Many times techno-preneurs, specially those who are not looking to raise money do not write a good business plan. With good I don’t mean a jargon friendly, marketing pitch business plan. But rather a business plan which can actually help you in execution. Various arguments presented are “Business plans will change”, “It takes me 3 months to build the product and take it to market, lets just do that first”, “Its boring”. Thing is business plan is probably the most important tool you can have at your disposal. Unfortunately like most of the things I know now are through my own mistakes and realization about importance of business plan is one of those.

Important parts of business plan:

Note that I am not talking about how to write business plan to attract investors, but how to write a business plan to help you put together your thoughts and research.

1. Vision:

  Vision has to be presentable in one or maximum two lines. If it takes more than that to tell your vision, you are not very clear about it. Do your homework find out what is the most important thing you want to convey and generally that is your vision. Now once you have that one line, print it out on a paper and stick on top of your monitor. If after reading for a week continuously you feel its still worth a goal to take all the required risk, then you are on right track. If at end of one week you feel the one sentence does not motivate you any more, time to check things. (Making tons of money is generally assumed so try put in something other than that. Kidding.)

2. Executive Summary:

  One pager giving away information which gets readers like partner, customer, new hire, investor (in order of importance again!) interested in reading further. This one page document essentially, when you read it after a gap of several weeks, will give you everything you wanted to know about your own venture. Problem you are solving, solution overview, competition, market and structure of your team.

3. Team:

   This is the most important part. And the part where most of the entrepreneurs make mistake. All focus on plus point, which is good to sell the team to VCs. But to really understand yourself put down all plus and minus points about every one involved. Right from socially awkward to technology genius are all important attributes. What you need to find out is who is best in doing what. There are several responsibilities a team has to take care of in a venture. All things are not as big as designing state of the art banking system or pitching to Fortune 500 client. There are lot of small things like who is better person to talk to a local electricity related person in case of any problem, who can handle low level operational things like writing invoices and cash-memos. Found out these thing about your team and put them together. Sure, while presenting this to VCs you may want to remove some things from the list, but internally maintain entire list. And make sure everyone involved is working on improving on some basic set of skills, if they are lacking in any.

   Also note down skills missing from the group and how you are going to acquire them. If you are going to recruit a marketing head, what you have so that best marketing person available will be ready to work with you? How are you going to find these missing people. Your team structure and roles various people involved are going to play.

4. Competition Analysis:

  This again is really important piece of information for any stake holder. Keep this part updated regularly. You have to know your competition. Right from how much money they have raised, from whom, for how much valuation to who are the core non-founding team members. You have to know everything about your competition. Their marketing strategies, strategic partnerships, investors, customers, outsourcing partners and every other person who has a tangent with them. Find out about what your competition is strong in and what are its weak points. What differentiation your are offering. Overlap of features. Your unique selling point/s. All this is very important when you start marketing your product/service. Never look at competition negatively. Competition always helps you, at least most of the times. Frankly if you could not find single competitor to your offering, I think you are understanding the term competition in itself.  Also one quote I always remember is “There is always enough room at the top”.

5. Market opportunity:

   Never lie about market opportunity. At least not to yourself. Yes, VCs will look for billion or at least few hundred million dollar market size. But if you do not have that kind of market, does not mean you can put up your fantasies here. Specially for dot com startups I have found people really struggling with how to evaluate market opportunity. If you have done competition analysis thoroughly then that will help to some extent. Important thing is how much money your customer is going to make or save using your product. Typically some ratio (1/10th I think) is the price customer willing to pay for your product. This can be a good way of finding true valuation. Though I am not very good at this myself :-) .

Exit options:

   There are good times exit options and bad times too. Good time options include merger and acquisitions, going public. who will be your potential buyers. Which companies will be looking to merge with you to gain strategic advantage. Is your market size big enough for you to go public at some point? Can you keep running the company with good return on investment for lifetime with out reaching any of the exit milestones. 

   Bad time options include selling off your technology, user base, marketing channels. Are you creating any patents or technology that you can sell off? If yes then to which companies? Why would they buy? Are your creating marketing channels which a particular company will be interesting in acquiring? If you are a dot com startup, then what user base you minimum need to reach to at least cash-in some part of investment if things dont work out? Have you acquired a domain name which might be very lucrative for your competitor?

There is more to business plans and will be in second part of this post.