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When Writing a Business Plan Is a Waste of Time

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Spending months writing a business plan can make you feel like you’re being productive, but what you really need is market data and some experience.

John Warrillow is the author of Built To Sell: Creating a Business That Can Thrive Without You. He has started and exited four companies and in 2008 was recognized by BtoB Magazine’s “Who’s Who” list as one of America’s most influential business-to-business marketers.

John Warrillow is the author of Built To Sell: Creating a Business That Can Thrive Without You. He has started and exited four companies and in 2008 was recognized by BtoB Magazine’s “Who’s Who” list as one of America’s most influential business-to-business marketers.

Walk into any bank in the country and ask for a loan to start a business and the knee jerk reaction of the banker behind the desk will be to ask you to write a business plan—even though they themselves have likely never written one and will not base their lending decision on its content.

The problem with writing a business plan as a start-up is that it will be based on one assumption on top of another. If your first assumption is flawed, then the whole thing is useless.

Way back in 1996, I wrote a business plan for an audiotape magazine. My idea was, each month, to give subscribers a new audio recording of an interview I had conducted with a well-known entrepreneur (sort of like today’s model of podcasting). I decided to charge $99 for an annual subscription.

My business plan called for 10,000 subscribers in the first year, which amounted to a run rate of a cool $1 million in annual revenue. I had no idea what it would cost to acquire a new subscriber but figured $10, or about 10 percent of what I was charging them, seemed about right, so I calculated that it would cost $100,000 to get to my 10,000-subscriber base. With only $17,000 saved up to start the business, I assumed I would finance the acquisition of subscribers through the $99 prepayments of my new customers. I calculated the cost of mass producing 10,000 cassettes (this was long before iPods) and the cost of mailing the cassettes to my 10,000 subscribers each month.

I invested months in writing my business plan, and when it was complete, I felt ready to start running my million-dollar business.

My first step was to put together a top-notch first edition befitting of a million-dollar company. I rented studio time at a professional facility and hired an announcer from a popular morning show in Toronto and a producer from a local radio station. By the time I had my first edition finished, I had invested roughly $5,000 of the $17,000 I had saved up to start the business.

Next, I went to a printing company and had a four-color logo and package designed for my tape series. Each color added a little bit more to the cost of the tapes, but I justified the fancy graphics to myself because, spread across the 10,000 subscribers my business plan called for, the cost of each extra color was negligible.

I then created a fax-back subscription form (yes, this is well before ecommerce-enabled websites) and set up a fax machine in my parents’ basement.

To get my 10,000 subscribers, I printed brochures and started handing them out anywhere entrepreneurial people gathered: trade shows, small-business development centers and so on.

The first morning after handing out the brochures at a small-business trade show, I rushed downstairs to see how many orders I had received.

None.

I checked the paper cartridge—it was full. I picked up the receiver to ensure there was a dial tone, and sure enough, the fax machine was working. I tried to remain optimistic, figuring people were still returning to their offices from the trade show, and told myself I’d have orders the next day.

The next morning I went downstairs again in anticipation of the floodgates opening. Still no orders.

The next day, again, I was shut out. I became increasingly depressed with each passing day of not selling a single subscription.

By the time I ran out of money and had to shut the business down, I had sold just 82 subscriptions in three months.

As I think back on the experience, the business plan I had spent months on was useless. It didn’t matter how much time I spent modeling out a million-dollar company because the house of cards was all based on one wobbly assumption: my guess that it would cost $10 to acquire a subscriber.

I had no basis for this assumption. I just made it up—which, of course, is the problem with the business plan of most start-ups: it’s all fiction until you get into the market and start selling. While it is true you can find comparable data from some sources, oftentimes start-ups are bringing a new concept to market making it impossible to find an apples-to-apples comparison.

What you really need to plan your business is some market data, which only comes from—you guessed it—the market. My advice for starting a business is to develop your product or service as cheaply as you can (or even develop just a description of what you plan to offer) and try to start selling it.

Skip wasting time on writing a traditional plan, and instead invest that energy in establishing a benchmark for what it costs in time, money and prospects to close a sale. Once you have a baseline, try to improve your efficiency over time.

