Making Fun of Business Plans, Venture Capital, and Multi-Level Marketing

What this episode covers

December 30, 2007: Jon had some recent debates about topics in this chapter, including an MLM guy hot on his heels, which inspired this new Free From Corporate America podcast. Readers have been after me. Through the course of writing this book, I’ve been asked about classic entrepreneurial topics like business plans, venture capital, and multi-level marketing. I briefly mocked business plans in an earlier chapter, but that raised more questions than answers. So let’s go through each of these topics, as well as the tactic of franchising, in the context of this book’s themes. I have no real beef with business plans. I criticized them earlier because business is more about execution than salivating over the “next big idea.” I’ve read lots of business plans over the years; they all gushed with confidence. And yet, none of those companies exist today. Oh well, at least they looked sexy on paper. When I recall the stupid excitement former (annoying) employers felt about their fantastic “plans,” I feel sick. Some of these plans sounded so good they should have been mounted and framed. But now they line gerbil cages. Sure, writing a business plan can be a great education. As you master the components of the plan, such as marketing and financials, you learn how to tie these concepts into your business model. As a way to learn more about business, writing a business plan is a useful exercise. But the time you spend writing and researching can take you too far into theory. Some would call that an “opportunity cost.” The real learning happens when you take those neato ideas and try to get customers to actually buy them. A particularly treacherous area is the financials section. Most business plans crunch numbers until they come out right. You have to hold your nose from the stench of these over-inflated fantasy numbers. Fact: there’s no way to pinpoint what the exact costs and revenues of a business are going to be. Contingencies are called contingencies for a reason. Divorcing ideas that aren’t financially viable takes ruthless honesty. Most people rework the numbers until their ideas look good, rather than trashing their ideas. The point of the exercise, of course, is to walk away from ideas that aren’t financially viable. I have yet to see someone who takes their own medicine though. Jon Reed notes, December 2009: While I’m not a fan of conventional business plans – as in formal, overly polished paperwork – I am a fan of planning in general. Which is why I can strongly recommend Morris Rosenthal of FonerBooks.com and his new “Starting a New Business Plan and Making a Living” flow chart. The opposite of a formal plan, this chart, with jumps to text explanations of each section you might need help with, is exactly the kind of real world thinking that will give you a leg up on your ventures and minimize risk. Business plans do tie into the world of venture capital, however. You can’t get financed without a business plan, so in that case, a business plan is a mandatory part of the process. I haven’t spent much time on venture capital in this book because I’ve been writing about “freeing yourself from corporate America.” In the first chapter, I contrasted the difference between “lifestyle entrepreneurs” and “Bill Gates entrepreneurs,” noting that this book is focused on the former. There’s nothing wrong with launching the next great American company, but you’re not going to free yourself from corporate America by following that model. Becoming the founder and CEO of a major American company is beyond the scope of this book. Those kinds of startups typically require large-scale venture capital at some early phase. This book works better for “build as you go” businesses that are not intended to go through the process of becoming a publicly-traded compan[...]

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