A Comprehensive Guide on How to Write a Startup Business Plan
It's not enough to come up with a great idea to launch a blooming startup company. There is a pressing need for mapping out how to bring this idea to life and a tech startup business plan suits this task as nothing else. Some will say this is a waste of time, while we would compare it to a floor plan. You certainly can build a house without it, but will you be satisfied with the end results and level of details?
Having an extensive experience with startups, we can say that a bit of planning will never harm any of them. On the contrary, a business plan helps to stay organized, focused, and raise funds.
Furthermore, writing a business plan for a startup isn't something boring and excessively formal anymore. Nowadays, entrepreneurs prefer a business model canvas that is a more dedicated and agile form of the traditional business plan.
What should a startup business plan include? Let's figure out how to approach the writing process.
Step 1: Draw up an executive summary
This is the first part of creating a business plan for startup and probably the most important one as it covers crucial points. Keep it simple and remember -- that's the case when less is more. Neither your investors nor partners are likely to enjoy reading several volumes of executive summary.
As a rule, there are four key points to describe in this part:
1.1 Consider problems users face
Each product should solve concrete problems and make lives of it's users a bit easier. In the business plan for software startup, you can describe what problems consumers experience and specify whether there are any solutions on the market that try to address those problems. If yes, consider their drawbacks.
Keep in mind the modern market is overcrowded with software solutions. To succeed, you have to clearly identify their weak sides and improve them in your product.
Answer these questions to measure the problem:
- What problems do your target audience experience currently?
- How serious are these problems for them?
- How do they approach to solving these problems?
1.2 Represent the solution you offer
That's the part of your technology startup business plan where you tell about your mission. Don't overcomplicate this part by providing a detailed description of every single feature, explaining how they work, and what technologies are used to power them. You better stick to problems you've already described and specify how exactly your solution helps to solve them.
A question to answer:
- What are some previously unavailable opportunities that your target audience can make use of with the help of your software solution?
1.3 Show the Unique Value Proposition
Your IT startup business plan should contain a Unique Value Proposition (UVP). It's something that describes the benefits you offer to users as well as how you meet their needs and stand out from other companies. In a perfect world, your company should be the only one that can offer such a ratio of conditions and features.
Your UVP should be really unique. Never claim your company is simply better than others. It'll take a lot of time and money before you will be able to comply with this statement.
1.4 Tell about company's objectives
This part of the business plan for startup company is of great interest to investors as by reading it they will be able to understand whether your company's goals correspond to theirs or not. There are two main points you should include:
You should define where is the starting point of your startup success. It can be a metric or achievement. For instance, the number of active users, turnover etc. Don't take long-term perspectives as a benchmark and better focus on short-term (1-3 years).
Think of future. What is the peak of the company's evolution for you? It can be the launch of Initial Public Offering (IPO), acquisition, and so on.
How to make a business plan for startup: Things to include in the first section
In case you need a written startup business plan example for every step described in this article, check out these step-by-step samples from Bplans.
Step 2: Tell a bit about your company
This part of your tech startup business plan should consist of a short company overview. Some investors consider it closely as they convinced the points described here are important for success. So, here you can include the general company information, tell about your team, management etc.
2.1 Start from the overview
At first, you can list the key points of your company related to it's current state. It's important to add there a short message telling about the type of business entity:
- Point out what kind of corporate entity your company belongs to (LLC, C Corporation etc.);
- Tell when the company was founded.
Next, you should say several words concerning your current office and team situation. Include there the following:
- The city where your company is located. Specify if it's a popular startup hub like Silicon Valley or New York in the US;
- The number of employees on your team so far. Specify if there are any remote specialists working on your project;
- The place you work from (office, apartment, coworking etc.)
2.2 Write a company's story
In this section of the business plan for startup company, you can tell the story devoted to how you came up with the startup's idea and decided to breathe life into it. The next step after a short introduction, is to explain what your team has been working on since you've gathered them together.
Also, it's a good idea to list the milestones of your project. They can be the first hired employees, location changes (office/country), or any other valuable information which is relevant to your experience.
Keep this section brief and clear.
2.3 Feature your management team
Staff is the most valuable resource in software development. It's no surprise many stakeholders pay great attention to the skill level of the specialists. Especially it concerns heads of departments.
That's why you can make up a short professional bio for each department chief and add them to your tech startup business plan. Include their names, work experience, degrees, and current responsibilities in the company.
2.4 Describe your monetization strategy
The software market is a complex thing. There are millions of solutions from different vendors and hundreds of identical or very similar products in each existing category.
Read our guide on how to monetize your application or watch our short video on this topic underneath
App Monetization. How to monetize your app? Vol. 1
As practice shows, most startups face difficulties in earning profit during some time after the release. Respectively, an effective monetization strategy is needed to overcome this difficulty. This is an important point to consider while creating a business plan for startup as it's important for getting funded and just staying afloat.
