Launching a new startup business takes more than an idea. In order to actually succeed and stand out as a viable competitor in your market, you’ll need to know the ins and outs of developing a startup business plan.
Why is a business plan needed to start a company in the first place? Why not just give it a go? Well, there are a few reasons a startup business would benefit from having a well-drawn-out plan.
A startup plan is beneficial for small businesses because it can help them gain access to certain funding options that aren’t readily available. Investors want to hear your ideas, but more importantly, they want to hear the bottom line. It’s okay if you aren’t sure what goes into making a business plan because we’ve got you covered.
Small Business Plan Characteristics
A generic, run-of-the-mill business plan that startups use will share a lot of similarities. Generally, they consist of these characteristics:
- Executive Summary
- Company Description
- Market Research
- Service/Product Description
- Management & Operational Infrastructure
- Marketing & Sales Strategy
- Financials (Bottom Line)
A thorough and professional-looking plan will nail every single one of these categories. Not only does the plan provide insight into your business, but it also supports the potential success of your business. In fact, startup businesses that write a business plan usually experience an increase of 16 percent in their chance of success.
Also, did you know that you can have a better chance of raising funding for your startup business by having a business plan written up? Banks and investors will keep their wallets closed unless they can see a well-planned and structured method of attack. What’s more, startups with business plans in place usually experience higher rates of expansion than businesses that do not have a business plan at all.
Defining Your Startup Business and Highlighting Its Objectives
There are times when ambiguity is acceptable and can find its way into your business plan. When it comes to describing what your company is about, however, transparency and clear language find more admiration among investors.
In your business plan, you want to focus on identifying your brand and what it stands for. You also want to provide a timeframe for when you expect to launch. Further, you should clearly describe the types of products or services that your business is going to be bringing into the industry and which niche you plan to compete in.
Going digital? Perhaps you are thinking of having a physical location for your business. This is something that should be clearly stated. Identify whether you will be online, offline or both. Also, be sure to describe whether or not you intend for your startup business to be local, regional, national or global.
Some successful plans have been known to include their mission statement in the company description. If you’re intending to use your startup business plan for funding purposes, you will want to make sure you are as thorough as possible. This avoids having potential investors and business loan opportunities walk away with further questions. It also provides you with an incredible amount of understanding of how your startup operates, what it is expected to do and what value it will provide to the consumers of the industry.
In addition to discussing your startup, you should also write about why you decided to go into business in the first place. Let’s say, for example, that you are opening a new custom home repair business because no one in your area has advertised this service or you have talked to others and found that there is a demand for it. Turns out you have a killer knack for this and want to capitalize on the market. Discussing why you are entering a particular market can help investors see the potential of your business.
Without going into a ton of depth, you can also touch down on where you expect your startup to be in “X” amount of time, how you plan to get it there and what you need to get it there. The reason to be light in this section is that you will be getting into a good amount of detail as you progress in writing your business plan.
Be mindful of the fact that the company description is more of a summary, so try not to go overboard here. Make your content precise and stick to around three to four paragraphs.
Who’s Your Focused Demographic or Ideal Buyer?
It’s important to remember that not everyone is going to buy into your business. While you may think your brand is the best, others might not share that same opinion. Don’t assume that your business is for everyone. A pretty critical stepping stone to successfully launching any business is to know your market and identify who the audience of your startup is.
A little consumer market research will be needed to identify who you will need to target. It’s a lot more complicated than just saying this product is for one type of person or a group of people. Research can help you determine exactly what type of buyer will be interested in your product or service and how to reach them. Research can also help you determine their individual buying power to help guide your pricing structure.
By being thorough in your market research, you will be able to clearly identify who your business will target. Usually, best practices break the audience into four categories:
First, start with demographic indicators like:
- Income level
It is smart to start broad and then narrow your audience down while categorizing them. Once you have completed your market research, you should be able to develop a basic “Buyer’s Persona” similar to the following:
- Eco-conscience males
- Ages 24-45
- Living in the New York Metro Area
- Annual incomes between $65,000 and $89,000
This buyer’s persona nails the five demographic categories mentioned above, and it’s super-specific.
Your business plan should discuss the research you did when identifying the market for your startup. Be sure to mention the data you collected from whatever methods you chose to use (e.g. surveys, interviews, testing pools). The information gathered during this portion will fuel other areas of your business plan as well as aid in future predictions and marketing strategies.
