Ah the business plan. Many entrepreneurs and startups slave over these documents, pouring countless hours into building and revising them. Why? For a number of different reasons, most of which don’t produce any real value once the document has been completed.
As previously discussed, I believe there is really only one reason to write a business plan: to raise money. I highly suggest reviewing my previous post, “Business Plans – When and How to Use Them,” before using this outline to construct your own.
This post provides a detailed breakdown of a business plan template I have developed/refined over the last couple years and which I have used in raising multiple rounds of angel investment. In my opinion this template is most appropriate for a company that has been operating for a period of time, has a product in the marketplace, and is looking to raise a larger round of financing.
I will be following up this post on Tuesday with an example business plan I created using this template that you will be able to download/revise/use. There is no Holy Grail business plan template, however, I’m confident that if you answer the questions outlined below, you’ll be able to create a solid business plan that you can use to raise angel or venture investment.
COVER PAGE
There are two goals to strive for with a cover page: 1) make it aesthetically pleasing/distinct and 2) make sure to include your company name, plan title, date of the plan draft, and your company’s contact info. In general I’d recommend making friends with a freelance graphic designer to help assist you in designing a cover.
TABLE OF CONTENTS
Provide a quick breakdown of the information contained within your plan. Be sure to keep your table of contents to around a half page; no need to reference every little point or section, just the big stuff.
EXECUTIVE SUMMARY
Please refer to my previous posts – Executive Summary Template and Downloadable Example – for information on how to write a solid executive summary.
REVIEW OF THE MARKET
- What business are we in?
The first paragraph! You may recall this and the next question are also part of the Executive Summary Template I went through in my previous post. There are three elements that I would encourage you to include in your answer to this question: 1) company name and the market you compete in, 2) your product name and what it does, and 3) how your product is sold. The goal in answering this question is to provide your reader with a clear (albeit high-level) understanding of who you are, the market you compete in, what your product is/does, and how you sell it.
- What have we accomplished?
Investors want to see that you’ve made progress towards your goal before you ever thought about raising money. Even if you’re just getting started, it’s key to include some of your accomplishments right up front. Doing so makes you real, as opposed to all those other business plans that are simply pitching “good ideas”.
- Who are our competitors?
Rule #1 regarding competitors: never say you don’t have any! Saying that may cause investors to burst out in laughter and/or get up and leave the room. Seriously though, everyone has competitors; knowing who they are and how to position your business against them demonstrates you have a firm understanding of the marketplace and that you’re prepared to fight and win. My general rule of thumb is to break competitors into two groups: direct and indirect.
Direct competitors are companies that are going after the same customers as you are with products/services that fulfill the same need as your product/service. Indirect competitors are the companies you think you should keep your eyes on; maybe they aren’t going head-to-head with you today, but they could in the future.
- What have they done recently?
- Product?
For each of your competitor groups, you want to talk about what they’ve done and what they’re currently doing in terms of products/services. How have they positioned their products? Are they focusing on any new features or services? Are there any general product-related trends you can identify? Who are the innovators versus the followers? The purpose of answering these questions is to provide a general assessment of your competitors’ offerings. Don’t worry about directly comparing their products to yours – we’ll get to that shortly.
- Strategy?
In this section we want to identify the go-to-market strategies for each of your competitor groups. How are their products sold/delivered? How are they pricing their products? Who are they selling their products to? Have there been any major changes over the last 6-12 months? The goal with this section is to paint a picture of how your competitors do business and to show where the holes/opportunities are that you plan to exploit. 
- What do we think will happen next?
- Market actions?
Time to take a step back and talk about market size and trends. There are a couple things that you should strive to address in this section: size and growth of 1) the overall market and 2) the market segments (i.e., the markets within the market). The richer the information you’re able to gather the better picture you’re going to be able to paint. As I’ve mentioned in previous posts, I’m a big believer in spending a little money to get a real market research/analyst report (e.g., Forrester, Gartner, IDC, etc.). Getting a real report does two things: 1) it provides you with a trusted source and 2) can provide a level of detail you straight up won’t be able to get by trolling through newspaper/journal articles.
While you could probably stop there, I usually add a little extra to this section regarding how the market movements/changes have or will affect how you and your competitors do business. Again, a key here is to show that your ahead (but not too far ahead) of the curve – the market is moving/growing/changing and you’re in the best position to take advantage of how business is and will be done.
- New solutions/competitors?
We’ve already talked about existing competitors, their products, and market strategies (i.e., the playing field). Here is where you want to discuss the likelihood of new competitors/solutions being introduced into the market over the next 9-12 months. Is your market getting a lot of attention/investment? Are general market shifts/changes creating opportunity for more or new types of entrants? Point being, you want to show that the course your plotting across the playing field is going to be relatively unobstructed.
- Competitor actions?
What are your competitors going to be doing over the next 9-12 months? Extrapolate your competitors’ product and market strategies forward and try to identify where you think they are going to be in 12 months.
As an aside, I think this is always a great spot to put as analyst quote that reaffirms your predictions around product, market, and competition. If you’d like to talk about how to get an analyst quote, shoot me a tweet @roachpost.
