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Netflix co-founder Marc Randolph claims that he never believed in business plans, considering them a waste of time. In his eyes, your business plan breaks into pieces once you have your first customer. And he’s right, in a way. Real business is not like the one from fancy documents and textbooks.
The biggest problem of an aspiring entrepreneur is that to make a lot of money, you have to invest a lot of money. But where can one get them without a list of completed projects? Or at least without a realistic financial model that early investors will trust?
Yes, the idea needs to be tested in practice and its viability proven. But if you want to go beyond a small experiment and grow a large-scale company, business plans and financial models are the basis for communicating with investors.
Without a strategy, interim reports or forecasts, you will not know where you are going, what is acceptable to you and what is not. The outside investor must make sure that your work is not a chaotic thing, but a fairly predictable business.
To keep your business plans working, study the audience in need of your product or service. The deeper, the better. Hire community representatives, move to the target market for some time, take local consultations on cultural nuances and regulatory policy. A wave of these nuances that you won’t be ready for can wash away the sandcastle of a start-up business.
Studying the client will not help avoid all mistakes, but it will definitely reduce their number.
Related: 7 Examples of When You Should Acquire a Startup Rather Than Build One
Thrifty or greedy?
Randolph describes his first impression of visiting an Amazon office in the late 1990s as an office with dirty and shabby partitions between workplaces, stained floors, a lot of people in a small area and dogs roaming the corridors. Negotiations between Netflix and Amazon took place at a table made from an old door. Shortly before the meeting, Amazon went out on an IPO, Bezos’ fortune was $54 million (according to the book).
Randolph alludes to Bezos’s almost morbid greed but makes his assumption on why people agreed to work with him for hours and inadequately small money. Bezos is a weird genius. He has exceptional intelligence, “nerdiness” and childish curiosity — with this he awakened devotion in people.
Now, in 2021, the market will not appreciate your ideology if the working conditions are similar to the 1997 Amazon office. You are unlikely to convince professionals to work overtime without offering them some decent compensation. On the other hand, you are unlikely to get great results by working with people who do not share your values and goals.
Related: 6 Practical Steps to Learning How to Build a Startup
Survival and negotiation school
The last fragment is about the importance of communication.
Marc Randolph talks about his National Outdoor Leadership School experience where people like him were taken to another city blindfolded, without watches, wallets, spare or warm clothes. The test lasted three days, during which it was necessary to provide yourself with food, lodging and other types of comfort. It was then that the co-founder of Netflix learned to ask for money. Randolph writes that asking an investor for $25,000 after asking for a couple of cents for food in the middle of the street is not a problem.
The book mentions that Randolph, being a father of many kids, a grown man, and an experienced employee, was the most embarrassed to ask his mother for money. She supported many of his endeavors, but the Netflix pitch was particularly challenging.
I perfectly understand his feelings. But looking for the first investment teaches us to prioritize: Do you want to avoid discomfort or launch a project?
Like many entrepreneurs, when I was 18, I was looking for my first money among FFFs. Family fundraising is not quick and not always successful. It worked out for me by the tenth time only. Although, I got 10 times less than I wanted and I had to compensate with 20-fold efforts.
I faced yet another communicating challenge when I was studying at the university. Computer games, which I love since childhood, and thoughts about business in the first semester put me on the brink of expulsion.
This situation boosted my communication talent unlike any other. I had to talk to some teachers one by one asking for a retake, with others I was exchanging useful books, with the third one I was lucky to meet on the battlefield in Heroes of Might and Magic III. So I learned to quickly solve problems and, if possible, prevent them.
The essence of these situations for me is in two points:
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If you believe in your project, fight for it — it is impossible to do something huge without putting it in the first place at least for a while
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Entrepreneurship gives a lot of freedom, but it asks for even more responsibility, and you have to be ready for it.
When I read Randolph’s memoir, it got me thinking that — regardless of geography and era — entrepreneurs test themselves for strength, listen to rejections in different forms and learn from mistakes. And some of them finally get the result for which it all started in the first place.
