September 23, 2019
What to Include in Your Business Plan
Some ventures don’t need a business plan, In fact, most just need an idea and a person willing to execute on that plan. It probably doesn’t require a lot of money to start and you simply begin by selling to friends, neighbors, and other who learn about your product or service through those friends or neighbors. That’s completely fine.
Business plans are required when you have a more ambitious goal to pursue such as seeking funding, influencing a particular audience, or to develop growth strategies. Business plans should be organic and revisited on a regular basis. Many external pressures such as new technology, new competitors, political or regulatory changes may require changing your methodology, pivoting, or radically reorganizing or consolidating.
Business Plans typically have the same components written for different audiences. Here are some of the common sections typically found in a startup business plan:
Summary and Objectives
This first section details background information, company description, general industry data, measurable goals that you want to achieve, and long-term objectives.
The Big Idea:
What is the problem you are solving for consumers or businesses? How dire is the situation? What is the potential market of people that would want to buy your product/service? How much would they be willing to pay? What is your value proposition and how does it differ from existing competition? Are you working on a disruptive technology that will change the industry?
Go-to-Market Launch Strategy and Marketing Plan:
Provide market data and an outline for how you will launch, market and sell your product/service. This exercise enables you to deeply understand your target audience and your plans for branding and distribution. Defend your plan with supporting numbers and statistics from verifiable sources, not just from some random web site on the internet. Also include separate, detailed sections on customer characteristics, and distinctive product features in your marketing strategy.
I know this is super old school, but you have to know WHO is already doing WHAT in your market and how your business will differ from them. Why should potential clients convert from their existing vendors? How will you minimize that risk? By creating a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis, you can maximize what you do best and minimize the risk on what you’re competing with.
Your Management Team:
A description of management positions (existing and planned) and professional advisors provides an organized look at key roles, the experience individuals bring to the business, and important consultants or mentors. You can also include resumes for key employees and startup owners if the business plan is supporting a loan application or investor pitch.
Estimate expenses as accurately as possible and ensure you’ve added in costs for Plan B’s (because nothing works on schedule and that slick developer just ran off with a pile of money and you have nothing to show for it). Create estimates through thorough research, and your expenses should include both Capital Expense (CAPEX) and Operating Expenses (OPEX). A comprehensive financial plan can include profit and loss projections and other budget forecasts in order to provide a clear picture of your startup’s financial standing and future outlook. This is your business model. Know how you will drive revenue.
Two words investors love are “diversified” and “recurring” when it comes to income streams.
This section is concerned with the fixed CAPEX startup costs, along with OPEX and projected revenues. Some people like to show one year, others three; some provide worst, typical and best case scenarios for year one. You may want to include details on location requirements, production methods, legal issues (such as licenses or insurance requirements), staffing information, vendor needs, and other operational elements.
Where You Are Today:
Seed investors will be very happy just hearing an idea that hasn’t gotten beyond the idea stage. Institutional investors will expect there to be a fully fledged product/service with real clients and revenue. The section should include where you are today. Who’s on board, who’s working on what, do you have a minimally viable product or service (MVP)? Have you performed and focus groups or managed to generate a BETA testing group of potential clients providing you with feedback on your MVP? Do you already have paying customers?
As part of your business plan, generate a forecast of where you expect to be and how you will measure that success. Will it be the number of employees by year end? Top line revenue or profit targets? Number of locations? This is the part of the business plan that needs to be revisited regularly to ensure you are on track or meet to see what else you can do to meet those targets on schedule.
Pitching Takes Practice:
Business plans don’t always require you to go outside and pitch for money, but having a solid business plan makes the pitching process easier. What you’ll need to do is create a simple, easy to follow twenty minute presentation based on your plan and how much money it will take to get you to the next level in your plan.
It’s not easy to get up in the front of the room and ask people for money. Especially a lot of money. It can be quite daunting to present your idea to a field of people typing on their phones, looking at their watches and updating their social media on their laptop while you’re up there. Start by pitching to family and friends and get their advice. Then, if you have people who can are in the business who can play “devil’s advocate”, you can practice dealing with difficult people and questions. Anticipate all the hardball questions and have good, well thought out answers. You probably still won’t get the money from the first few real pitches you do, but you never know. The more pitches you do, the better you will get.
Guy Kawasaki, a serial entrepreneur, evangelist and investor has some great tips for building a pitch. In fact, he also features an infographic which really shows how succinct and focused you should be in pitching your business plan. I highly advise any one looking to pitch to simplify, simplify, simplify. You can always provide a booklet with additional details about your project for those at the meeting that provides a lot more detail about your market, financials, forecasts, team bios, etc.