When you’re setting up a new business, it’s one thing to have a good elevator pitch or a convincing story to tell at a “speed-dating for business funders” event. Yet when people want to get serious about investing in your idea, they need something more concrete.
Your business plan is what you prepare to explain what your business hopes to achieve and how you plan to accomplish your goals.
Business plans don’t need to be long; back in the day, it was recommended to have a 20 to 40-page business plan with lots of detail, but now funders look for a more concise business plan.
What to Include in Your Startup's Business Plan
This should be a brief overview of your business plan. Its purpose is to serve as an introduction, sketching out what is to come, providing a short synopsis of the entire document.
You can even use a well-crafted Executive Summary as a stand-in for a full business plan when you meet with potential investors but don’t have time to discuss the full document.
The company overview section explains how you do business – online, brick and mortar, or both – and you can talk about key hires and agreements for supply and distribution that you have already made.
Your Products or Services
Explain what your company is selling, and why. What need does your product or service meet? How will customers benefit from your offer? Is there any intellectual property that you will be able to leverage? And what sort of research and development is your company carrying out? What are your plans for the future development of your product and service, and how much funding will they require?
Your products or services section should answer these questions and help guide your business strategy.
This is where you discuss the market you are approaching, and how your company meets a specific need. It’s good to have hard data here, because this shows that you have taken the time to analyze your possibilities, as well as potential areas where your company needs to improve its reach.
Within your market analysis, you should also give an overview of who your customer base is, target demographics, and how you plan to reach them.
What is your unique selling point that will enable your business to overcome existing and potential competition? It’s important to scout out the market and see who your competitors are. Find who you will be up against selling your product or service and explain how you will get ahead of them. And where is the market going? Is your business in a new, growth market, or is it a more established market that may make it more difficult for a newcomer to disrupt the status quo?
Your competitive analysis should answer these questions, which will help you position your company in the competitive marketplace.
Sales and Marketing Strategy
You need to explain how you will reach customers. Which techniques will you use to market your business, and what do they cost? What sort of return will you get from your marketing budget? How will you position your brand, especially if you’re entering a sector with lots of competitors?
Answering these questions will help you identify how your company will communicate with your target audience and explain the benefits of your product or service.
A start-up lives or dies by its talent, and you need to present the key players on your team. Talk about their education and experience, and what makes them the ideal people to guide your idea into fruition.
Also: highlight where you need to add to your team, which skills are you lacking, and who you need to hire to reach your business goals.
One of the most important elements of your business plan is your financial plan. You need to explain how you plan to raise money, how much money you need for each stage of your business, and how you plan to use that money. How much will be spent on personnel, how much on offices and retail locations (if any), how much on internet infrastructure, and how much on other costs? How much money will the company make, and when will this offset costs? What is your profit margin, and when will the company be profitable?
You should also provide information about projected income: abbreviated income statements and balance sheets for the next few years of your business. And if your business has been running for a while, you must include full financials for the past few years.
As Feld and Mendelson point out in their book Venture Deals, “The only thing you know for sure about your financial projections at the early stages is that they are wrong.” But you still need to work out these numbers, so you have a road map for where you are heading financially.
While the business plan is an essential tool, there are alternate versions of your business plan that may be useful: the Executive Summary on its own, and a Pitch Deck. Each of these provide shorter versions of your business plan that you can use to make a first contact with potential hires or investors.
Your business plan isn’t just helpful when you’re seeking funding; it allows you to refine your ideas and discover any weak points in your strategy.
And don’t forget that a business plan is a living document; as you progress in your project, you’ll be updating it as the market changes, and as you encounter success or setbacks.
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