Let’s say, for example, it costs you $16.60 to get a prospect (or a website visitor, person to visit your booth or shopper to come into your store). If you have to pitch 15 prospects before one says yes, your cost per customer acquired is $249 (15 x $16.60).

Now let’s imagine you charge only $200 for your product. With a marketing cost of $249, you’re underwater and need either to raise your price or to get more efficient at selling.

Start by getting more efficient. Let’s say you tweak your pitch and, over time, get your cost per customer down to $135.

Now start nudging up the price and see if you can keep acquiring customers at $135 each. Imagine you’re able to get your price to $250 without compromising your ability to get a customer.

You’re now clearing $115 per sale, and assuming you’re making your product for less than that, you’re in business.

Spending months writing a business plan can make you feel like you’re being productive, but it’s really just busywork. No bank in the country is going to lend you money based on your business plan (they only lend to start-ups based on your personal creditworthiness). Hiding behind a spreadsheet won’t help you get a business off the ground. What you need first is some real-world data, and you won’t get that from sitting in front of Excel. It comes when someone says “yes” to what you’re selling.

With some real data, you can start to write a business plan for scaling up your company. I think too many of us make the mistake—often encouraged by well-meaning bankers and advisers—of writing a business plan before you start. The problem is, until you have some real-world data, your business plan will be pure fiction.

John Warrillow is the author of Built To Sell: Creating a Business That Can Thrive Without You, which will be released by Portfolio/Penguin on April 28, 2011.

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PICHAI PUTS KIBOSH ON GOOGLE SEARCH ENGINE FOR CHINA

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Google is not working on a bespoke search engine that caters to China’s totalitarian tastes, and it has no plans to develop one, CEO Sundar Pichai told lawmakers on Capitol Hill Tuesday.

“Right now, we have no plans to launch in China,” he told members of the U.S. House Judiciary Committee at a public hearing on Google’s data collection, use and filtering practices.

“We don’t have a search product there,” he said. “Our core mission is to provide users access to information, and getting access to information is an important human right.”

Pichai acknowledged that the company had assigned some 100 workers to develop a search engine for totalitarian countries, however.

“We explored what search would look like if it were to be launched in a country like China,” he revealed.

A report about a Google search engine for China appeared in The Intercept this summer.

The project, code-named “Dragonfly,” had been under way since the spring of 2017, according to the report, but development picked up after Pichai met with Chinese government officials about a year ago.

Special Android apps also had been developed for the Chinese market, The Intercept stated, and had been demonstrated to the Chinese government for a possible rollout this year.

“We certainly hope they abandoned those plans,” said Chris Calabrese, vice president for policy for the Center for Democracy & Technology, an individual rights advocacy group in Washington, D.C.

“We didn’t think it was a good idea to build a search engine that would censor speech in order to go into the Chinese market,” he told the E-Commerce Times.

Google may have been testing the waters with its Chinese browser, maintained Russell Newman, assistant professor for the Institute for Liberal Arts & Interdisciplinary Studies at Emerson College in Boston.

“It’s an example of a firm seeing how far down the road it can go before it receives pushback,” he told the E-Commerce Times. “It discovers a limit, then pushes that limit a little more. I’d be surprised if they wholly gave up on the search engine for China.”

Mission: Protecting Privacy

In his opening remarks to the committee, Pichai declared that protecting the privacy and security of its users was an essential part of Google’s mission.

“We have invested an enormous amount of work over the years to bring choice, transparency and control to our users. These values are built into every product we make,” he said.

“We recognize the important role of governments, including this committee, in setting rules for the development and use of technology,” Pichai added. “To that end, we support federal privacy legislation and proposed a legislative framework for privacy earlier this year.”

Pichai also addressed a burning issue for Republican members of the panel.

“I lead this company without political bias and work to ensure that our products continue to operate that way,” he said. “To do otherwise would go against our core principles and our business interests.”

‘Bias Running Amok’

Among the Republicans on the committee who raised the issue of unfairness with respect to the way Google’s search algorithm treats conservative views was Mike Johnson, R-La.

“My conservative colleagues and I are fierce advocates of limited government, and we’re also committed guardians of free speech and the free marketplace of ideas,” he told Pichai.

“We do not want to impose burdensome government regulations on your industry,” Johnson continued. “However, we do believe we have an affirmative duty to ensure that the engine that processes as much as … 90 percent of all Internet searches, is never unfairly used to unfairly censor conservative viewpoints or suppress political views.”

