Take the Pain Out of Writing a Business Plan
On one hand, you need a plan to make sure your business idea is viable and fully-baked, and secure talent and capital to build your company. On the other hand, completing a plan is a lot of work, and you may not need to do it all now. Instead, save time by concentrating on just the first part of your plan, which covers “what” you intend to do. Later, address “how” you’ll do it, and what you’ll “need” to make it happen.
1. Goals. You’re starting a business for certain specific reasons. For example, you might want to reach annual revenue of $1 million within three years, or pay yourself $10,000 per month so you can quit your day job. But startups change constantly, and it’s easy to lose sight of your initial motivations. Also, it’s critical to make sure that everyone involved is shooting for the same things. If you focus on market share, but your partner or investor cares more about cash flow, you’ve got trouble brewing.
2. Environment. An idea that’s great in one place, or at one point in time, could be a dud in other conditions. In the 1990s, early social networks struggled to gain popularity. At the time, consumers were reluctant to post personal information online, and dial-up Internet access made it difficult to share photos or video. Today, social networks like Facebook are nearly ubiquitous. The lesson is that you need to make sure your market is big enough to support your goals, and that the trends are working in your favor. Bagel stores may be a big hit in New York, but that doesn’t mean yours will be successful in Shanghai.
3. Customers. Startups have limited resources, so you’ll need to focus on one customer segment, and stick to it like a shark with a laser beam helmet. By limiting your initial target market, you’ll have a better chance of finding your customers, and being the best in the world at what you do just for them. If you try to start the next Nike overnight, you’ll probably fail. But get pro athletes to love your sneakers, and you’ll soon win over weekend warriors, and eventually even couch potatoes.
4. Unmet needs. To make your business succeed, you have to match your products with needs your customers have that aren’t being satisfied today. To pull it off, you’ve got to start with a clear, objective understanding of what your customers really need or want, and are not getting. Just because your mom loves your iPad app idea, doesn’t mean customers will buy it. Instead, find cheap, fast ways to get in front of potential customers, to find out how they react. Get a few clients to pre-pay before you launch your service. Test a blog before you invest in a custom website. Or sell your products at an in-store boutique before you sign a lease.
5. Strategy. Creating a simple, clear strategy statement forces you to crystallize your thoughts. That helps your team understand exactly what you’re setting out to do, and makes it easy for outsiders like investors to grasp. As Einstein said, “If you can’t explain it simply, you don’t understand it well enough.” A fictitious company called DigitHeads might explain their strategy like this: DigitHeads provides tech support for people over 50 years old. Subscribers can call DigitHeads at any time, with any tech-related issue, and get help from well-informed, well-spokenexperts.
6. Business model. If you want to build a business, you must have a way to make money. And that way of making money needs to fit with what you’re doing. If your primary source of revenue is selling ads on your website, your customers need to care about your content enough to visit often, and brands must want to pay to reach your audience. There’s more to a business model, like unit economics, but you can cover that later.
David Ronick and Jenn Houser are serial entrepreneurs and start-up advisers. They partnered with Inc. to create Upstart Bootcamp@Inc., a program that guides entrepreneurs to start up smarter. To learn more about business planning, take UpStart's on-demand course. Or get a free reality check to find out if your plan is ready for action.