What Is Competition Doing?
Not only will you be looking into who will buy your products or services, but you will also need to see where they are currently getting their needs met. Think about it: If you’re writing a business plan, then no one knows you even exist yet. You are nowhere to be found, so cookie cutting your competitor’s strategy will not likely cause a disruption in their sales. Ask yourself what makes your startup different and why customers should flock to your company.
After you know who your competition is, it will be much easier to identify areas in which you can gain a competitive advantage. Are you aiming for the top designer brands or are you looking for wider exposure to a more cost-conscience crowd? Maybe your price point is lower and you have a natural sourcing process for your products. These types of things should be mentioned in your business plan.
Outlining Your Budget Appropriately
One thing is for sure: If you want to stay out of the red, then you’ll want to make sure all of your numbers are organized and in order. This is especially true for those looking to land a little investment funding.
Determine exactly how much will be needed for your business to operate or you’ll quickly run the piggy bank dry. Did you know that running out of funds is one of the top reasons startup businesses go belly-up?
Keep all costs in mind. Some of the costs associated with all businesses include:
- Equipment costs
- Legal fees
- Property (buying or leasing)
In your business plan, you need to carefully calculate all of these numbers. While the total operating costs may not be as high as your startup expense report, it is wise to generate a cushion to sit on just in case something unfortunate happens.
What Direction Do You See Your Business and Its Financials Going?
When you haven’t yet launched your startup, you will not have access to income statements, flowcharts or any other accounting documentation. This doesn’t mean that you shouldn’t know where your company is going. Provide predictions based on population, market size and percentage of potential customers expected to convert. These projections should outline three to five years. Be reasonable with your expectations and predicted projections.
Include plans to expand, including the costs of opening new storefronts or facilities. Always remember to set reasonable goals and do not promise anything you cannot deliver to investors.
Outline Your Organization’s Intended Hierarchy
A good business plan will also include a brief overview of your organizational power structure. Is it just you and a buddy? Maybe you have a single team or intend to be multi-tiered with numerous departments. Either way, you’ll want to create a model that is easy to understand and not so overwhelming. If your startup will be segmented into several departments, try not to overload this section as it could quickly become too complicated to follow.
Be sure to show how the business will run in regard to decision making among board members and investors. Let it be clear who has the final say in the decision-making process and who is in charge.
How Do You Plan on Marketing?
Everything you have learned so far is useful when developing your marketing plan, which should be much more in-depth than simply saying, “I will run an ad that will sell stuff.” This is not a strategy, and while one could spend days going over all of the different marketing strategies and how each one could be applied to certain businesses to produce desired results, there is no right or wrong way to market. Also, the same strategy that worked for your competitor may not be viable for you.
During this segment of your plan, you will want to identify how you will get your customers and how your competitors get their consumers. You’ll also want to outline what the costs are to get said customer and what the lifetime customer value (LTV) of that customer is. It sounds complicated and can certainly become that way unless you cover your basics and start with stepping stones such as:
- Website launch
- Social media activity
- Lead list building
- Customer retention efforts
- Potential consumer loyalty programs
Marketing is something you do not want to take baby steps with. Jump right into this and start with all of the above before you even officially launch. It would be unfortunate if your customers wanted to learn about your brand or business and had little to no information available.
Knowing How Long a Business Plan Should Be
While we’ve covered a few different things that should go into writing a business plan, this is not a call to produce a dissertation for graduation. You want to be very thorough and detailed, but you also want to keep it as concise as possible.
You also need to ensure that the plan is free of any grammatical or spelling errors and that it avoids the use of slang terms in favor of a clear, professional voice. The reason you will want to go through the extra hoops of refining your plan and making sure it is error-free, is that you may need to use your startup business plan to help raise funds and additional capital. Your potential investor conversion rate will be drastically reduced if your plan is riddled with errors and grammatical issues.
Concluding Your Business Plan
If you have been through in the rest of your business plan, the conclusion should not be very long or detailed. In fact, it can be quite brief. Simply reiterate the opportunity that is available with your business before highlighting the strengths of your plan and your business vision. Finally, end on why your business will be in place to execute the plan you have provided. If you’ve done your job carefully, you and your enterprise will be in the position to succeed.