How to Draft a Business Plan for your Startup01 Dec 2015
A business plan is a draft of your business goals, reasons they are attainable, and plans for reaching them. Preparing a business plan is one of the first things that you should do as a founder. An accurate, easy-to-read, and well-organized business plan conveys professionalism and credibility. Although it takes a while to do all your due diligence to craft the perfect formal business plan, there are a few key elements that you should consider while drafting it. In this article, we have discussed some of these elements for you to keep in mind when you start working on the business plan for your startup.
While preparing your business plan, it is very important to understand three things:
- What: what problem does your startup solve or what market needs does it cater to?
- Why: why should people pay for this product/service?
- How: how does this business make money or plan to make money?
It is critical that as a founder you take time to identify and articulate their business’s core values and purpose, which will serve as your startup’s compass for decision making at all levels.
The success of any startup is determined by the clarity of their vision about what you want to achieve in the long run. While it is difficult and not always possible for a startup to have long-term vision at a very early stage, it is imperative to understand where you are headed, and evolve as your company evolves. While drafting your business plan, you have to develop strategies on how you are going to realize this vision.
A good business plan always includes financial projections for the next few years. But before you can figure out facts and figures, you’ll need to work through potential scenarios to make sure your business model is going to work. You need to include details of hiring, pricing, sales, cost of acquisition, expenses, growth, etc.
Analysis of Feasibility
You will need to come up with a few hypotheses and test out different monetization avenues. HealthSetu, a Venture Factory portfolio company is the prefect example to understand this concept. HealthSetu provides curated medical content to the vernacular audience. According to their research, the way the vernacular population consumes medical information on the Internet is vastly different from the rest of the world. Most of the quality content is in English; it is technical and not specifically targeted for the local audience. HealthSetu bridges the gap by developing quality content specifically targeted towards the vernacular audience, helping them understand their options and make better decisions about their health and lifestyle. They studied what mainstream content-driven websites that provided content in English were doing. Then, they tested the feasibility of their business by talking to people at the ground level, in hospitals and with doctors and understanding how they consume information. Although it is good to have spent hours in front of the computer, at some point you should go out and talk to industry experts, potential customers and other entrepreneurs to determine the feasibility of your business idea.
Here is a road map of what your business plan should look like.
- Executive Summary: Summarize the elements of your business.
- Describe your Startup: Introduce the reader to your company and your business concept.
- Industry Analysis: Provide a picture of your industry and how your business is positioned within this framework.
- Market and Competition: Evaluate what you are getting into. Know how your customers are segmented and who the target market is. Understand how you can offer more value than the competition. An analysis of both of these together will help in explaining your market share.
- Strategies and Goals: Analyze the market and your competition in order to determine how and where your company or product/service fits.
- Product/Service: Describe your products or services and how they match your findings of your strategies and goals.
- Marketing and Sales: How will you market your products or services with the best positioning and to forecast your sales based on the findings of the previous points.
- Management and Organization: Present the management and personnel who will run the business.
- Operations: Present the detailed explanation of how the business is or will be run.
- Financial Requirement: Present the type and amount of financing needed, based on the previous points, to accomplish the entire business plan and ultimately your vision.
Writing a business plan and approaching big venture capitalists can be intimidating, but think of it as simply as writing about your business as attractively as possible to get investors intrigued. Making a fair assessment of your needs and planning accordingly will ensure that your plan is stable enough to get you off the ground. Understanding the nature of your business, its purpose, what you’re selling, who your audience is and how you make money, is the key to producing a great business plan.