It’s insufficient to concoct an extraordinary initial idea to kickstart a blossoming new business. There is a squeezing requirement for mapping out how to breathe life into this idea and a winning business plan suits this errand as nothing else. Some will say this is an exercise in futility, but this is certainly the biggest need for a successful beginning. You absolutely can manufacture a house without it, however, will you be content with the final deliverables and level of detailing? Think!
A bit of planning will never harm anyone, don’t you agree? A proper business plan for a startup will, in fact, help to remain focused, organized, and procure necessary funding successfully. Turning a mind-blowing business idea into a viable business is altogether a different game. You have a perfect idea in mind and that’s certainly great news. You should definitely be excited about it but planning is as important as an itinerary for a great trip. So, let’s figure out the approach of writing a winning business plan for a startup:
Step 1: Craft an executive summary
This is the initial segment of making a strategy for startup and likely the most significant one as it covers essential focuses and crucial aspects. Keep it basic and recall – that is the situation when toning it down would be ideal. Don’t forget “less is more” and you can never go wrong with this step in particular. Neither your business partners nor your stakeholders especially investors are probably going to appreciate huge volumes of the executive summary. So, here are the major four points that need elaboration here:
1.1 Keep in mind the problems that users often face
Every product ought to take care of solid issues and make the lives of its users somewhat simpler. In order to draw up a business plan for a software Startup, you can portray what issues customers encounter and indicate whether there are any arrangements available that attempt to address those issues.
The market in today’s digital age is overcrowded with varied software solutions. In order to have lasting success in what you do, you need to identify their major downsides and improve the same in your offering.
Answering the following questions can help you perfectly measure the problem at hand:
-> What are the issues that your targeted audience or potential customers face currently?
-> How grave are these issues for them?
-> How do they often approach to solve these issues?
1.2 Clearly present the solution that your product aims to offer
That is the segment of your startup plan where you tell about your main goal. Don’t overcomplicate this part by giving a point by point depiction of each and every component/feature, clarifying how they work, and what technologies drive them. It is highly recommended that while you draw the executive summary, you stick to the major issues you’ve just portrayed and indicate how precisely your solution or offering assists with unraveling them.
1.3 Prominently present the Unique Value Proposition
Your UVP or Unique Value Proposition is a reasonable articulation that depicts the advantage of your offering in terms of a product or service, how do you solve your customers’ issues and what sets you apart from your competitors. Your exceptional offer ought to show up noticeably and you should come up as a company that is a class apart in fact!
But keep in mind that your UVP should be distinctive. Simply claiming that your company is better than the rest is a bad choice because the claims should be backed by your achievements in the vertical you serve. In fact, it will take a lot of time over the years and financial resources before you could comply with this statement.
1.4 Specify the company’s objectives
This particular segment of your business plan is of key interest to your major stakeholders, especially the investors for they can analyze it and gather if their goals resonate with the goals of your company and the offering. There are two fundamental points that you should include in this part which are as follows:
A. The clear meaning of success for your startup: You ought to clearly showcase the starting point of your startup business. It tends to be a measurement of accomplishment. For example, the number of users or turnover and so on. Do not focus on the long term perspectives as a yardstick and better concentrate on short-term goals and success (1-3 years).
B. Final goals for the development of the company: This particular chunk is all about thinking about the future. What is the peak of the company’s success for you? It can be anything like an Initial Public Offering (IPO), major funding, or acquisition, etc.
The executive summary of your startup business plan, therefore, should contain the major sections like:
a. Problems or issues that users face
b. The solution that you offer
c. UVP of the company
d. Key Objectives
Step 2: Tell about the company
This piece of your startup plan should comprise of a short overview of the organization. Some investors do consider it intently as they consider the key points that are depicted here as significant for the progress and success of the business. In this way, here you can incorporate the general information about the organization, tell about your team, the board, management, and so on.
