Building and launching an idea into a startup business is a complex process that’s not unlike building a house.
First, you start with the blueprints drawn up by an architect who knows just where you need to build certain foundational elements so the structure is strong enough to withstand the elements for a long time.
The same should be true for your business. A business plan is the tool (or blueprint) typically recommended to steer your business as you grow.
What is a business plan?
A business plan is written documentation that outlines the path your business will take to gain revenue and grow over the course of 3-5 years. This document serves as your road map that has a clear starting point and follows the directions of your intended goals.
A business plan is by no means set in stone, especially in a startup environment where you’re building and testing MVPs, pivoting based on market demand and desire, etc. Rather, for a startup, a business plan is meant to be a living document that gets updated as the years pass and things change.
What type of information is commonly included in a business plan?
Business plans often include “big picture” elements of a startup’s short- and long-term plans and goals. This can include everything from a company description, market analysis, description of service/product line, the organizational structure and management of the business, as well as plans for marketing and sales.
Benefits of a Business Plan
Even if you aren’t a big planner, there are definitely reasons to put in the effort to put together your business plan. Let’s run through a few benefits of writing a business plan.
It Helps You Reach Milestones
Your business plan will help you keep your eyes on the prize and reach goals along the way. Your plan doesn’t have to have every answer known to man, but it helps you think objectively about key elements of your startup while making decisions. Don’t forget to take time to recognize and celebrate all your efforts when you do reach those big milestones you laid out! Staying aligned has never been easier with a business plan on your side!
Assists in Repositioning Your Business
There are always unknown circumstances that will make you adjust your startup, whether it be something personal or as big as a national economic issue. If your current plan of sales and operational models aren’t working, it is perfectly alright to rewrite or adjust your business plan to define, try, and validate new ideas.
It Can be Used to Secure Funding
Business plans can be a great asset to gain funding or business partners. Investors or potential partners will feel more confident in investing time or money if they see you’ve put quite a lot of thought into your document. Whether it’s paired with a presentation or given alone, your document gives them something detailed to read on their own and reflect before coming to a decision. They have master notes on your business’ path to success. Your plan serves as a tool that can be used to persuade and prove to others that your startup is one that’s worth investing in.
You May Uncover New Opportunities
While dedicating time to writing and brainstorming your business plan, you’ll likely see your startup in a different light. You may come up with new ideas and strategies for running or marketing your product. Implementing unique ideas is what sets you apart from any competitors you may be facing.
It is Customized and Specific
There are different types of formats available for you to work off of and no one size fits all. Traditional, lean, or something in between, what’s most important is that it suits you and your startups needs. If the task of creating your document seems too daunting, you can try splitting your plan down into smaller plans focusing on sales, operations, marketing, etc.
What information is important for a startup business plan?
You’ll often see two main types of formats for business plans, traditional and lean. Traditional business plan formats use a standard structure and require a lot of upfront work. These formats encourage adding as much detail as possible in every section.
A newer style of format, called a lean startup business plan, can be completed quicker by summarizing the key elements of your plan. They’re typically one page compared to the packet size of a traditional plan.
Business goals and financial projections
An important section in your business plan for a startup is one that details your business goals and financial projections. Although much of this might evolve and change as time goes by and you learn more about your startup idea’s viability, you’ll at least have criteria laid out on paper that can guide you to smarter decision making.
Funding and partnership terms of agreement
If you’re interested in getting outside funding or teaming up with business partners you’ll want to detail requirements and terms in your document as well. An executive summary of the entire plan is recommended. An executive summary is a brief outline of the company’s purpose and goals. It can include things like a summary of what your product or service does, a summary of your objectives as a business, a description of the current market, discussion on your viability and advantages over the competition, talk on your intended growth, and an outline of funding requirements.
The Lean Canvas Business Plan
While traditional business plans are satisfactory and very detailed, they tend to be very tedious and often don’t get updated when things change. If you share your business plan and pitch, often the most viewed portions are the summaries and pitch decks. This is where the Lean Canvas format comes in handy.
The Big Benefit of a Lean Canvas Business Plan Model
Lean business plans summarize the key components of your business
The Lean Canvas template was created by Ash Maurya and it is adapted from Alex Osterwalder’s Business Model Canvas.
