Foolproof Tips for Creating a Flawless Business Plan
If executed properly, a business plan provides a basis for inevitable, unanticipated, and required adjustments a company has to make. Sure, business plans may not be considered trendy or necessary in today’s unicorn-hungry landscape. But the truth is that 92% of startups fail within the first three years, and 74% of those fail due to premature scaling. Launching a startup is one of the riskiest career moves you can make. It can also be the most rewarding endeavor in your (professional) life. The process of writing and enhancing a business plan greatly increases your odds of creating a self-sustaining business by ensuring that the founder has a proven product-market fit, understands the industry, builds a strong team, and has a contingency plan for when things go south. A business plan is a hypothesis for your company. Derive one based on facts with the following components and you might just be that one in 10 that succeeds.
All business plans should include financial projections for the first three to five years. While these may be largely fictional at the beginning, it’s important to work through a theoretical financial model to see how you can possibly make money in the future. Start with a list of assumptions. Justify these assumptions with industry averages, benchmarks, and any other comparable you can find. Consult a financial specialist if you are unfamiliar with financial models.
When you’re first starting out, your team is small. But that doesn’t mean production and operations aren’t important. Test and iterate on your small team’s workflow. Once you’ve established a system that works for your initial team, you have a foundation for implementing a scalable onboarding system to grow your company’s team and expand its reach.
The only way to know how you stand out is to understand your industry. That’s why it’s essential for you to include a market analysis in your business plan. Who are your strongest indirect and direct competitors? What do you offer that they lack? Drawing a Venn diagram to figure out which magic combination of services you offer is a good tactic. You want to invest your time in a company that can gain meaningful (at least 20%) market share. Your market analysis also gives you the ability to hone your unique value proposition. This is your competitive edge. If you don’t have something special to offer, you won’t be able to acquire users, let alone customers. Make sure your unique value proposition has high barriers to entry. You don’t want to waste time and money building something a larger, more established company can replicate at a fraction of the cost.
Can you articulate what your product is in two minutes or less? If you can’t, your product is likely more complicated than it needs to be. Reduce your product description to an elevator pitch. What problem are you addressing? How are you solving it? And what utility are you offering your users? Provide a visual representation of your product, if possible. Screen shots or an actual prototype should always be included with the business plan. If your product is incomplete at the beginning stages of your startup, which is often the case, include a development schedule with designated milestones. Don’t forget to include any foreseen weaknesses in your product. This is not a sign that your company is incompetent. All businesses have shortcomings, and if you can identify those early on, you are more well-suited to deal with them than if you ignore them.
Your management team should have a unique and complementary set of skills. As a founder, know your weaknesses and hire accordingly. You don’t want skill redundancy in your team. Each member should bring a different skill set and different experiences to the table, so that as a team, you are unstoppable. In your description of the team, make it clear why you work well together. World-renowned tech incubator Y Combinator funds startups first and foremost based on the strength of their teams, not the strength of their ideas. Your team-management section should answer the question What is the competitive advantage of this particular group of people? It should also clearly state the roles and responsibilities of each person. The management-team section of your business plan is essentially an annotated organization chart that makes accountability crystal clear.
In today’s media-savvy, venture capital–hungry world, your startup’s story is its calling card. What was your light-bulb moment? How did you evolve from an idea into a company? Your story should be a slightly romanticized version of the truth. You want a sound bite that people can remember. The best founders are often those who solve a problem for themselves. So if you can, make your story personal. Chances are that if your company improves your life, it will improve other people’s lives.
An executive summary functions as an introduction to your business plan. However, it should be written last. This one- to two-page document should highlight each of the components of your business plan in bullet-point or brief-paragraph form. The idea is to provide a general outline of your full plan, without the nitty-gritty details. Be protective of your business plan, but less so of your executive summary. This is something you can offer to potential advisors and investors to familiarize them with your company before an initial meeting.
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