The vast majority of start-ups fail, primarily on account of poor planning. While most things are out of your control, a roadmap is the only way to prove that what you’re setting out to achieve is attainable. It’s what the VCs and the banks you approach, and even your employees, will want to see. All of this will need to be properly packaged in what is known as a business plan. This is where you state your intentions, how you will tackle externalities and prove the potential of the business.
Business Plan Components
What is the business?
This is a very short description of your business i.e. your elevator pitch. You could compare it with an existing business (an Uber for massages, let’s say).
How will you execute?
The person reading will want to know whether yours will be a tech-heavy business, a human-resource-driven business, etc. So explain how you will execute the above idea.
What is the business model?
Here’s where you state how your business will make money. Be as clear as possible. In most cases, this should be very straight-forward. If it’s too roundabout, it will receive a poor response.
Should you address market potential?
You definitely need to highlight the opportunity available, but allocate space based on popularity of the sector. If you’re going to do something in a well-known category (say, social media or e-commerce), the person reading your pitch will not need to know what the market potential is, because it’s well known. If you do dwell on this, it’s likely you’ll just put them off your idea. If, on the other hand, you’re going to enter a market that is niche or obscure, do key in details of market size and potential.
Which part of the market will you tackle?
Here’s where you go a bit deeper. If there are already players in the market, explain what you’re going to do differently, which category of consumers would pick you over the others, how the features of your product will be different. Don’t get too technical here, as VCs tend to be more interested in the thinking, rather than the working of the business.
What are you doing today?
Now, there may be a potential of $20 billion in the market you’re addressing, but what have you done so far? Does it seem to indicate that you will achieve your goals? How many customers have you got so far, how many have you been able to retain, how often do they come back to you? These are questions you need to answer.
Who’s on board?
The key players, along with their experience and background, should be discussed in a separate slide. VCs don’t just invest in an idea; they invest in a team.
Don’t get too technical. Skip Excel sheets, skip product details. People want to hear the story of your company before they get into any of that stuff. It can all come later, once you get your second meeting.
Advantages of a business plan
A business plan aids in assessing the future and communicating the plan to others. Hence, having a business plan can:
1. Motivate you and your employees to work better towards achieving the goal set forth in the plan;
2. Help you to stay on the correct path, and bring you back in line;
3. Have clear and concise business objectives;
4. Prioritize your requirements at the beginning of the year;
5. Make an impression on your investors and bankers – this is extremely essential, since they are going to help you in achieving your targets.
Framing the Mission Statement
By framing the business plan, you will be able to describe the business clearly. This will enable you to write a clear mission statement, which will ultimately be used to define the company’s culture. The mission statement typically encapsulates the reason why the business was started, why it was given a particular name and what it wishes to achieve.