Guide on writing a good business plan for a technology startup

Before thinking about a biz-plan guide, I'd say you need one business oriented person as partner. The document require some accounting/finance/marketing knowledge.

Because you mentioned VC/Angel, I assume that you are writing this for raising funds(equity). This is the outline I used to create my own biz plan for a pitch competition. You don't need to organize the entire document in the exact order but do include all the info.

Sorry I cannot give you a written example, cause the only one I have is my own company's.

Good luck!

P.S. my company is an internet start-up.

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1.Executive Summary – Briefly describe the company that is planned to be formed or already formed, and give a general idea of what the business seeks to accomplish.

2.Product/Service Description – Briefly describe the specifics of the product or service.

a.Features: Describe what the product/service is.

b.Value Proposition: Why is the product/service valuable?

c.Competitive Comparison: General comparison of the features of the product/service against the existing providers of a similar offering in the market.

d.Technology: The unique or core technological features of the product/service.

e.Future products/enhancements/service

3.Market Analysis – Summarize segmentation, target market, size, and growth of the market. a.Market Segmentation: How is the market segmented?

b.Target Market Segment: Describe who comprises the target market. Mention the size and the growth of the market.

c.Market Need: What is the pain that the future clients are suffering from?

d.Market Trends: Describe the trends followed by the clients and the business participants.

e.Competition: Describe the main groups of competitors and then the individual business participants in each group. If the targeted entry market is un-served, describe the substitutes that customers are using to solve their problems.

f.Competitive Advantage: What advantage does this product/service have compared to the competitors?

4.Business Planning and Strategy – What is your strategy for growing this business?

a.Entry Strategy: Who will be the first customers?

b.Marketing Strategy: Describe the marketing techniques that will be used.

c.Positioning Strategy: Describe how the product/service will be differentiated from others in the market.

d.Selling Strategy: How will the product/service be sold? Direct sales, salesmen, web, brick and mortar, or all of the above?

e.Distribution Strategy: What are the channels of distribution?

f.Pricing Strategy: How is the offering priced?

5.Management Team Profiles – Profiles on who is running the company.

a.Management Team: Describe briefly what each member brings to the table.

b.Board of Advisors: Describe briefly what each member brings to the table.

c.Personnel Plan: Show the number of people needed in the next five years and their cost.

6.Financial Plan – Summarize your company’s financial plan.

a.Important Assumptions

b.Break Even Analysis

c.Profit and Loss Statements

d.Cash Flow Statements

e.Projected Balance Sheet

@Reed has given a good overview for a general business plan ... so use theirs as a good template for your table of contents to fill in the blanks.

BUT as a venture developer (invest technical IP rather than money), I wouldn't read a lot of that. I want to know:

• What the idea is. Basically "what is the pain/issue you are removing" or "what is the cool thing you will bring to customers".
• Who you have available now. What skillsets do you have, who do you know, is it more than just an idea?
• Who is your target market? Have you done anything with them before? PLEASE don't say "anybody". I would rather see 3 or 4 seperate very targeted demographics / profiles than 1 "everybody" sort of statement.
• Customer Aquisition. How you would get your first 10 customers (they are your test bed), How you would get your first 100 customers.
• Break even. At what point after paying yourself and others well do you start to break even? For some businesses this is critical, for others with lots of investment whos value is on having a million eyeballs a day then its not as important (to start with).
• Where can you realistically get to in 2 years. With each quater roughly how much would go out in wages, marketing/sales and Other (fixed, estimated variable costs). This will be compared to "getting customers in".
• What are the scaling points in the business. People, servers, servicable clients ... every business model has them. Key ratios might include:
  • Customers per Sales people per quarter. How many on average can they close?
  • Advertising budget / traffic buying per 1000 customers. How much will you spend to get your 1000 customers.
  • Expected conversion ratio. 3-5% of traffic bought is a good starting point without any other proof.
  • Customers per server. Transactions per customer per month. Transactions per customer per minute. This says roughly how fast and it hard to guess at but if you know put it in.
  • If your doing high value sales: (we sell $100K per install systems) then your not buying traffic your flying around the country/world, doing trade shows and lots of meetings / demos. This costs time and people ... cheap trade show budget around $30,000 for not in your town and $8K - $10K if it is in your town.
  • Canvas rate. In 1 quarter how many new calls can a sales person make / juggle? If they are serious leads 10 is respectable on large scale work.
• What are the points that won't scale as well, there is only one of you is this an issue to address? Can't answer this you haven't thought about it enough.
• Pricing models which would most likely apply. There are some key models which seem to work well and a lot of variants. who is going to use it and who is going to pay for it to be used? these can be the same but often 1 group pays and another group uses it ...
  • Product Sale + SLA. Basically sell the product and change for maintenance and updates.
  • Saas. Software as a service. This has a few models underneath it but basically you are charging per month / quarter or year and including the support.
  • Freemium. This is Saas but you give it away to 80-90% of the user base and make your money from the 20% who need specilist features. Good for high volume sort of things ... good example is EverNote.
  • Advertising driven. Have enough qualified users you can put the right ads in front of them and generate revenue from that.
  • Traffic buying driven. Basically you become a funnel to other sites (normally through advertising).
  • Charge the end user, change a reseller who has the end user as a client, change an advertister to get access to the end user, charge a company to improve their workforce or process, charge company A in order to improve their offering to B? What is going to work and why?
• List of competitors and "associated noise". Basically lots of people think they are unique, but the market may not understand differences or misunderstand the noise.

So after you have been through all of that thinking, condense it down into 1 page (a max of 2-3 pages) and have the rest on standby if its asked for. The important part is that you have gone through it all for youself so that you ACTUALLY know what you are talking about when it comes to it.

My approach would be:

1. do the research and write a thorough business plan using the above answers which have lots of great detail. This will be invaluable for market research, consolidating your knowledge of your industry and honing your strategic thinking about your business.
2. Then take that information and distill it to a 20 page business plan geared to investors and a one page exec summary (and a slide deck). You may not use all these documents but you will have them if you need them.

I have written lots of business plans and reviewed hundreds. The best ones have done thorough research and thinking as suggested above but then cull down the information so that every piece of information included in the plan for investors helps to sell the idea, build credibility and demonstrate the team's ability to execute.

The key with plans for investors is to remember that it is a sales document - you are selling the opportunity to them. They will ask you lots of nitty gritty questions if they are interested and you better know the answers, but the written documentation is to get you face to face with them.

I am currently looking for funding and the approach I have used which has been successful in getting me in front of people so far is to send a one page concise and hard hitting executive summary and then to follow up with a meeting. I found a great template for exec sums from Pollenizer here. (The bonus with this approach is that I am only disclosing IP when I get an indication of interest.)