2.1 Begin with an overview
From the outset, you can list the key purposes of your organization identified with its present state. It’s critical to include there a short message telling about the type of business entity that you are:
A. You should mention the kind of corporate entity, your organization belongs to (LLC, C Corporation and so forth.);
B. Tell when the organization was established.
Next, you should state a few words concerning your present office and company state. Incorporate there the accompanying:
a. The city where your organization is incorporated. Also don’ forget to indicate if it’s a mainstream startup center point like Silicon Valley or New York in the United States.
b. The total number of employees that have been employed in your group up until this point. Determine if there are any remote pros that are actively working on your venture.
c. The spot you work from (office, an apartment, coworking, and so on.)
2.2 Write the story of the company
Use this dedicated section of the business plan to tell the story of your company. Incorporate the basics like how you came up with the idea of this startup and how you decided to infuse life into that. The next segment after a crisp and quick introduction is to provide a proper explanation as to what your team has been engaged with since they have started working together.
It is a great idea to mention your milestones in this sector, be it the employees that were first hired, the first offices or location, and any other relevant information that you might consider valuable.
But keep it clear and concise!
1.3 Feature the management team of the company
Personnel is the most valuable resource for a company dealing with software. That is the key reason why many specialists pay great attention to the skill and expertise possessed by human resources especially the head of departments and specialists. Add the short professional bio for each of the departments’ chiefs and add that to the startup’s business plan. You can include the name, their expertise, and professional degrees, work experience and current role and responsibilities in the organization.
1.4 Provide the description of the monetization strategy
Software is indeed a complex world and there are hundreds of vendors and solutions too in each of the existing categories of products.
Earning profits in the initial phase is where most of the startups face issues, an effective monetization strategy is a major need while they face such a situation. So, this is the major point that should be properly described for getting the proper funding and ensuring the survival of the startup.
Step 3: Research the market
Market research is indeed crucial for it can make or break a successful product launch. Ultimately, this is one of the low-cost ways in order to get the validation for your product or service concept before you venture into the market. In order to build up your startup and a brilliant startup plan, you ought to have in-depth knowledge of the industry vertical you are going to serve. So, do a record that knowledge in your business plan for the startup as well as to show the same to the investors.
There are several aspects to be covered in order to comprehensively cover this part of the business plan:
3.1 Identify your targeted market
Always remember, if there is no demand for your planned product in the market, the startup is bound to fail. If there will be a demand, there will be supply to fulfill the same. It seems so obvious, isn’t it? But this is often one of the major factors that are often overlooked by many of the startuppers as they forget to analyze and spend their time to consider this point while drawing out a perfect startup plan.
A research that was devoted to searching for reasons as to why startups fail, revealed that the absence of market need is the most common reason why that happens. Startuppers remain so much obsessed with the initial idea that they totally overlook the market need and the fact that their offering will only be of interest to them and not the market they are planning to target.
Top reasons why startups fail?
There are several reasons why startups fail. Some of the top reasons are:
a. There is no market need for the product/service
b. The startup ran out of cash
c. The startup had not the right team
d. The startup got outcompete
e. Startup faced pricing/ cost issues
f. The product was not user-friendly
g. The startup planned a product without a business model
h. Poor marketing
i. Customers were ignored by the startup
j. The product was mistimed
So, to kickstart, you should begin with broader categories of the user and then gradually narrow down the said categories to figure out your targeted market and user base. For example, if your target market is North America, you can first analyze the entire region of North America and then gradually move ahead by narrowing it down to a single state or even a city.
You should describe the following given segments to segment your target audience:
You can include the following details to narrow down:
d. Level of Income
In order to target more specific information about your market, it is advisable to dive deep while conducting market research. By the end of it, it may look something like this:
a. The San Francisco area;
c. 20 to 30 years old;
d. Average annual income ranges between $40000-$50000
3.2 Consider the competitors
One of the major exercises that you should complete along with the identification of the targeted audience is competitive analysis. As a budding startupper, the information and data that you gather while carrying out the competitive analysis will assist you to craft a brand differentiation strategy and answer questions like “ Why should the users be interested in using my product?”.
