At times, managing a tech startup can be crazy and chaotic. However, the best tech startup founders find a way to leverage data, analysis, and well-formulated processes to inform their decisions.
"Planning is one of the most important parts of running a business, no matter whether it is a large multinational corporation trying to plan an expansion or a small business launching an exciting new product," says Stefan Topfer, contributor at Nasdaq. "It is easy to start a project, but without careful planning, it is like setting off on a journey to an unknown destination without a roadmap."
For most early-stage startup founders, the planning process begins with a business plan. According to Palo Alto Software, entrepreneurs with business plans are twice as likely to secure capital investments, qualify for loans, and successfully grow their companies. However, business plans are much more than tools used to raise funds. In fact, they serve as a blueprint for scaling fast, staying on track, and avoiding roadblocks. When building a business plan, the best startup founders include the following:
Business Plan Checklist: 5 Key Components to Include
1. Executive Summary
The executive summary is the most important part of the business plan. It should effectively summarize the business's goals and objectives. What makes the startup unique? How is the startup qualified to solve the industry's biggest challenges? What does organization do to "wow" consumers?
"Think of the executive summary as an advance organizer for the reader. Above all else, it must be clear and concise. But it also has to entice the reader to read the rest of the business plan," says Susan Ward, contributor at The Balance.
Because the executive summary serves as an overview of the entire plan, write it last. As a baseline, the best startups include the following components:
- Business Opportunity: Why do consumers need the product/service?
- Target Market: Who will benefit from the product/service?
- Business Model: What is the product/service?
- Marketing Strategy: How will consumers learn about the product/service?
- Competition: Who else is fighting for market share?
- Goals: How will the startup revolutionize the marketplace with the product/service?
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2. Company Summary
The company summary is the next critical component of any well-formulated business plan. If the executive summary is designed to intrigue, the company summary is designed to inform. In this section, founders describe when, why, and how they built the tech startup. It's important to give as much detail as possible in this section. Additionally, approach the company summary with investors in mind.
"If the goal of your business plan is to secure funding, you want to focus on areas that will appeal to investors and lending institutions such as why you're the best person to run this business, your experience in this type of business, and how you plan to make it a success. For example, you want to include your background knowledge, expertise, and experience in doing the work involved in your business," says Randy Duermyer, contributor at The Balance.
Above all, the company summary should address the following:
- Business name.
- Business structure.
- Mission statement.
- Competitive advantage.
- Date founded.
3. Market Analysis
Every business plan needs to include a solid market analysis. This section should cover the most important information about product development, customer acquisition strategies, and strategy. The market analysis is the section of the business plan that will require the most time and research. However, Tim Berry, contributor at Inc, recommends to be selective about the data you choose to analyze:
"A useful business plan doesn't necessarily include a market analysis suitable for a Ph.D. candidate in market research," says Berry. "If you are looking for investment, then you may have to use this section to display your wisdom and understanding of your industry, but don't overdo it. The value of information is limited by its impact on decisions. If more market information is not going to help you do something better, then don't bother."
The market analysis should include:
- Detailed descriptions of the target consumer.
- In-depth definitions of the chosen market segment.
- Comprehensive summary of market growth projections.
4. Management Team
Even the best startups will fail without an all-star team. In fact, companies with high-quality talent are more likely to hurdle unforeseen roadblocks. As such, it's important to highlight each team member's education, skill set, and experience in this section. Founders can also include details on how the management will orient the startup towards long-term success.
The management team section should answer the following:
- Who are the key leaders?
- What experience do these leaders have?
- What are their responsibilities and duties to the company?
- How much are they being paid?
- Do they have any stake in the company?
5. Revenue Projections
Revenue projections provide potential investors with a glimpse of what they can expect to see in financial returns. Early-stage startup founders who are seeking funding should provide detailed assessments of revenue, financial milestones achieved, and projections. A brief overview of cash flow helps potential investors understand current spending habits and more.
The revenue projections section should address the following:
- Sales forecasts.
- Expenses budget.
- Cash flow statement.
- Income projections.
- Assets and liabilities.
Many founders struggle with creating realistic projections based on current sales data and market trends. There is no perfect formula for generating financial projections, but an experienced advisor can certainly point founders in the right direction.
Ready to Build the Best Business Plan?
Your business plan should be well-researched, comprehensive, and showcase the value of your product or service to investors. Make sure your passion comes through! Remember, potential investors review a lot of business plans and base their decisions on a variety of factors including your gumption to get the job done. Your plan must stand out from the competition.
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