How to Write a Business Plan with 10 Questions
The truth is you don’t need to write a business plan before you start your venture. Business plans take a lot of time to write, and most people don’t read the whole thing anyway.
Unless you are executing a proven business model, you should avoid spending too much time on writing a business plan. Your time is better spent building a basic minimum viable product that will validate your core hypotheses with prospective customers than planning your business on a piece of paper.
However, some investors may not take you seriously without a comprehensive plan that articulates your vision and how you intend to execute against it.
Writing a business plan for a startup requires a different approach from what is needed for an established business.
Your aim is to convince potential investors about the unique problem you are solving, the existence of the market for the solution and the ability of your team to capture the market.
It’s not a good idea to outsource your business plan to someone else. The business plan should be a living document that you draft and update as you develop more knowledge and understanding about your business.
The process of writing your business plan will enable you to evaluate the critical issues such as overall goals, market, operation, customer development, financials, competition and your risk exposures. If you’ve done the required research on your business idea, writing your business plan should not be a daunting task or take several days to write.
Most startup investors prefer a pitch deck to a detailed business plan. However, the discipline of articulating your idea in a comprehensive business plan is valuable in executing and tracking your progress.
The key to writing an effective business plan is your ability to be succinct and simple. Assume your audience are incredibly busy, not interested and have zero domain knowledge of the problem you are planning to solve.
Here are ten questions that will help you write your business plan within the shortest possible timeframe.
1. What is your business in one sentence?
This is similar to the elevator pitch statement. You should be able to describe your business, what it does and why we should care in one line. The goal here is to catch the interest of your audience and convince them about the importance of your business within 10 seconds. You’ll need to simplify your idea and make it succinct with simple statements. Consider using this format: “(Company) help (customers) (solve a problem) through (product).”
Here are some examples of one-sentence pitch that you can adapt for your intro pitch.
Your aim is to convince potential investors about the unique problem you are solving, the existence of the market for the solution and the ability of your team to capture the market.
2. What is your business in one page?
Now that you’ve got the attention of your audience with one sentence, you need to draw them in further with a one-page executive summary. This is a single page version of the entire business plan. Consider writing this after you’ve drafted the whole plan.
Potential investors reading your plan must be able to understand the most important thing about your business, including the projected financials after reading this page
3. What problem are you solving?
The fundamental goal of business is to solve a tangible challenge for a specific set of people in exchange for financial profit. If your product is not creating value that someone is willing to pay for, you are building something other than a business. Your business plan must articulate the unique problems you are solving with your products, goods or services.
What makes your solution unique and what value will your target customers get from using your product? Avoid using too many technical terms to describe your product. Consider using illustrative diagrams to simplify critical issue where necessary.
4. How big is your potential market?
So you’ve found a gap in the market that your product can fill. Well done. Your business plan must demonstrate that there’s a market in the said gap. The size of your market will determine the type of investment or resources you need to build your business.
You’ll have to calculate what the total potential market opportunity is for your products or services. Avoid using carpet statement such as ‘our potential market is enormous’ or ‘everyone can buy our product’. It is better to demonstrate that you are going after a small market that has high customer LTV and low churn, than a big market with low LTV and high churn. Otherwise, you may be boiling the ocean.
Provide answers to specific questions such as: who are the people willing and able to pay to remove the pain points that your product or service is addressing? How many of these people can realistically find and use your product? How much do they currently spend annually to solve the problem you are addressing? Will your product and services increase the number of people in the market or the amount of money they’ll spend? Who else will you share this market with?
5. What is your competition?
The worst place than an overcrowded market is the one with no competition. It’s either an uninteresting space or you are too early. An atrocious approach is to dismiss your competition as non-existent.
Your competition might not be direct. Even if you think your business is one of a kind, ask yourself the question; if your business didn’t exist, but the customers’ need still existed, where would they spend their money? That’s your competition.
Acknowledge all types of real and potential competition and express your competitive advantage.
Your analysis of how your product is positioned and differentiated in the competitive landscape is crucial to your potential investors. It demonstrates how responsive you might be to inevitable changes on your journey to building a profitable business.
6. How will you acquire your customers?
Building a product is relatively easy. Getting through the noise to acquire potential customers to use it is the hard bit. If you build it, they won’t just come. You need to highlight key customer acquisition channels and what it will cost. How will you get your product into the hands of the first set of customers? Will you leverage on someone else’s existing user base or build your own?
Outline your strategies for customer discovery, business development, partnership, branding and user acquisition. There is a significant difference in the go-to-market strategy for enterprise product vs. consumer product. And you need to make this clear in your plan. Highlight your assumptions around the customer acquisition costs and how you intend to validate them.
7. How much will it cost you?
To develop the financials for your business, you’ll need to answer few fundamental questions.
How much will it cost you to build your product and services? How much do you plan to sell per unit? How much do you plan to sell in a given period? These will be estimated based on calculated assumptions around the market size, cost of sales, operating and fixed expenses. You must be able to show the expected revenues your business will generate in first few years of operation. Your financial plan helps the investors to determine how much you are raising, what you intend to achieve with it, and the estimated return on investment.
A typical financial plan often includes monthly projections for the first 12 months of operation and then annual projections for up to 5 years. You do not need a formal business or financial education to build a solid financial forecast. However, you may need additional tools and resources beyond standard Excel sheets to help you build one.
8. How good is your team?
The most valuable asset in any business is the team that is executing the vision. A lot of investors put significant value on the team ahead of ideas and potentially big market.
Smart investors would rather invest in a great team with a mediocre idea than in an average team with an excellent idea.
You need to demonstrate that your team can accomplish what you have planned, and win in your space.
You need to show your thinking about the key roles and responsibilities that are required to start successfully and scale your business. You’ll have to include relevant background, skills, experience and education of your team members as you make the case for why your business has got the winning the team.
Avoid using egoistic c-level titles (CEO, COO, CTO, CMO, CFO, etc.) to describe everyone. It indicates your lack of foresight to acknowledge that your business will require different types of experience and knowledge beyond what is currently available on your team.
Rather, try as much as possible to identify and indicate gaps in your team that you will later fill.
9. What are your key milestones and metrics?
Investors are wary of plans that cannot be measured. Your plan must include key measurable milestones and metrics complete with deadlines, defined roles and responsibilities. Your milestones are major goals you intend to achieve within a given timeframe. For example, if you are building a consumer product, your milestone could be shipping the first version of the product or acquiring the first thousand paying customers. Milestones must be specific and time-bound.
While milestones look forward, metrics are used to measure key indicators of progress you are making. You need to identify the most important metrics for your business.
10. How much are you raising, now?
While this may not be necessary for some business plans, it is important to be clear and upfront about your funding need if you are targeting investors for your business. You need to state how much is needed and what you intend to achieve it with it.
