Business Plan is ‘The’ most important thing you need to master if you are or want to start a Startup. It is not just numbers and financial projections.
You need to plan ahead on the company purpose, market pain points, business strategies, customer acquisition and the monetization channels.
Here’s a Step by Step Guide to Building an Effective and Simple Business Plan:
1. Define The company Purpose:
The goal, The bigger vision. Think with your heart and soul since you need to stick with this for the years to come.
2. The Problem:
The problem you are trying to solve. Pinpoint the real issue that people/businesses are facing that you plan to solve for them.
Talk to people! Identify a broad target market, conduct thorough market research and narrow it down.
3. The Solution:
What solution have you come up to solve the problem? What is the value proposition you are delivering to the customer?
Is the solution saving time or money? Use cases generally help understand the solution better.
4. The Product:
What is the form factor and the delivery model? What features and functionality will you be delivering? Product architecture and intellectual property (if any). Break your vision down and build a Development roadmap.
5. Why now?
Why not 2 years ago and why not 2 years later. There’s a right time for everything!
6. Market Size:
You need to know if you are solving the puzzle for 100 people or 100 thousand. There are bigger problems in the world to solve than for just 100 people(unless those 100 are willing to make you a millionaire for your product/service)
TAM, SAM, SOM. Recap on the Startup Glossary if you are unaware of these.
7. Business Model:
Revenue model – Pricing – Average account size and/or lifetime value – Sales and distribution model – Customer/pipeline list. Explore and narrow down to the one that compliments your strengths and looks most lucrative. At the end, everything boils down to ‘money’. We’ve built a ‘Startup Business Model Template‘ for entrepreneurs to use.
You’re fooling yourself if you think nobody else in the world is doing what you are doing. Many companies did what Uber does years before they did it. You need to know your successful, growing and dead competitors. Both direct and Indirect. What is that they did wrong and how you can improve. What is stopping them from coming and killing your business? How do you mitigate risks?
You should have a killer team or at least a killer board of advisors. Work on flaunting your achievements and your track record.
Time to get down and dirty with the numbers. Work on capital allocation for salaries, marketing, infrastructure etc, your balance sheet, cash flows, and projections. If you are raising capital, then how much do you need, how will you spend it, how much runway does it buy till you raise the next round?
- Business Plan is for you! Not for the Investors!
- Smart investors do not care about the fanciness you bring to the plan. They care about how well thought out and self-explanatory the plan is.
Do not waste time beautifying the plan if you don’t have the numbers right.
- Be very-very specific on what you are building NOW and how you plan to monetize in the immediate future. Great businesses are long term and ever evolving.