How to make a business plan for startup: Things to include in the second section
Step 3: Research the market
To succeed in building up your startup, you should be very knowledgeable about your industry. Write that knowledge down in your tech startup business plan to keep it in mind all the time or show to investors.
Here are several things to examine to cover this part of IT startup business plan comprehensively:
3.1 Identify your target market
Where there's demand, there's supply. In other words, if there is no place for a product on the market, the startup will fail. This seems so obvious but far not all startuppers spend their time on considering this point in their business plans for a startup.
According to the research devoted to reasons why startups fail, the absence of market need is the most common one. Being obsessed with the idea, many startups simply forget their product may interest only them, not the market.
Creating a business plan for startup: Top reasons startups fail (Source: CB Insights)
You can start with broad user categories and then gradually narrow them down in order to figure out your target market. For instance, if your target market is North America, you can analyze the whole region and then narrow it down to one country and even a concrete city.
Describe these basic categories to segment your audience:
You may include the following:
- Level of income.
The deeper you dive into your market research, the more specific information you get. By the end of research it may look something like this:
- The New York City area;
- 20 to 30 years old;
- Average annual income ranges between $50,000-$60,000.
3.2 Take care of competitors
The competitive analysis should be completed along with identifying the target audience. In fact, the information you gather during writing this part of the technology startup business plan will help you to create a brand differentiation strategy and answer the question 'Why should users choose my product?'
Another purpose is to analyze competitors themselves. Here you can do as you wish -- traditionally describe competitors or use interesting approaches like the one proposed by Gartner. This approach is called a Gartner Magic Quadrant and it helps to visualize the market situation. You can find a guide on how to use it here.
3.3 Add market projections
Nowadays, entrepreneurs tend to rely on market researches for checking the viability of one or another idea. It's a good thought to complement your startup business plan with the key points taken from studies that are relevant to your industry.
You can include the growth rate of companies from your industry as well as the total turnover in this industry. However, make sure this information is provided by a reputable research firm and aligned with the market you're going to compete on (local/global).
3.4 Conduct SWOT analysis
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This implies you should consider your company at different angles and objectively evaluate all points mentioned.
By adding SWOT analysis to your business plan, you'll show stakeholders and investors your awareness of the situation and let them understand you do everything possible to minimize risks.
How to make a business plan for startup: Things to include in the third section
Step 4: Draft a tech startup marketing plan
The startup marketing plan should be aligned with everything we've talked about previously. The most important requirement for this section is to be realistic about how to achieve goals. That's exactly what investors will be looking for.
4.1 Include a customer acquisition strategy
This section of software startup marketing plan may consist of general strategies you'll use to acquire new customers. Make a brief description of each channel (e.g. SEO optimization, Content Marketing, PPC) as well as tactics you're going to use. And don't forget to attach realistic expectations concerning the price you need to pay to generate one customer from each channel.
4.2 Describe your way to drive growth (if applicable)
Most global services are in need of a large user base. If your startup fits this description, then you should include a way you're going to drive growth to the tech startup marketing plan.
If you don't know where to start from, consider a referral program as a solution. For example, Uber offers coupons for both participants. It's a great way to stimulate growth as both parties are motivated.
4.3 Define the metrics to focus on
It's easy to get lost in metrics. That's why you should define key metrics when writing a marketing plan for a startup. Define the ones that really matter for your business as well as specify them in your business plan and explain why you're intended to focus on them.
For example, for most apps the number of active users is more important than the number of downloads.
How to make a business plan for startup: Things to include in the fourth section
Step 5: Map out a financial plan for startup business
This is definitely the most important section in case your primary goal is to get funded. Do the following in order to make sure investors understand what they spend their money on:
5.1 Calculate startup expenses
Ensure your estimates are reasonable and you considered some extra costs which may appear. In general, you have to take into account almost everything:
- Expenses on equipment;
- Leasing or buying property;
In case you still have no product, calculate the development cost for each platform in your financial plan for startup (if it's applicable). Let's say estimate web and Android development separately.
Also, you can divide your payments by frequency and stability.
Payments by frequency are:
- Something you have to pay for only once (e.g. setting-up a business bank account);
- Repetitious expenses (e.g. rent, insurance).
Payments by stability can be fixed and variable:
- The fixed one stands for the price that remains unchangeable regardless of the business state;
- The variable one means the price may change as your business scales (e.g. salaries).
Again, if you need more details on how to write this section, here is a good example.
5.2 Summarize your funding requirements
To build up a coherent picture of this deal, make sure you've covered the following points in your financial plan for startup:
- The amount of money you need;
- The percent of equity you're ready to allocate to investors;
- How much time will pass before you need a new round of investment.
How to make a business plan for startup: Things to include in the fifth section