Political bias is running amok at Google, charged committee member Louie Gohmert, R-Texas.

“You’re so surrounded by liberality that hates conservatism, hates people that really love our Constitution and the freedoms that it’s afforded people like you, that you don’t even recognize it,” he told Pichai, who was born in India.

“It’s like a blind man not even knowing what light looks like because you’re surrounded by darkness,” Gohmert added.

Despite Republican claims of liberal bias in Google’s algorithm, “there isn’t any evidence to back that up empirically,” Calabrese said.

Market Dominance

Committee members also were concerned about Google’s market dominance.

“I’m deeply concerned by reports of Google’s discriminatory conduct in the market for Internet search,” said David Cicilline, D-R.I.

Google has harmed competition in Europe by favoring its own products and services over rivals, and by deprioritizing or delisting its competitors’ content, he noted citing European Commission findings.

“It is important for the U.S. government to follow the lead of other countries and closely examine the market dominance of Google and Facebook, including their impact on industries such as news media,” observed David Chavern, CEO of the News Media Alliance in Arlington, Va., a trade association representing some 2,000 newspapers in the United States and Canada.

“We will continue to urge for more hearings to examine ways in which the duopoly impacts the business of journalism, which is essential to democracy and civic society,” he told the E-Commerce Times.

Prelude to Privacy Law

House and Senate hearings in recent months are just the prelude to data privacy legislation that could be introduced next year.

“We’re certainly going to see a wide variety of comprehensive privacy bills filed, and I think we’ll make some progress,” Calabrese said.

“Advocates have seen the need for privacy legislation for a long time,” he said, “and now that we have privacy legislation set to kick in in California in 2020, there’s a lot of companies who would rather be governed by a federal law than they would a bunch of different state laws.”

If a general privacy law is enacted, it shouldn’t use Europe’s General Data Protection Regulation as a model, maintained Alan McQuinn, senior policy analyst for the Information Technology and Innovation Foundation, a public policy and technology innovation organization in Washington, D.C.

“We don’t want to see the GDPR enacted here in the states,” he told the E-Commerce Times.

“It is highly likely to create a drag on the European economy and hurt innovation and businesses,” McQuinn explained.

Privacy rules should be styled to fit industries, such as healthcare, finance and commerce, he suggested.

“The sector-specific approach that the U.S. has taken toward privacy has allowed for more innovation,” McQuinn noted, “and created the powerhouse of the digital economy that we have here.”

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AT&T PLANS BUYING GUIDE: WHICH ONE IS THE BEST FOR YOUR NEEDS?

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So, you’ve been thinking about biting the gun and becoming an AT&T customer?

Good thinking, but which plan to choose? Clearly, the abundance of options in AT&T’s roster don’t make the choice any easy, but we are here to help.

A couple of weeks ago, we walked you through all the different plans in Verizon’s lobby, but now it’s time to subject AT&T to the same treatment.

Unlimited plans

AT&T Unlimited Plus Enhanced and AT&T Unlimited Choice Enhanced

Ever since AT&T caved in and finally offered truly unlimited plans last year, its Unlimited Plus Enhanced plan has positioned itself as the most-loaded out plan. This plan is perfect for families due to the flexibility of the included line options and the loadout of features, compromise with speed, streaming quality, or the ability to use a mobile hotspot.
Meanwhile, AT&T Unlimited Choice Enhanced is mostly the same unlimited data/text/voice calls ordeal, but it comes with less features and is a bit more affordable. Both plans are perfect for family usage scenarios, and choosing one over the other would highly depend on your stance towards video streaming quality, mobile hotspot, and speed throttling.
Here’s a rundown of the pricing of the different lines, and after that we’d rundown other notable features of the plan. Note that the prices below have AutoPay and Paperless billing discounts applied to them.

* – Prices after discount with AutoPay and Paperless billing.

It’s obvious that the more, the merrier.

As you can see, once you start adding new lines to the AT&T Unlimited Plus Enhanced plan, prices become more and more affordable, making them more and more palatable for the regular family of up to four out there, and overall, a better deal.

