration that will drain capital. Every pivot should get you closer to success, rather than closer to failure."
3. Think vision, not plan.
"A lot of entrepreneurs have a perfect deck of slides, a perfect business plan, and a perfect financial model. But that's all they have," Hsu says. "They think starting a business is having a business plan. But being an entrepreneur is about creating the future one step at a time."
Does that mean you should never look ahead? Not quite, he says. "Where you have two or more co-founders, it's important for them all to put down on a piece of paper, or a whiteboard, the canonical things they all agree on. They need to agree what the vision is and what the path to success will be. But don't spend time trying to put that into a 40-page document. I'd rather you take that time and talk to 10 more customers instead."