innonate 8% rule: Spend part of your time working on a tangential plan / by Nate Westheimer

One common topic of discussion in the start-up space is when to call it quits or what to do when you see your model failing. Yesterday, OnStartups did an article called StartUp Suicide: Five Ways to Kill Your Startup, listing some sure-fire ways of failing early; today, Wired had this article, which talked about Riya's decision to get out of the face recognition search software business an into the clothes and accessories recognition search software business. "You want to change strategy before the money is out," Riya CEO Munjal Shah said in the article. Yes, assuming you have a plan that moves your company forward -- Starup Suicide #4 is Death by Doing Nothing -- you'll want to build in a place to jump make radical changes if necessary. But, you'll also want a side plan, so if you do change strategy, you already know where you're going.

Thus the innonate 8% rule: As you're starting your company, take about 8% of your time, or an hour of your work-day (I like to do it before I go to sleep, when I'm tired of thinking about my real project), and work on a tangental business plan.

Tangental how? Look at the strengths of your business model (not the details) and think of another way you could apply them. Riya did this with search and image recognition software. One way you could do it, if you were Woot in its early days, is start planning another site based around the model of selling one overstocked item per day at a deeply discounted. If Woot hadn't been successful, maybe they would have been the creators of SteepandCheap.com, which has now altered its model to continuously bring up one overstocked item of outdoors equipment to sell at a time.

The 8% model is important because it works as insurance for you and your investors. It also works a good ammunition to defend yourself from your investors prying questions; investors will care a lot about your master plan, and will appreciate that plan has a tangental plan already written in (it's "if XYZ happens, we'll do DGQ instead" not, "if XYZ happens, we'll come up with another plan").

And lastly, the 8% rule serves as a great addendum to your business plan, and it's a first step to building an empire, rather than a castle. Say you are lucky enough for your business to work out, now your escape plan is more like an expansion plan. The RobotCoop is a perfect example of this, with their 43whatever-they've-thought-of footprint firmly planted in the Web 2.0 space.