There are many schools of thought in how a Business Plan should be developed. I find that often, a young startup seems to approach developing the plan much like writing a novel – NOT GOOD! I have found these 3 basic steps to be the foundation of a good plan.
First, consider the views of a plan and think about how each perspective will be addressed. In most cases, the Investor’s Perspective is the most critical since most plans are written to attract capital (both dollars and human capital).
Next, focus on the “Essential Ingredients” of the Plan (I’ve provided my own list below). Each of these essential ingredients should be drafted in some graphic or spreadsheet form – if you can’t draw a picture of it, you won’t likely create it.
Finally, flow chart your concept – identifying components of the business process that drive revenue, those that create the expenses, and the areas where the magic happens – value is created for the customer.
Once you have these elements done, assembling them into a logical plan will be relatively easy.
There are 3 Views of the Buiness Plan:
- The Entrepreneur’s Perspective – My Business Model
- The Customer Perspective – Product or Service Value
- The Investor’s Perspective – Does this Make Money?
The “Essential Ingredients” of the Plan:
- Clarity of the Problem or Opportunity
- Defining Your Solution
- The Market Size (validated)
- Evidence of a Compelling Need for the Product or Service
- An Early-Adopter Customer
- A Logical Business Model
- Clarity of Revenue Steams
- The Right Team
When Building a Business | Think Architecture & the Model. First, Develop the Model. Within the Model, what % of sales would each expense be? How does this compare to the rest of the industry (if there’s nothing to compare the business too, it leaves the investor in an uncomfortable place of guessing). How do you outperform everyone else’s contribution margin, EBITDA? What makes this a “better, faster, cheaper” model? Next, Flowchart the Model: Identify the Revenue Drivers, Identify the Cost Drives, and the Points of Differentiation & Value-Add.
Finally (and most Importantly) - secure your first customers. If you don't have a customer, you don't have a Business - Just an Idea.