With prices out of the way, let’s see what the two unlimited data plans offer as far as data allotments, features, and speeds are concerned.
Common strengths of both plans:
  • Free HBO for life: Both plans give you HBO for life. That’s undoubtedly a boon for all fans of A+ TV shows from the likes of Game of Thrones, Westworld, The Wire and many others as HBO has one of the most loaded-out subscription services out there. Have in mind that the actual promotion will start within 2 monthly billing cycles. Of course, if you drop your Unlimited Choice or Plus plan, you automatically forfeit the HBO benefit.
  • Unlimited roaming in Mexico & Canada: Pretty self-explanatory, but with either Unlimited Plus or Choice you get unlimited roaming in both neighboring countries.
  • Unlimited texting from USA to 120+ countries: With either Unlimited Plus or Choice you can text, send pictures and video messages via MMS to more than 120 countries around the globe at no extra cost.
  • AT&T THANKS: AT&T’s benefit program allows you to get insider access to special events, various forms of entertainment like movies and music, as well as get expert help, and many others at no extra cost. The majority of these benefits can be explored and used from the dedicated AT&T THANKS app on the app stores.
  • Military discounts: If you’re qualified military personnel or a veteran you get 15% discount at every monthly bill.
Our verdict: If you want the absolute best unlimited plan on AT&T, you should certainly go for Unlimited Plus Enhanced. It has the most bells and whistles and you shouldn’t worry about throttling that much. Well, at least until you don’t go over 22GB of LTE data per line per month as you’re likely to experience temporary throttling at busier times. Additionally, the 15GB mobile hotspot allotments is well worth it, especially if you use your device to cast Internet in your immediate vicinity. Conversely, if you’re perfectly fine with a bit more throttling in busier time windows and don’t use your device as a mobile hotspot, you will also be fine with AT&T Unlimited Choice Enhanced.

Limited & Prepaid Data plans

If you’re looking for something else than an unlimited data plan, AT&T’s prepaid ones are here to help. But which one to choose – the eponymous AT&T Prepaid plans or the Mobile Share Flex ones? Let’s highlight all the features and intricate differences and help you make up your mind.

AT&T Prepaid

The good ol’ Prepaid plans are a perfect match for people that value flexibility over anything else. With no annual plan, credit check, or even an activation fee in sight, it’s as close as you can get to freedom when dealing with large corporations. You can have AT&T Prepaid in a variety of flavors, ranging from $30 to $85 per month, depending on your loadout and discounts. Here’s a rundown of the prices and features:
No matter which plan you choose, we highly recommend enrolling into the AutoPay program, which will automatically charge your eligible credit or debit card every billing period. With AutoPay, you eliminate the possibility of having your service terminated after not paying on time. That’s a great thing to have on its own, but the discount on the prepaid plans is another boon to consumers’ wallets.
You can save even more if you bundle multiple prepaid plans together. For a second and a third additional lines, you get $10 off on your total monthly bill, while for a fourth and fifth additional line you get $20 off. This means that you can save up to $110 per month if you combine five Prepaid Unlimited Plus plans, or $1,320 per annum. You can check out the interactive AT&T configurator right here.
Our verdict: From the get-go, we wouldn’t recommend the $65/mo plan as it’s pretty hampered when compared to the others. Sure, it comes with unlimited data in tow, but we don’t like the lack of mobile tethering functionality as well as its inability to stream 1080p video. Albeit pricier, the top unlimited data plan is definitely better value on all fronts. When it comes to the ‘cheaplings’, it all comes to whether you can live with as low as a gigabyte of fast-speed data per month and whether you travel to Mexico and Canada often – if no, you should probably go for the $40/mo plan, but if you are okay with less data and no free-of-charge roaming allotment.

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LOCATION DATA SELLING THREATENS CONSUMER PRIVACY

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Selling location data collected by mobile phones has become a lucrative business, The New York Times reported Monday.

Location advertising sales are expected to reach US$21 billion this year, according to the article. At least 75 companies receive anonymous, precise location data from applications with the location services feature activated.

Several of those outfits claim to track 200 million mobile devices in the United States — about half of all devices in the country, the Times reported.

The data is very accurate, coming within a few yards of a person’s whereabouts at a point in time, and is updated often — as frequently as 14,000 times a day, the paper noted.