A Lean Canvas template cuts down the time spent creating a business plan exponentially. Typically, you may spend a month gathering everything you need for a traditional format, where you can put together a lean canvas format in less than an hour.
All your key information is condensed to one easy to read page. If you need to make any changes down the road it’s almost no hassle to edit because of its simplicity.
How to Make Your Own Lean Canvas Business Plan
If we’ve piqued your interest with our suggested format for your startup’s business plan, let’s go over the section topics. We’ll be listing the sections in the recommended order to fill them from the creator Ash Maurya himself.
Step One: Customer Segments & Early Adopters
Your customer segment drives your business model. Taking time to nail down some specific audiences can help you avoid making a product for no one. If you have multiple specific audiences, you should create separate lean canvas business plans targeting each one. After listing your customers and users, list characteristics of your ideal customers.
Next, write about your early adopters. Early adopters are a smaller section of your customer segment that have an above-average need for your product. Focusing on a group of local potential customers could be a good place to start for early adopters. Think of this group as the easy-to-get customers.
Step Two: Problem & Existing Alternatives
List 1-3 problems you believe your product would solve for customers. Make these problems as specific as you can, like for instance, focusing on early-adopter’s needs rather than the general target market to begin.
After listing these problems, identify how these problems are being solved currently by your target customers. While this area may be easily filled in by competitor’s names, try to think of other answers such as the alternative of your customers ignoring the problem entirely or possibly cobbling together some handmade solution. Think beyond your product category!
Step Three: Unique Value Proposition & High-Level Concept
Write a single, clear, compelling message that turns an unaware visitor into an interested prospect. Follow up this proposition with your “X for Y” analogy. (Ex. Airbnb for pets, Youtube for cooking lovers).
Step Four: Solution
Briefly describe the solutions provided by your product for each problem you wrote down in the “Problem & Existing Alternatives” box. These are the reasons your users will want to use your product!
Step Five: Channels
List of paths to your customers (Ex: word of mouth, social media advertisements). Try to identify scalable channels that you can continue to use as your business grows. It is okay to start off with initial outbound channels to learn and grow first!
Step Six: Revenue Streams
There is no business in your business plan without revenue! List any sources of revenue that fuel your business. Start by identifying who the customer is. In direct business models your users and customers are the same people, but in more complex models the user and the person buying from you are different. Secondly, look for monetizable pain points. Lastly, take a stab at how much you’d like to charge for your solution.
Step Seven: Cost Structure
Estimate your burn rate for implementing your idea. Choosing a small time window gives more accurate estimates. Note both fixed and variable costs that will be seen in this time frame.
Step Eight: Key Metrics
The numbers you need to track to measure progress in your business model. Minimum success criteria is a good metric to start with. Get some ballpark estimates written down, it’s alright to not be exact!
Does Order Really Matter?
Ash Maurya admits that after years of coaching and reviewing people’s Lean Canvases he’s found that there is no “correct” order to filling out your lean canvas model. Good ideas can appear and come together no matter where you begin or end in the process. Ash shares that he finds ideas to be like jigsaw puzzles, they can have many starting points that eventually come together to make up the bigger picture.
“The goal of sketching a Lean Canvas is deconstructing an idea so that you see it more clearly,” Ash said. “While imposing a starting point (like customer and problems) was well-intentioned (because they tend to be the riskier boxes), I found that too many people would often fake these boxes anyway. They would write problem statements to justify a solution that they already wanted to build. And, in the process, gave themselves a false sense of comfort”.
So, really his recommended order is just as it says, a recommendation. As long as you take the time to answer each box to the best of your ability and don’t include fluff, you’ll be getting the most out of your lean canvas business plan.
Plan Now, Not Later
We get it, you’re ready to kick butt and be a full-fledged entrepreneur today and not get dredged down in the little stuff (that’s actually really big stuff). Putting in some time now to get your thoughts and ideas down on paper to plan can provide value as you begin growing your business in the coming future. Whether you choose a traditional plan format or opt for the lean canvas method, they both provide you with documentation to keep you aligned as well as help inform others about your business.