Entrepreneurs know that the first step to starting a business is to gather data, do research and develop a business plan. Fill it with timelines, projections, statistics, achievable milestones, and a healthy dose of jargon. This is how business plans have always been approached. What if it could be done differently? What if you could succeed as an entrepreneur in burning your business plan?
Carl Schramm is a professor at Syracuse University and past president of the Ewing Marion Kauffman Foundation. He has held senior positions in the company and was a member of the President’s National Advisory Council on Innovation and Entrepreneurship. His new book is Burning the Business Plan: What Great Entrepreneurs Really Do.
I recently interviewed Schramm for the LEADx Leadership Show, where we discussed his planless approach to startups and the myth of youth in new ventures. (The interview below has been lightly edited for space and clarity.)
Kevin Kruse: What is 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, mostly economists, not business professors doing case studies. And what we found are radically different observations about who the entrepreneurial population is, and I think that’s very helpful for people to think about. So I guess in a way one of the most important ideas in the book is that the average entrepreneur is 39 when they start a business.
The second, which I think is probably even more important, and you can’t have one without the other, is that the average entrepreneur has been in business for 15 years before starting a business. Now, that’s such a radical departure from what’s been pumped into business literature. That’s the stuff of academic business literature, and I’ve made this point before, the reason is that business professors who study this, entrepreneurship professors, study case after case, and you know, we have confirmation bias.
A lot of people think, “Oh, I want to hang out with young people.” Well, that becomes confirmation bias. You tell stories of young people or someone who might be 35 and started their business at 21. So it becomes a story of youth. It was after writing the book that I took stock of my own career and said, “Holy shit, I started my first business at 38, like the book says.
Kruse: Should we burn modern variants of the business plan, like the one-page Lean Canvas and things like that?
Schramm: I wrote an article about the fact that the plan is not everything, and it basically answers this question: “Why is planning useful?” And it’s hard to say.
We all plan. If tomorrow you say, “I’m going to have a picnic,” you go to the grocery store today and buy hot dogs. You’re going to have kids, buy a bigger house, buy a station wagon, and give up your sports car. We do planning. It’s endemic.
On the other hand, this ritual of business planning, I think Eric Ries’ books are criticisms of business planning, but they are wrong. What they’re basically saying is that the plan is ridiculous. They know this because they haven’t written plans themselves. The founders of Apple and Facebook and Microsoft and Google and Uber? No business plan.
So why are we doing this? I think in a way they’re helpful, we’re going to do it anyway, but anyone could build a lean startup. I have created five companies. Right now I’m invested in at least a dozen companies. I have never read a business plan for any of them, and I have never written a business plan. Does that mean I don’t think there’s a set course for each of the businesses I’ve started, or that I would invest in a business where I couldn’t vaguely see how it would succeed? Not coming to an exit. How will they succeed? The exit will take place. It’s natural.
And that’s one of the biggest criticisms 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 every time they started a business, “How are you doing?” They said, “What are you talking about? We started because it’s a creative platform for our lives. We know how to make soap. We know how to make candles. We help people in the market. better ? And by the way, we are getting rich.
Kruse: You say, “Be realistic about the time and make your business your life.” Tell me more.
Schramm: Part of the problem with business planning is that you get a timeline in front of you. The formal business plan actually has a timeline, so you need that amount of money and you will hit those milestones. It’s a management vocabulary, and we’ll come out of it in five years with a return of 15 on your investors’ money.
These calendars cannot work in business. Anyone who runs a business knows this. So that’s the first thing, you have to be realistic about the time. You jump, and you don’t know where this trip is going. I think that’s one of the hardest things about business plans is that they put blinders on, especially if you have investors that you’ve promised to follow through with. I tell the story of Michael Levin in the book, who had to buy out his investors because he would have crashed and burned if he stuck to the business plan, and then suddenly he realized that he had a software company, not a corporate steel company, which was a huge eye-opener.
As for the next part, which I think is kind of the most important part, is that it becomes your life and your identity. Part of my life is that I am a teacher. Part of my life is that I’m an investor. Part of my life is that I’m an author. What you do becomes your identity, and the idea that you’re going to do that kind of siloing off your family and your hobby is unrealistic. If you want to have a successful business, it will become you, and if you are lucky, it will become fantastic platforms for creativity.
Starting a business doesn’t always have to start with a plan. You don’t have to be in your twenties to be successful either. Instead, live and breathe your business and free yourself from scheduling constraints.