Leaving the experience, knowledge, skills, money, staying power and all other essential traits and qualities aside, starting a business requires a fair bit of thinking and planning beforehand. For a business to stand a chance of survival in the early going and eventually grow to profitability and self-sustainability, it has to have a clearly defined target audience and be able to fulfill and address their needs, wants, pains and desires, better than anyone else.
In some cases and markets good as the competitor would do just fine but such businesses must have a unique selling proposition (USP) which is not easily replicated or the first mover advantage with lion’s share of the addressable market. Proliferation of globalization brought about by the advancements in transportation, communication and technology has created a fierce global marketplace with lower to no barriers to entry, which further adds to the predicament and complexity founders find themselves in while starting a business.
Taking into consideration all the risks associated with starting a business and countless things that can go wrong, making a transition from an idea to an operational business requires a clear vision and stellar execution, among others. To help in the process, founders usually reduce their ideas to a business plan which in essence is the roadmap that guides them throughout the journey and ultimately helps them raise funds along the way, when and if needed.
Now, when it comes to business plans I’d say there are two schools of thought; one school postulate the need for and is a strong proponent of a full-fledge business plan while the other school of thought is indifferent or rather in favor of a time-saving ‘light’ version of a business plan with only the very basic info – I belong to the latter school of thought.
So how do you decide what school of thought you belong to and what type of business plan you’d need for your startup? Let’s explore each one in more details and make comparison along the way.
Full-Fledge Business Plan vs Light Business Plan
Executive Summary
Each business plan should naturally start with an executive summary. When written eloquently and to the point, executive summary section of the business plan serves two purposes; first, it keeps founders motivated, excited and on track of their deliverables and duties at all times, and second, it gives investors enough information to decide whether to pursue the business in question and drill down to the nuts and bolts or not waste their precious time on it. Executive summary is a MUST have when starting a business, no matter what school of thought you belong to.
General Company Description (WHO?)
Given that each business plan is associated with a company, it’s only natural to provide the company relevant information. General company description section of the business plan is the WHO and should include company’s overview, mission and vision statements along with its operations or reporting structure. No need to overdo this section, instead be concise and to the point.
Products and Services (WHAT?)
Can you imagine a business without products or services? Exactly, therefore this section is of grand importance as it spells out the WHAT of a business. As such, products and services section of the business plan must articulate to the tiniest details what is it that company does e.g. products and or services it sells and benefits associate with it. When describing your products or services, this is as good section as any to include your unique selling proposition (USP) associated with it. This section is the WHAT of the business and is much important so make sure you’ve got it covered irrespective of the business plan you’re drafting.
Competitive Analysis
This section of the business plan is a testament that founders have done their due diligence and are fully aware of the competitive landscape and their competitors. Competitive analysis exercise is a must do because it helps you as a founder learn who are you up against, what your marketplace looks like, what’s the market and revenue potential and what the true pains, want and desires of your target audience are. In addition, should you ever need or want to seek external funding from Angels or VCs, you’ll have to own this section entirely and be ready to answer in your sleep any question investors may have on the subject matter. Unless, you want to fail, make competitive analysis a part of your business plan
Go-To-Market (GTM) Marketing Plan (How?)
The best product or a service that everyone needs would flop if not positioned adequately and timely. Conversely, some of the ordinary products and services have been epitomized as ‘eternal’ with ‘wow effect’ for no reason other than extraordinary GTM strategy and execution. Case in point Coke, Starbucks, Apple etc. Because of the foregoing, this section of the business plan might be the most important hence, must be done meticulously or else.
Assuming you’ve clearly defined your target audience, think long and hard how you want to roll out your product or a service into the marketplace. Depending on your business model i.e., online, brick and mortar etc. you’ll have several options to choose from e.g. direct, channel, online Whatever your business model may be, make sure you think through every little detail as this is your strategy which mustn’t fail, so be thorough and forward thinking. Most definitely include it in your business plan.
Management and Organization
This section is meant to describe the executive management team e.g. founders, senior executives, directors etc. An org chart with photos and brief overview of each team member are typical information placed in this section. While for you as a founder, this section doesn’t mean much hence, need not be included in your business plan however, should you need to raise funds in the near future, you’ll have to include this section in your business as investors will most certainly ask for it as they care very much about the founding and executive team of a company they invest in.
Startup Expenses and Capitalization
Clearly as a startup founder you ought to know your numbers in your sleep or else things might not go so well for you unless of course, you can afford a financial controller or a CFO from day one. With that said, this section is much important chiefly for you and your co-founders – if any – as well as for potential investors, should you need to raise money for your startup.
Essentially, you need to list all of your initial or capital expenditures (CAPEX) as well as your operational (OPEX) expenses. In other words, to do this right, you’ll have to prepare financials statements 1. Balance Sheet (assets, liabilities and net worth), 2. Income Statement aka Profit and Loss (revenue and expenses) and 3. Cash Flow (cash inflows/outflows).
Financial Plan
This is yet another much important section of the business plan and is closely related to the startup expenses and capitalization. Financial Plan has to elaborate your sales forecast, revenue generation and expenses associated with it. A breakeven analysis and possible risks associated with achieving it should also be included in this section of the business plan. All of the foregoing make this section a must for your business plan.
Appendices
This is where you include any supporting documents, tables, charts, flows etc. used in your business plan.
How important for you is to have a business plan when staring a business? Connect with me via Twitter or Parttimerz