From Passion Project to Startup in Four Days: A Guide (featuring beer and tacos)
So what are you waiting for?
I planned to spend this week relaxing.
Really, I did. I originally had 4 much needed days off from both work and MBA classes and I was spending some of my down time with the two founders of my favorite art-based business that I have the pleasure of advising.
Despite my capitalist persuasion they allowed me to become involved with them a year ago, and like many of the days since then our conversation ran a dizzying course through obscure music, absurd software ideas, performance art, the human experience, dollar-tacos and eventually (inevitably) entrepreneurship. One of the two founders, who is currently in a Masters of Fine Arts program, brought up an entrepreneurship pitch competition being offered to students — which thanks to his MFA meant technically our team was eligible.
Then he mentioned that there was a cool $40k up for grabs in prize funding.
My ears perked up. I stopped rambling about Banksy’s recent Central Park installment and what it might mean regarding American capitalism.
30 seconds of additional conversation revealed that the deadline for submission was 4 days away. There was hesitation, but who were we kidding? Even a small chunk of $40k can pay for a LOT of art.
Challenge accepted, vacation over.
So the past 4 days have been a crash course through the essentials to get a concept from passion project to pitch-ready, and there was even still some time for dollar-tacos and a few beers. Although the founders have been propelling this project for 3 years on sweat equity alone, when I sat down and threw together a page and a half overview it was described by the two founders as “the most business-writing on this project yet.” I believed it.
Here’s how we made it happen:
Business Model Canvas
You gotta start somewhere, and this is a place I know, love and trust. After 45 minutes you have all your crucial assumptions laid out, and hopefully you have covered every aspect necessary to make your business concept functional. Wikipedia is a great source for a template that includes examples and directing questions.
TEST YOUR ASSUMPTIONS
Realize that everything you wrote on the BMC is more or less hypothetical. If you spend the first 45 minutes of day one cranking out the canvas, spend the rest of the hours that day testing your assumptions. Talk to every and any person who is relevant to the business in some way (provider, client, partner, competitor, etc). You can talk to over 300 people in a single day — I’ve done it. Revise your canvas as your conversations point out the massive oversights you missed and costs you completely forgot to consider.
This is the most important part of the entire process, everything from here on out is only as good as these assumptions.
Put Some Meat on that Canvas
For each category of the business model canvas you should realistically have a half page to a page (at least) to explain what the canvas actually means in context.
Value Proposition should include the problem you are solving, the solution, the competitive landscape, any insights you have on existing players and finally your Unique Selling Point that sets you apart. Explain exactly what you do to deliver value to customer and the activities it requires.
Consumers are the most important thing to achieving your value proposition. Spend a page describing all of your customer segments (size, behavior, preferences), specifically noting the one most important to your success or failure. Give another page to relationships and channels combined, explaining how you are going to get new customers and maintain the customers you have. stay focused on your delivering your Value Proposition and Unique Selling Point throughout the plan.
Partners are the next logical step. No matter what you may believe you will most definitely not get anywhere alone, and there are probably numerous roles outside of your organization that are crucial to its success. Be specific. Identify roles and if possible individuals that can fill them and why. Explain why every partner is essential.
Resources are about as relevant your partners. Tell the investor exactly what resources you need and why. Mention the ones you have, the easiest and hardest to get, and which are most essential.
Cost structure is where you will either win or lose the faith of whomever is reading your plan. Minimize your costs wherever possible, but most importantly be realistic and try to account for every cost imaginable as accurately as possible. Explain which ones are most significant and/or unavoidable, when you’re going to incur them and how you will make decisions to incur them. Think about depreciation — those great resources you have won’t last forever. Make sure to factor in the cost of your partners, managing relationships, resources, acquiring new customers, labor, not to mention actually DOING whatever your value proposition is.
Revenue streams are everyone’s favorite part. Once again, be realistic. Its tempting, but be careful not to over-project. No hockey stick shaped profit models, no infinite growth, in all likelihood no getting rich in year one. Explain how much of your market you can REALISTICALLY tap into. Focus on what they’re willing to pay for right now and base estimates of how much they are paying for similar products/services. Round down.
TEST MORE ASSUMPTIONS then get those tacos and beer.
If possible, put the whole plan in front of someone who is relatively experienced/educated in the field of your concept. Make sure they’ll be honest with you and get their feedback on its feasibility. Tell them to take their time and get it back to you the next day. Then seriously, relax. At this point its probably late into day 2, but you have a fully fledged business plan that’s 5-9 pages to show for it.
Pro Forma Time
Get a calculator these are financial projections based on all of your assumptions. Don’t run for the hills quite yet though, amazing services like ProjectionHub can gently hold your hand and walk you through every step along the way. Trust your gut and remember what you focused on in the Cost Structure and Revenue Streams sections of your brand new business plan. Low-ball your sales, be generous with costs, assume “if things break” really means “when”. This part is never fun, but once your done (if you used ProjectionHub) you’ll have 10 spreadsheets with 3-year projections of Cash Flows, Income Statements and Balance sheets, as well as an Annual Summary. Check out your net profit in year three — are you out of the red? Your passion project is officially looking as real as Google. Keep in mind most start-ups are in the red for year one, and likely year two.
Executive Statement
Keep it under two pages. Explain your value proposition and unique selling point as short and sweet as possible. Talk about how awesome and amazing your team is and what sets them apart from anyone else who might be competing in your space. Always be selling your a team, and always be telling a story. Briefly tell the story of how you got to where you are now from the beginning, and what you are doing right now in the effort to execute your plan. Highlight the best aspects of your Plan and your Pro Forma models. Get human too — talk about what is driving you to do this. It is a passion project, right?
Get Abstract
Keep it under 100 words, make them fall in love, and make key message points easy to remember and improvise. If done correctly, this is also your elevator pitch. Describe the big-picture of your Value Proposition and Unique Selling Point, why the problem you are solving is important in the grand scheme of things, and what uniquely positions you to be the team to execute. Sell your amazing incredible team a little more and end with something pithy that they won’t forget.
CELEBRATE
Put the abstract on top, executive summary, business plan and then your Pro Formas. Have another beer or go to bed because its 2:00AM on Friday and your week-old start-up finally has a fighting chance at some cash.
