When you start a new business and look for options to finance it, the first thing potential investors will ask you for is the business plan. Even if your investors are friends and family, they still will want to take a look at your business plan. Having a business plan is still a sign for going about your business idea in a serious way – if you don’t even put in the time to develop a great business plan, people don’t think that you do have it in you to run the startup eventually. But while many people use the work without thinking twice, its meaning is often not as clear as you might think. In this article, we will go about everything you need to know about the business plan for your startup to get your idea off the ground and impress potential investors from the get-go.
What is a business plan?
The business plan is the document where you specify mainly four things:
- What is your company going to do?
- How will you accomplish your business goals?
- Why are you the perfect person to implement this?
- What will be the budget you will need to get your startup up and running?
While we normally think of a very formal, very long, printed document when we think about a business plan for a startup, this is not always the case anymore. Depending on your business, the plan can be anything from one page to as many pages as you need. Keep in mind though, that shorter business plans are almost always better. Sometimes it is even suggested to keep the business plan to one page – in the cases where this is possible.
A business plan should be short and gripping, to be able to attract and keep the attention of the reader. If you explain every little detail of what you want to do, you will lose your attention very quickly. Your business plan does not need to go super deep, but everybody who read it should be able to explain later what the overall idea of your business is.
It is very important to keep in mind that your business plan should be something dynamic. While you implement your ideas, they will change and adjust to the conditions, and so should your business plan. If you write a document, in the beginning, print it out and try to follow it closely, even if some of the circumstances change, you set yourself up for failure. Schedule regular meetings to revisit your business plan and see if it still works for your startup, or if you have to make adjustments and changes. Flexibility is key to run a successful startup and shows that you understand today’s requirements of the business world.
While writing your business plan for your startup, you should also keep the audience in mind. If you want to convince your friends and family, use words and language they can understand. If the business plan is for investors that are very well-versed in the area, you can use language that would not necessarily be understood to others. If the business plan is just for your internal use, you can use colloquial language.
Why do you need a business plan?
Like we stated earlier, a business plan is needed when you are looking for investors for your startup. Investors will want to understand your plans and know exactly how you are planning to do business. They will also want to know how you came up with the idea and what information lets you to believe that your endeavor will be successful. A great business plan will convince the potential funders that you are an expert that knows exactly what they are doing and that your business will be a total success. Ideally, the business plan will convince them to actually give you money and fund your ideas.
But being able to show something to your potential investors is not the only reason you should develop a business plan. It can also help you to gain clarity about your ideas and your plans yourself. Many times, when beginning to work for a startup, people have many ideas, but no real plan or strategy. Even if the ideas are great, they will never lead to success, as long as they are not implemented strategically with a master plan. The business plan is your master plan – it details how you want to implement your idea and gives you a much better idea of necessary steps. It will also let you know if you have to change anything about your approach, as researching the competition is a huge part of it.
Writing a business plan can help you to gain the necessary clarity to get started. It can streamline your many ideas under one business goal and make sure, that you do everything that is needed to achieve that goal. Even if you do not have to impress any potential investors, the business plan should be a document that you can refer to internally throughout the take-off phase of your startup, so you know if you are on track and if things are going as planned.
Do only new companies need a business plan?
It is a common misconception that only new businesses need a business plan. Research actually showed that existing businesses also benefit in a great way from having a business plan. Planning can help a business grow much faster and will support its development. If you know exactly where you want to go and you know the milestones along the way, you will also be able to encounter roadblocks and issues along this way and will be able to solve them. If you only react to things that happen, your actions will not be purposeful and thus will have a much smaller impact.
Specifically for existing businesses, it is important to constantly refine the business plan. Things change, and the business plan for startups should be reflective of that. When developing a business plan, you should include regular meetings where you refine it and adapt it to current circumstances. You should revisit your business plan at least every six months, preferably more frequently.
How can you develop a business plan?
Developing a business plan should be a group effort. If you are working on your startup in a team, the same people should also work on the business plan. You will need everybody’s input to make the business plan comprehensive. The main elements that you should include in the business plan are the following:
In this section, you sum up what you want to do in a very condensed way. It should be around one page and be written very well. While it is the first part, it is normally written last, because you need to know all the contents of your business plan to be able to sum it up well.
In this part, you explain which problem you want to solve for your customers and what you want to sell. You will also take a look at the competition and the market for this product. You can describe your target customers as well and really go into detail in describing what sets your product apart from other products that are similar.
This is the section where you explain exactly how you will take the opportunity that is presenting itself and will turn it into a startup. You can include your operations, your sales and marketing plan and everything that will explain to the readers how exactly you will implement your idea.
In this part of your business plan for your startup you can describe your team and the expertise everyone brings to the table. While your business idea needs to be great, potential investors also want to know who would be there to implement it. Make them understand that your team is the best to work on the ideas you present.
Of course, you have to make financial predictions and develop a budget in your business plan for your startup. You have to show which cost will occur and which income you predict.
If you have further information that you want to include and that you think is necessary to make your idea clear and relatable, you can include this in the annex. This could be more technical information, pictures, drawings, etc. – depending on your startup idea.
If you cover these areas in your business plan for your startup, your readers will have a very good understanding of your business idea and your startup. While it is important to include a certain level of detail, keep in mind that shorter business plans are better than a very long one. Investors might not have enough time to read a 40-page document, so even if your intention is good, it might actually have a negative impact. If people still have more questions about the technical execution of your idea after reading the plan, they can always get back to you for more details.