Firstly, what is a business plan? In my opinion it’s the stepping stone of your future business. Or more exactly, the architectural plan of it. These plans are being made in all the companies at all the development stages.
You should definitely have a business plan before starting a business. The main reason for it is that it will make your life much more easier. Forget about ideas that you only need it, as a Cluj startup, only when you seek investments from outside sources. With outside sources I refer to angel investors, VCs, accelerators or bank loans. Yes, it is pretty much required in order to get financing from this sources and you should be prepared for this moment. You also need a business plan to help you keep the company on track.
As a future startup owner you really need to write down a startup business plan for yourself. You may ask why is it that important? Well, in a business plan you write down what business goals you have and how you want to reach them. Planning ahead will give you the ability to focus exactly on those goals.
When you’ll start the business and work daily, you’ll be very busy with the day by day work that needs to be done and might not remember all the plans you had in the beginning. So you can see why it’s valuable to have the written business plan in order to help yourself stay on course with growing your business. Now of course, there will be situations where you will need to make additions or changes to the initial startup business plan, and that is perfectly normal.
Nobody can know all the obstacles that will arise along the way, the best anyone can do is to try to guess them and plan for them; this comes with the experience, so if you are at the first business your are starting, it’s normal to miss some things. Just plan for the fact that there will be adjustments that need to be done along the way and be realistic about this.
Another benefit from having a business plan is that you will be able to constantly monitor how your business is performing. The fact that you can compare at any moment the real sales with the assumptions made initially is of great help. You will know if things are going in the planned direction or if you need to steer the company.
Lastly, but equally important, it will be of great help when discussing about investments or bank loans. When someone, be it angel investor, venture capitalist or bank, is asked to invest money in a business they will ask for the business plan to analyze it. It will give them an indication of your growth expectancy and what kind of business person you are.
By having totally bogus data or unrealistic forecasts it is most sure that you will raise some flags for those people. In that case, they will be reluctant to invest in your organization. Nobody wants to work with and risk money with someone who is not on top of things, who doesn’t have a clue about the market and business. You can safely assume that the business plan is a separating factor for many investors. When they have multiple options for investment and they need to pick only a few, they look at business plans.
Sections of a Business Plan
Now that we have seen what a business plan is good for and how it helps a business owner, let’s see which are the parts that form a complete business plan:
Include everything that you would say in a slightly longer “elevator pitch”, like a summary of each member of the executive part of the company, what will be the product, who are your possible customers ?
A more detailed description of your business and of the market in which you will operate. Include here the legal form of ownership, where the main location will be, what experience you have, what skills you bring to the table that will help you grow and succeed with the business
Identification of Need/Problem
Specify what is the main problem or need that you have uncovered in that specified market; you need to explicitly describe this
Proposed solution to the identified need/problem
Describe your product/service that you think will solve the identified problem; give details about the proposed solution and argument why it’s a good (if not best) one
Here you must present and analyze your competitors, how they tried to solve the problem, what market share they have and how you plan to be better than them, to get a piece of their market share. Use a lot of details here, try to find out even how long have your competitors been on the market, what strategies they have applied in the past, why you think they worked or haven’t etc
Marketing analysis and strategy
This chapter, again pretty important one, will need to contain your go to market strategy: costs of your products; prices for which you expect to sell them; how will you advertise; who are your customers; how you intend to reach your customers; how will you distribute your products/solutions; will you have different promotions in the beginning (if so, what kind of promotions?). This is not that easy, and if you lack the experience in doing something like this maybe it would be a good idea to ask some help from someone working for a few years in a marketing department.
Background of managers
Describe in detail what is the experience of each co-founder and manager from your organization; describe past positions, successes, skills, maybe some courses they attended to
Here you should explain in detail how the business makes money, spends money and accumulates money (sources of funding) in a “financial language”; to bring value to this planning, you must demonstrate it with actual sales or with market data. These need to be segmented by location and industry. There are basically two very important reasons why you should make sure this chapter is very well written and explained:
Future investors will use this to quickly review how healthy the business is (in case of an organization that already has some traction) or how much the business can grow (in case of a Cluj startup company)
For you, the entrepreneur, it will be of great help to see these numbers. You can understand if the business will be sustainable and profitable in the future. Also, from what moment you can expect to be profitable, when you will reach the break even moment?
Use this last section to explain in more details that have not been explained before. Try not to introduce new data here, but to explain existing data or show some support for the aforementioned data.
As a closing statement, I will tell you to be realistic and not expect the writing of such a business plan to be easy or fast. It might take you a lot of time to gather all data and structure it in an easy to understand way. Nobody can predict how much it will take for another person to write a complete business plan.