STRATEGY GOAL
- What do we want to achieve?
You’re going out to raise money because you want to do something. The strategy goal is that thing and includes three components: 1) where you’re going, 2) when you’re going to get there, and 3) how you’re going to get there. It’s important to be very clear and concise in defining your strategy goal – this really is the heart of why and investor would put their money into your company. In general your strategy goal shouldn’t be more than two sentences.
- Short term?
You’ve defined your strategy goal, now you need to talk about timing. I tend to use the short term as an opportunity to talk about what we’ve done over the past 3-6 months, and what we’ll be doing over the next 2-3 months to better set ourselves up to achieve our long term goal. In general, your short term goal should 1) be in support of your long term goal and 2) a period of time no longer than 6 months.
Your short term goal doesn’t need to be more than a paragraph in length. Again, the purpose is to show investors that you’re already moving forward with achieving your overall plan. You always want to be giving investors the impression that you’d like their involvement, but that the train is already pulling out of the station.
- Long-term?
Your long-term goal is really how you’re going to go about achieving your strategy goal. For a startup, you probably shouldn’t be talking about a period of time more than 12 months (multi-year financial projections, exit plans, and other business plan appendices are a different story). Keeping the long-term timeline to between 9-12 months is going to help/force you to talk about how you’re going to achieve your goal in a specific manner. Specifics are good. ☺
Unlike your short term goal, describing how you’re going to achieve your long term goal is going to take a few more words. Personally, I like to do this by addressing the specific goal associated with each element of my business. This concept will be explained in a future post, however we view the core elements of a business as Cash, Customer, Prospect, Product, Team, Infrastructure, and Brand. All businesses are made of up of these elements, and using this breakdown will help to provide investors with a complete understanding of how you intend to achieve your long-term goal. So, lets go through each of these elements and talk about what you should think about putting down.
- Cash?
How much is it going to cost to achieve your strategy goal? Where are the three or four primary areas where you will be putting these funds to work (i.e., use of proceeds)?
- Customer?
How do your customers relate to achieving your strategy goal? How are you going to keep them happy? Do you have plans to develop/leverage them in any way?
- Prospect?
How do your prospective customers factor into achieving your strategy goal? How will you be qualifying and selling prospective customers? What are you doing today and how will this change to better position you to achieve your goal?
- Product?
How about product? Are you going to be enhancing an existing product? Do you have plans to launch additional offerings?
- Team?
Do you need to expand your team to achieve your strategy goal? What are your key leadership hires going to be?
- Infrastructure?
What infrastructure needs are you going to have? Infrastructure should include everything from the things that produce and deliver your product (e.g., servers/hosting services in the case of a web software company) to the equipment and services your team needs to support their activities.
- Brand?
What brand and marketing activities are you going to employ to achieve your strategy goal? Such activities can include press relations, direct marketing, developing affiliate/partnership programs, attending industry events, etc.
EXIT
- How does this end/what happens next?
The exit strategy is an area I’ve personally tripped up numerous times in the past. It took me a while to realize that without having an exit in mind, no matter how far off an exit was, I wasn’t addressing one of the most important items to any investor: how they’re going to get their money back. Whoops!
While the purpose of the plan is to define the where, when, and how of your business over a specific period of time, the exit strategy should show the investor that you have an understanding (more like a belief) of how you’re ultimately going to realize a return for their investment. Exit strategies can range from going public, to selling to a strategic acquirer, to simply scaling. Defining your exit strategy is less about making big promises (e.g., “we going to sell”) and more about demonstrating you have some understanding of where and when the likely exits will be for your company (e.g., “we’ll be in a position to explore a sale in 12-18mo).
APPENDICIES
- Legal and administrative
Angels and VCs don’t like signing NDAs. Further and in consideration of the fact fundraising is more a kabuki dance than a binary process, I don’t think it’s a great idea to kill the mood by asking someone to sign an NDA just so they can get a copy of your business plan. It’s like asking a girl to commit to a second date before the first one is even over! That said, I always append my business plans with a simple, one-page disclaimer that states the plan is confidential, shouldn’t be shared with anyone, etc., etc., etc. I will include a copy of this appendix in the example business plan I’m going to post on Tuesday.
Parting thoughts…
You’ll notice that I’ve left a number of things out of this outline, including detailed information on team, financial statements and projections, and product features/services/pricing. Whether you decide to include these items in your business plan should depend primarily on the stage of your company. As mentioned, this plan template was last used for a web application provider that had been operating for a couple years, had a product in the marketplace with customers using it, and was going out to raise a second round of financing. All of that other information was either attached to the business plan as appendices, linked to on our company website, or contained in a separate document.
While I encourage you to take whatever you like from this outline, if your company is just getting off the ground, I’d suggest using the Sequoia Capital template we included in a previous post.
As mentioned, I’ll be following up this post with another on Tuesday that will include an example business plan I developed using this framework that you’ll be able to download/revise/use. Although I’m sure there will be many future adjustments/iterations, this outline has served me well over the past few years and I’m confident it’ll do the same for you. Please feel free to leave any comments or shoot us a tweet @roachpost if you have questions or would like to discuss any items included in this post.
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