A startup is often the product of someone’s bold idea. However, one idea is not enough to bring a startup to life. For success, you need to draw up a detailed business plan because it is a well-written plan that will allow you to structure all ideas and draw up a path to implementing the idea.
Research has long proven that a business plan really brings a startup closer to success, and in this article, we will look at how to write an ideal business plan that will consist of the following parts:
- Executive summary
- Company description
- Marketing plan
- Financial projections
- Team structure
Despite the fact that this stage is the last when creating a business plan, we will start with it. This is because the executive summary is an introduction to your business plan that briefly describes what exactly your startup is about. The standard executive summary consists of several points:
- Business overview. This paragraph briefly describes the essence of the startup and its proposal.
- Target market. At this point, it is worth detailing the target market, attaching various studies and customer problems that you are going to solve.
- Competition. Competitors as part of the target market are also subject to detailed descriptions, along with your strengths against them.
- Finances. The finance point should spell out the forecasts and various milestones of your startup in financial terms, such as ROI, sales, and more.
- Team. Describe your team, list who runs the various departments, and mention the past experiences of the startup participants.
- Funds. This point is important for investors because it is in it that you describe in detail how much money you need to implement your idea.
As you can see, there are a lot of points, and at first, some difficulties may arise. To minimize this chance, we have prepared some useful tips to help you write a good executive summary.
- Write your executive summary last. Since this paragraph summarizes the entire business plan as a whole, it is worth writing it last, when all other blocks of the business plan are completely ready.
- Stick to a clear structure. An unstructured executive summary can alienate investors and make reading a challenge. Use a clear structure from the introduction, main body, and conclusion.
- Add facts. Simple words are not enough to induce investors to invest in your startup. Back up your words with facts, giving them more weight through different predictions and more.
- Don’t forget to add an exit strategy. Investors will pay a lot of attention to the exit strategy, be it share selling, technical due diligence, or another option.
Although this section is quite important as it reveals all the details about your company, it is the shortest section of the entire business plan. And this section also consists of several points.
- Company history. The name speaks for itself, but this point is very dependent on the company itself. If you are an established company looking for funding for a new project, you should briefly describe the history of your business (when the company was founded, by whom, and so on). If you are a brave startup that has only recently appeared, at this point, it is worth describing the main ideological people behind the birth of the startup.
- Location. Briefly describe the location of your company, and do not forget to add the physical address of the head office (if available).
- Type of business. Describe what your business is doing or is going to do. Tell us about the industry, types of services, and so on.
- Employees and management branch. In this section, it is worth listing all the departments of the company and the management team. In addition, do not forget to add information about yourself as a startup owner as an introduction.
- Legal structure. Another point that is extremely important for investors. Describe the legal structure of your business, be it LLC, C-Corp, S-Corp, Sole proprietor, or in partnership, and describe in detail which part of the company belongs to whom.
- Mission and principles. Shortest point. In a sentence or two, creatively describe the company’s principles and aspirations.
This point is of most interest to investors, and it is on it that they will focus their attention when familiarizing themselves with your business plan. At its core, a marketing plan describes all the competitive advantages and goals of a startup, which helps define its niche. A marketing plan simply cannot do it without three main parts:
- Target audience analysis
- Competitor analysis
- SWOT analysis
Target Audience Analysis
Any business, like any startup, is nothing without clients. That is why it is vital to identify the target audience of your startup in order to understand who exactly will need your product. A detailed analysis of the target audience helps in this. Any target audience can be divided according to basic criteria such as
All of these points will help you make your first guesses about who your target audience is. Start from afar and gradually get to the core of your audience. For example, your startup is an online retailer of airsoft equipment, and you are planning to launch it on the east coast of the United States. With some thought, your approximate target audience might look like this:
- Age 15 to 45
- Lives in Washington, DC.
- Secondary education
- With income from $ 40,000 to $ 80,000
- Fans of airsoft, outdoor activities, hiking, organizers of reconstruction
Once you’ve figured out your target audience, it’s time to determine who you will have to compete with. This is extremely important as you can get a better understanding of what competitors are offering and can come up with a counter-offer. The study of competitors usually takes place in several stages.
Step #1. Competitor Search
This is the starting point. You can start with regular search engine queries using relevant keywords. This will create an initial list of competitors. Once the list is ready, start digging deeper and research competitors’ social media, news mentions, and more.
Step #2. In-Depth Research
In the first step, you learned only the most basic information. Now it’s time to do a more in-depth analysis, and you may need special software like Ahrefs, SimilarWeb, and others. You should study the following criteria:
- Pricing. Everything is simple here. You have to study the pricing policy of competitors.
- Organic traffic. Use Ahrefs and SimilarWeb to understand how many visitors a competitor’s Google site gets.
- Social media mentions. Tools like Sprout Social can help you take a closer look at your competitors’ social networks and followers.
- Time on the market. This point will help you find out if you will be competing with a market veteran or a new start-up.
Step #3. Categorizing
Based on the data obtained from the previous steps, you can categorize all competitors, dividing them into three groups:
- Primary competitors. This category will include the main competitors with whom your startup will share the same audience.
- Secondary competitors. These competitors are similar to you. However, they work for a slightly different audience, and the quality of the product is lower than yours.
- Tertiary competitors. These competitors may be indirectly related to you but do not directly compete with you.
After the two previous analyzes, it’s time to take a quick look at your startup. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats that are inherent in your startup. Let’s take each one apart:
- Strengths. This category includes the traits of your startup that make it stand out from the competition.
- Weaknesses. This includes certain weaknesses that can inhibit or hinder development.
- Opportunities. In simple terms, these are the boosts that will help you achieve your goals.
- Threats. This category includes various obstacles that hinder development, but at the same time, do not depend on you and your actions.
For faster analysis, you should use a template. We prepared for you a convenient SWOT template that you can use for your business plan.
I hope it’s not a secret for anyone that until the investor sees the detailed financial plan of the startup, you will not receive a single cent of the investment. A financial plan serves as the basis for your planning and projections and allows you to establish clear milestones for your startup.
All financial plans may look different, but one thing remains unimpressive – the structure. All financial plans include four main points:
- Balance sheet. The foundation of any business plan is your current financial resources. It is at this point that you must add your existing financial reserves. If they are not there, you can add certain forecasts here that will show the estimated future balance of the startup.
- Expense projections. This item includes all possible startup costs. The important point is that this paragraph should be as transparent as possible.
- Income projections. Use different forecasts in order to show investors the estimated profit that your startup will generate.
- Cash flow projections. This item includes all the money that goes in and out of business.
To make things easier for you, we advise you to use this financial plan template which has all sections that we mentioned.
This is the final part of your business plan that introduces investors in more detail to your team and its structure. In this section, it is important to mention three points that investors will pay attention to:
- Management team. Describe in detail all management positions, who holds them, what skills these employees have and how their skills relate to the current startup.
- Management team gaps. If there are any, you should clearly describe which management staff you are missing and your indicative plan to fill these gaps.
- Board members. If you have a Board of Directors in your startup, it is also important to take them into account in this section and detail each member of this board. If you do not have it, then this section can be skipped.
As you can see, writing a business plan is a pretty challenging process that you should be prepared for. But this is the process that all startups come through. On our behalf, we prepared a business plan template for you that has all mentioned sections. This will help you make a business plan faster and start your search for investors.
Vitaly Kuprenko is a technical writer at Cleveroad, a web and mobile app development company in Ukraine. He enjoys writing about tech innovations and digital ways to boost businesses.