Yet another reason to take up the exercise of competitor analysis is to identify and analyze the competitors themselves. In fact, you can use Gartner Magic Quadrant by Gartner to describe competitors and this approach will help you analyze the market situation. You can follow this guide and learn how to use it.
3.3 Go for market projections
These days, young entrepreneurs worldwide, in general, depending on different market researches in order to check the feasibility of their business idea. It’s a decent idea to supplement your tech startup plan with the key focuses taken from the various studies that are pertinent to your industry.
You can incorporate the growth rates of the companies from your industry vertical as well as the turnover of the industry you are targeting. But it is important to ensure that this data is given by a respectable research firm and lined up with the market you will contend on, whether at the local level or globally.
3.4 Conduct a SWOT analysis
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It includes indicating the goal of the undertaking or startup and recognizing both the internal as well as the external components that are favorable or unfavorable to accomplishing that objective. This calls for the evaluation of the company from different angles so as to objectively assess all the points mentioned.
By including the SWOT analysis in your tech startup business plan, you can indicate your awareness regarding the situation to your investors as well as the other stakeholders and that you will take every possible measure to minimize the risks.
Therefore the market research section should contain:
a. Target Market Overview
b. Competitive Analysis
c. Market Projections
d. SWOT Analysis
Step 4: Device a tech startup marketing strategy
The tech startup marketing strategy should be in line with all that has been discussed previously. It is crucial to have realistic plans for achieving the goals because the investors exactly look for this.
4.1 Add a customer acquisition strategy
This segment of a tech startup plan may comprise of general techniques you’ll use to gain new customers. Make a concise portrayal of each channel (for example SEO optimization, Content Marketing as well as PPC) just as well as the tactics that you are planning to apply. Furthermore, it is pretty much important that while devising and including this strategy, realistic expectations are set concerning the price that needs to be paid in order to generate every single customer from each of the channels.
4.2 Description of the manner to drive growth (if applicable to the organization)
Most of the tech giants rendering global services require a massive user base. Ig your organization fits the given criterion, then there is a need to include the description of the manner in which you will drive the growth for the tech startup marketing strategy/plan. If you are clueless regarding the point from where you should initiate, you should give a thought to the referral plan.
4.3 Define the key metrics
While devising a tech startup marketing plan, it is of paramount importance to define the key metrics. A key metric is a key performance indicator that helps in ascertaining how the enterprise is performing. In this startup plan, by defining these key metrics, you can define the ones that really matter for your business and why you are keenly intended to focus on them.
For example, for most of the app developers or mobile app owners, the number of active users on the app is much more important than the number of downloads.
So, the marketing plan of the tech startup should contain the following elements:
a. Customer Acquisition Strategy
b. Manner to drive the growth
c. Key metrics
Step 5: Guide out a financial plan for the startup plan
If the primary goal for your tech startup is to raise the funding, then this section should be your key focus area. You should undertake the following in order to make those investors of yours understand what they invest their money in:
5.1 Calculate the startup expenses
While mapping out a financial plan and calculating startup expenses, make sure that the estimates you are making are reasonable but don’t overlook any extra costs that may come up. So take into account almost everything such as:
a. Expenses on equipment and tools
b. Expenses to be incurred on buying or leasing property
f. Initial legal expenses etc,
You can divide all of your payments on the basis of two factors namely, frequency and stability.
Payments by frequency can be:
A. Something that you had to pay just initially i.e. one-time basis (like setting up a bank account for the startup)
B. Recurring expenses (like rent, insurance, taxes)
Payments by stability can be:
A. Fixed expenses are those which remain the same irrespective of the state of business
B. Variable expenses are those which keeps on changing as per business operations like salaries or taxes.
5.2 Draft a summary of your funding requirements
To build a complete picture of your startup or the deal, it will be pretty much crucial to remember including the following points in your tech startup financial plan:
1. The total amount of money that will be required for your startup
2. The percent of equity that you are willing to offer to the investors i.e. the overall share of investors in the equity capital
3. The time period that you will require before you will need another round of funding for your startup
Therefore, the financial plan should contain the following:
a. Total expenses
b. Key financial requirements