I was watching Parks and Recreation with my wife the other night, and Aziz Ansari’s character Tom was starting a new business.
He starts one every other episode, this particular business was renting upscale clothing to teenagers.
How his character buys upscale clothing as a low level government employee is beyond me, but hey, it’s TV. He always has his douchey sidekick John Ralphio along, and together they started planning the business.
First they work late into the night on a business plan, a mission statement, and an investor pitch. Tom kicks John Ralfio out of the business because he only wants to go clubbing, and gets an investment from his boss. They open a storefront, and the rest is TV history.
This all sounds good on TV, and it’s what you think of as a boilerplate new business plan.
It’s funny, but it illustrates what people get wrong about starting a business.
Business is about making sales, period.
Too many people focus on the little, unimportant parts about business like a mission statement or a logo.
The truth is that you probably won’t know what your mission really is until you’ve been in business a couple of years. A fancy logo won’t help you get your first few sales, only hard work will do that.
What Tom should have done is brought his clothes to local schools and started taking orders. He would have found out what clothes kids are looking for, how much parents are willing to pay, and built his customer list.
Money starts coming in, and he has a better idea of what his business is really about. Now he can sit down and make it official, with an LLC, a website, business cards, etc.
Doing it this way allows Tom to bootstrap his business, meaning he won’t need any investments at first. If he decides to get investors later, he will be in a better place to negotiate and keep more equity. If things go poorly and no one wants to rent his clothes, he can shut it down and try something else without wasting time.
Sitting around creating a business plan is a waste of time for Tom this early, because he doesn’t really know his customers yet. His plan is guaranteed to change, as will his product, pricing, mission statement, and everything else.
He also doesn’t need an investor, it’s too early to setup a storefront. He doesn’t know what demand will be, so he is just incurring overhead for no reason at this point.
Sales are the only thing that matters, and it’s not just in the beginning. Even after the business starts making more money, the only reason to do anything is to make more sales. Creating a website, hiring employees, and answering the phone is all for this purpose.
Without sales, there is no business.