By Gonzalo Schwarz — December 19, 2018
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A review of Burn the Business Plan: What Great Entrepreneurs Really Do by Carl Schramm
As a nonprofit entrepreneur and consultant to think tanks looking to implement industry best practices, I’ve always used and recommended writing a business plan. However, after founding a public policy think tank, the Archbridge Institute, I’ve come to realize that despite the hypothetical importance of business plans grit and a belief that you have some good or service that the world wants ultimately drive success. This applies to both for profit and nonprofit enterprises.
Most investors (or donors in the nonprofit world) want to know why you’re doing what you’re doing and what you plan to achieve. How you will do it matters but is not the main motivation for investors. This was one of my first mistakes when starting Archbridge. I had a very detailed and organized power point based on a carefully crafted business plan and market study. So detailed and organized in fact, that in my first meeting with a prospective donor, he fell asleep as I was explaining exactly how and what I was planning to do.
A business plan can help give direction, but it will not come in handy when you have to decide what to do when you can’t make payroll or when there are delays in your product delivery intended to show proof of concept.
These lessons could have been learned earlier if I had read one of the best books I’ve read this year, Burn the Business Plan by Carl Schramm, once called the “evangelist of entrepreneurship.” Through case studies and data, Schramm shows us how the most successful businesses in the world did not have a business plan when they started. Schramm also discusses key figures that should make us think twice about how entrepreneurship is taught in business schools and the myths we accept about the world of entrepreneurship. For example:
1) The average age when entrepreneurs started their businesses is 39. People who start in their 40’s and 50’s are more successful.
2) People mostly start their businesses after about 15 years of experience in an established firm. Usually starting a business in the same industry.
3) Venture capital (VC) investment fails 6 out of 7 times (historical trends in business dynamism shows that a proxy for this, business closings, is about 8–10%). VC represents 1% of entrepreneurs.
4) Most entrepreneurs fund themselves without going to Venture Capital or taking loans.
Following some mythbusting, Schramm goes through evidence about some of the least helpful concepts commonly used when professionals are teaching and trying to incentivize more entrepreneurship: entrepreneurship courses, business plans, venture capital focus, incubator models that don’t incubate, and thinking about an exit strategy.
Many of the stories discussed in the book show that what really matters is what the sports world calls “intangibles” or in economics is known as “soft skills,” which include traits like hard work, grit, perseverance, and responsibility. The book also contains an uplifting view on the impact of entrepreneurship and how, despite being a much needed signal, profit is definitely not the whole story. As business historian Gary Hoover recently told me:
[Whole Foods founder] John Mackey in his 20s came to the conclusion people did not eat the right things, causing them to have worse, shorter, less healthy, and less happy lives. He and his colleagues built a company worth $13B on that thought and their drive.
Herb Kelleher, an outsider to the airline industry, thought the longstanding carriers like American and Braniff were inefficient and charged too much. So he built Southwest Airlines, always reminding his associates/employees that without Southwest’s lower fares, thousands of people would miss a wedding, a funeral, or a graduation.
A guy nicknamed Kinko founded a chain of copy shops that became worth over a billion dollars. While some saw the work as menial, he saw it as a high calling. Without Kinko’s, people would not get the word out about the ice cream social or be reunited with their lost dogs. He continuously emphasized the purpose of the enterprise as he traveled their many locations.
These people consistently remind themselves and everyone they touch of the important purpose of their enterprise, of why it was created, why it exists, and how it prospers. Somehow serving people, making life better for someone. Ever-improving products and services, delivering value.
Going through the case studies in the book, including Schramm’s own business ventures, what stood out as a connecting theme was that drive of serving people, making lives better, and delivering value.
Finally, I couldn’t help but think about an iconic figure in my youth. Cosmo Kramer from the hit TV show, Seinfeld. In one episode, Kramer goes to a car dealership and wants to test drive a car, while not really intending to buy one. During the test drive, Kramer and the sales rep attempt to see what happens when the gas tank gets to empty. They want to experiment how long the car can go until it completely shuts down and they need to refuel. As they approach that threshold, they become increasingly stressed, but also exhilarated, as the car never stops or needs to be refueled. I’m not sure that this would happen in real life, but the metaphor is quite fitting for many of the stories shared by Schramm in the book and the experience of other entrepreneurs I have met in my own journey. Fittingly, Kramer was in his late 30’s and 40’s during the TV show, a prime age for becoming an entrepreneur as the data Schramm shares with us shows.
There is simply no linear path to becoming a successful entrepreneur. The road is full of obstacles and things never go exactly as planned, at least in the startup phase. But what entrepreneurs share in common is a relentless drive, the ability to withstand pressure and stress, and sticking it out until they are able to finally put their products and vision out there for consumers and investors to see.
This is a formative book for anyone interested in becoming an entrepreneur, learning more about the art of entrepreneurship, or recognizing mistakes in how entrepreneurship is taught. Ultimately, if there is one key takeaway from the book, it’s that the best way to learn how to be an entrepreneur is just to become one.