Business plans? I've heard of them (opens in new tab)

Regardless of whether or not you use a formal plan, exploring the size/scope your target market, loosely defining your product's parameters, and predicting some form of financial return is always a good exercise. You don't need to present it as a formal business plan, but doing those standard, boring, HN-hated activities will at least help you properly explain yourself.

I've been on both sides of the fence: 1. as an entrepreneur involved in three start-ups all boot strapped that later attracked VCs and, 2. as an investor. I mostly agree that business plans are just words on paper as one of my fellow investor puts it but I would like to point out that a business plan tells potential investors the same thing a college degree does to potential employers. It says I did my homework, I did my SWOT analysis, I know my numbers, and I have thought about my competition and/or long term goals in terms of exit strategy. That's all! Every investor knows that five year financial are mostly guess work but at least by doing this you have shown you know the potential your idea has in terms of being bought or adopted.... It really is that simple.

Even if business plans may seem obsolete, its a nice way to get your thoughts and plans sorted, written down in a well reading way. It probably helps you as the founder the most and might also give you new ideas because you suddenly analyze so many competetiors and the market in a deep way. I have written a business plan and while probably nobody read it (just guessing), its still always a good thing to be able to send someone a well thought out 30 page plan when requested. (we got funded)

Its not that much about the businessplan itself as about the fact "ah ok, so these guys have actually thought this through and are serious about it"

Of course you should still have a good 10-15 slide presentation about the most important stuff, because people will actually look at that ;)

Planning doesn't mean slavery to the plan. But planning can be useful, even without 100 page slide decks to sleep through, or massive binders on the wall.

Planning can help with:

- How many talented developers might we need in 3 years? If we want to grow our own, when do we need to start hiring interns?

- At what size do we need to hire a receptionist and start thinking about more space?

- What's our burn rate, and when do we expect to run out of money?

- What rate of customer acquisition will we need to grow this business? Are we doing the right things to get there? If we do succeed, what's that imply for buying hardware?

- What's success look like?

- What's failure look like?

If you think about business plans as frameworks for evaluating the viability of a business, there are new formal tools, like Business Model Generation that serve exactly the same purpose (evaluating the current viability of the business in a structured way) but more aligned with web reality (fast time to market, pivots, extreme competition).