With that kind of accuracy and frequency, calling the data “anonymous” is a bit misleading.

“If you are collecting a person’s location over time, and it’s tied to a unique identifier, it’s disingenuous to call that anonymous,” said Natasha Duarte, a policy analyst with the Center for Democracy & Technology in Washington, D.C.

“If you have information about where people are going and where people live, you can build the story of who that location data belongs to,” she told TechNewsWorld.

Someone can learn a lot about you from your location, said French Caldwell, CFO of The Analyst Syndicate, an IT research and analysis group.

“They can tell what your interests are and who you’re meeting with,” he told TechNewsWorld. “Your location data tells more about you than your Social Security number.”

Businesses that collect consumer data typically say they’re not interested in individuals but in patterns. Data collected on individuals is “anonymized” by attaching it to an ID number. However, that ID doesn’t even have the cover of a fig leaf for anyone with access to raw location data.

Those people, who include employees or customers of the data collector, still could identify individuals without their consent, as the Times did in compiling its report.

Not surprisingly, the leaders in location-based advertising are Google and Facebook. Both companies offer mobile apps that they use to collect location data. They say they don’t sell it but use it only internally, to personalize services, sell targeted ads online, and determine if the ads lead to sales in the physical world.

Google did not respond to a request for comment for this story. Facebook, through spokesperson Jay Nancarrow, declined to comment.

Some large companies have started to get in front of the location data issue before it becomes a problem for them. For example, Verizon and AT&T announced during the summer that they would stop selling their customers’ location data to data brokers.

Deceptive Omissions

Most mobile apps request permission to use a device’s location services before accessing them, but the Times found that process could be misleading. An app might ask for location services access for one purpose but use the information for multiple purposes.

“Not all app notices are perfectly clear as to what location data is being used for,” CDT’s Duarte said.

“Often the app will ask, ‘Do you want us to use your location to provide you with local weather information, or personalize your experience, or improve the accuracy of the maps that you’re using?’ They don’t list all the other purposes the data will be used for — like advertising and sales to third parties,” she pointed out.

Some 1,400 popular applications contain code to share location information, the Times reported. About 1,200 were written for Android phones and 200 for Apple models.

In a sample of 17 apps sending precise location data, three Apple iOS programs and one Android offering mentioned that location data could be used for advertising while seeking permission to access the service, the Times found.

Creepiness Factor

Understanding what’s done with location data can be an onerous task for a consumer. It requires reading user agreements and privacy policies, and changing settings for all the apps on a phone.

“That can be incredibly time-consuming,” Duarte said. “No individual has the capacity to do that properly, and it’s not a burden we should be placing on individuals to depend on location-based services.”

How concerned are consumers about possible abuse of their location information?

“Most consumers don’t care, but there’s a creepiness factor that bothers them a little bit,” said The Analyst Syndicate’s Caldwell.

“We’ve all been on the Web and looked at a new pair of shoes or something, and all of sudden all you see in your browser for hours are ads for those things,” he continued.

“The same kind of thing is happening with your physical location,” Caldwell pointed out. “Stores are tracking your location and will start pushing suggestions to you based on where you went in that store. There’s a creepiness factor there.”

Legislation Needed

Consumers are very concerned about what’s being done with their location data, maintained Duarte.

“The problem isn’t that consumers are not concerned,” she said.

“It’s that even if you’re very concerned, it’s impossible for anyone to have the capacity and time to understand all the things companies are doing with your data, and then go into your settings and make the choices that align perfectly with your personal privacy interests,” Duarte explained.

“What really needs to happen is for our laws to recognize that location privacy in a commercial context has to be built into any service,” she suggested.

Congress should pass a commercial privacy law, “which would include limits on how companies can collect and use location information,” Duarte said.

Such a law might include provisions already adopted in Europe’s General Data Protection Regulation, which allow people to access information companies have collected about them, correct information if it’s used to make important decisions about them, and delete information.

One area where U.S. lawmakers may want to depart from the GDPR is in consent. The European rule allows data to be collected if consent is given by the owner of the data.

“Some uses of information shouldn’t be allowed even with consent,” Duarte said. “One of those uses might be repurposing of location information — collecting the information for a location-based service, then reusing it for something completely unrelated — like location-based advertising — or selling it to a data broker.”

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