Writing a business plan may seem like a formality and, therefore, unnecessary when launching a tech startup, but it can prove vital for success, especially for early-stage companies. In this guest blog post, Designli CEO/Co-Founder and friend of the Founder Institute Keith Shields describes the reasons behind why entrepreneurs should write a business plan for their startups, as well as how to get started.
A business plan is a crucial document that explains what you’re going to do, what your goals are, how your company is unique, what your strengths and weaknesses are, and how you’re going to bust into the market. Basically, it’s a short way of getting across your product or service, how you’re going to make money, and what your company is and is all about.
Why should you write a business plan?
A business plan might seem tedious to write, but it’s a crucial and un-skippable part of the business development process. Without knowing where you stand and where you’re going as an early stage startup, it’s possible to forget and forgo certain steps that will ensure your success. It provides a structure for your company and a roadmap you can follow, and it compiles all of the research you’ve (hopefully) done on your competition, on the industry, and on your own means of success.
A successful business plan can help convince investors that you’re worthy of their investments, and you’re potentially going to need that capital to help get off the ground. Essentially, you should write a business plan because it’s a blueprint for the formation of your company, and it’s an easy reference-able document to refer to in order to make sure you’re on the right track.
Without it, it’s possible to be too vague, too general, too unspecific, too lost without a guide. It’s likely that, without it, you’re going to have a difficult time explaining your company, product/service to people. If nothing else, it’s a process whereby you’ll be able to at least think about where you are and where you’re going.
What are some things to avoid with a business plan as an early stage startup?
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Length. A good rule of thumb is that you should keep your business plan in between 10 and 15 pages. Otherwise, your business is way too complicated (especially for a startup in the beginning stages of building up), and you need to make sure you pare it down into an easily consumable document of information. If it’s too long, it’s easy for those who need to see it to become overwhelmed, or, worse, bored and uninterested.
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Claims Without Research to Back It Up. This is crucial. If you’re going to make grandstanding statements about your strengths or weaknesses, your niche, and the way you’re going to break into the market against your competitors, and why your early-stage startup is worthy of investments, you’ll need research and studies to back it up. Make them easy to understand, and highlight the important parts. Better yet, utilize footnotes.
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Being Too General. A business plan needs to be specific to your unique startup. It might be tempting to follow some general templates, and it’s not necessarily a bad idea to use it as a starting point, but you want to make sure you keep it specific to you.
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Forgetting that Your Business Plan is Alive. You’re going to need to revisit your business plan constantly to make sure it’s on the right track and adjustable to feedback, new information, and ideas your team possibly forgot on the first draft.
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Not Formatting and Not Proofreading. This speaks for itself. Make sure it’s completely free of spelling and grammatical errors. Otherwise, nobody is going to take it seriously as a legitimate document.
How do I get started?
Determine what your product or service is, and make sure you have a minimum viable product ready for market. A prototype is going to be crucial for getting yourself out there into the world.
Ask yourself the important questions before beginning a business plan.
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What is the company about? What are the visions, mission, goals, values? If you needed to explain the company in a few short words for an elevator speech in under 60 seconds, what would you highlight?
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Who is your target audience? Who will the product or service be for? Who will the business plan be for? Is it for your team, or for potential investors?
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What is the industry like? What is your niche and how are you going to bust into the market? What is your market size?
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What is the competition like, and how do you differ from them?
Before going forward, remember that you’re going to need to keep it brief. You don’t need to include statistics on a month-to-month basis for the rest of the year or ten years in advance. You don’t need fancy charts detailing every component of the industry or your competition.
What are the ultimate goals of the business plan?
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Describe your company
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Describe your product or service
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Describe how the company is a viable, money-making company
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Describe the market
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Describe the process whereby you’ll be able to produce the product en masse depending on demand
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Describe your team
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Describe your competition
What are the components of a business plan?
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Executive Summary: Write this section last. It’s going to be the part where you summarize everything else in the business plan in an easy-to-understand format so anyone wanting just the highlights can pick up on your company details right away.
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Company Description: Highlight your mission, vision, goals, values, how you’re going to manage and operate, and what your team is like. Don’t forget to include information regarding your location and where you’re going to operate.
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Industry Analysis: What does the current industry look like? What is the market you’re going
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Competition: Write about how you differ from the competition, what your top 5 competitors look like
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Strategies and Goals: Write about how you’re going to reach the goals, and what those goals even are. Focus on short-term goals, like how you’re going to initially grow with your MVP, and what your long-term goals are.
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Products or Services: Short and sweet. What is your product or service, why is it something that will solve a problem, what that problem is, and why it stands out from the competition.
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Marketing and Sales: Describe how you’re going to sell the product. Are you going to utilize beta testing, landing pages, and viral marketing to get it off the ground? Are you going to utilize print advertisements, press releases, or word-of-mouth referrals and social proofing? Make sure they understand how you’re going to generate interest in the product or service, and how you’re going to get the product or service into your customers’ hands.
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Financial Forms: How are you going to raise money? What are the reasons an investor should invest in you? What are your revenue goals and how are you going to reach them? Include enough information to show you’ve done your research and you understand how you’re going to make money.
Are you properly prepared to operate a business? Are you ready to run a company? Do you have a team in mind, or a co-founder? It’s crucial to develop a business plan so that you set standards for yourself and your team and make sure everyone’s on the same page. It can be the difference between getting funded or not, between growing as a startup or not, and between succeeding or failing.
