How to create the best business plan for your tech startup
August 16, 2019
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Creating a business plan is probably not the first thing that follows your first brilliant startup idea. However, once you’re past imagining how your products will conquer the world, and you’re done congratulating yourself for your genius startup business idea, you’ll probably start Googling “how to start a business.” And guess what you’ll find very high among the results: write a startup business plan.
While creativity and innovation are among the most important features of a startup company, starting your own business is not all out-of-the-box thinking brilliance. In fact, most of it revolves around down-to-earth stuff like applying for startup funding, debating which legal form to take, and drawing up an organizational chart.
As you can see, despite the excitement, being a small business owner doesn’t always look shiny and glamorous. But believe it or not, writing a business plan will help you sort through the maze. How come?
While creating a business plan may seem like a daunting task at first, it helps you sort through your thoughts and set out a clear path to follow. Don’t worry about the sheer amount of information you’ll need to put in your plan. The thing is, without all this data, you’d have a much harder time starting your own business anyway.
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1. Mission statement
Why are you starting a business? What need is your product going to answer? What do you want to accomplish as a small business owner? These are the questions your mission statement has to answer.
Outline your reasons and future goals in clear, professional terms. While it’s important that the document sounds businesslike, feel free to let your passion for your startup shine through. Use straightforward, professional language with the occasional adjective to make it a compelling read.
2. Market review
No business startup can survive without a target market. You need to know exactly who will be interested in your products. And no, “awesome tech dudes” is not a proper target market.
The most convenient way to find your target market is by dividing the population into categories based on age, gender, geography, education, income bracket, and location. Then imagine what kind of people (or businesses) would be interested in your product.
Middle-aged women with a college degree living in Tennessee? Professional services firms that create business proposals for their B2B clients? The more specific the details, the better. Just make sure not to narrow it down too much. It’s not a viable business that targets athletic twenty-something web designers who share their Lower East Side apartments with cats.
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Once you have a theory, it’s time to test it. Do a thorough market research and try to prove or disprove your assumptions. When you’re done, you’ll have your target market ready.
The research of competition goes hand-in-hand with that of the target market. Which companies are already targeting this market? Is it large enough for another actor? Is there a specific niche none of the existing companies are active in?
You need to know all this before you can launch. If you find other companies that offer similar products or services, look at their image and exact niche. Can you differentiate yourself enough to compete?
For example, if you’re offering a better price or quality than the existing companies, you have a good place to start. However, if your product line and pricing is too similar to the competition’s, consumers won’t likely leave their existing brand for an unfamiliar one.
4. Budget and startup costs
Money management is an essential part of business administration. Since everything costs money, you need to have a thorough budget detailing your costs and revenues.
This part of your business plan is especially important if you want to apply for small business start up loans. Show potential creditors like 500 Startups why investing in your business would be beneficial for them.
Beware though that it’s quite common for startup businesses not to be profitable for the first few years of their operation. Make sure you have enough funding to cover the initial losses that come with launching a new business.
5. Organizational chart
An organizational chart shows the inner power structure of a business. Who answers to whom, and who gives the final OK?
While startups tend to work in a more informal environment, decisions still have to be made. The person giving the final “go” is the one in charge, even if he wears short pants and a hoodie to work.
The organizational chart becomes even more important when your company begins to grow and you find yourself advertising new startup jobs. This is the document that helps keep the natural startup chaos at bay and lets people know who’s responsible for what.
Don’t worry about this too much. Draw a quick chart depicting the current state to show potential investors. You can always change it later when the need arises.
Where do you see your business in a year? And five years? Create realistic, research-based projections to show people your vision. Include financial, organizational, and production details, anything that can help demonstrate the path you want your startup to take.
7. Marketing plan
How do you want to market your products? Feature a short marketing plan describing how you position your business and how you want to reach potential customers.
You don’t have to draw up a full-length marketing plan complete with social media campaigns and exact web design. The point of this section is to prove that you have a viable strategy when it comes to marketing your product.
Like this article? Click here for more tips on marketing your business.
Formatting your business plan
Did we manage to scare you about the sheer amount of information you need to include?
Don’t worry, nobody’s expecting a full-length novel. In fact, investors usually lack the time to read more than a couple of pages. Here’s a template that can help you organize the content and show you the length you need.
Be short, clear, and professional. However, don’t fall into the trap of removing your personality from the pages altogether. The result would be a boring, unremarkable document, and even the best business idea ever would have a hard time catching the attention of investors.
Show people the passion that motivates you. Let your creativity and spirit shine through the pages and get investors as excited about your startup as you are.