< here is my response to an email I get roughly once a month….>
My first response is that business plans are absolute pants for start-ups.
If your venture is based on 80%+ known-knowns, clearly articulated business drivers and risks, then a business plan is for you.
In that case, with some certainty and luck you can predict revenues and costs in two quarters from now- you might even have a shot at twelve quarters from now.
If your business plan is for a startup there are precious few certainties at all.
Delivering a business plan with certainty, 3-5 years cash, p&l and balance sheet is somewhere between a joke and a lie.
I don’t recommend it.
My advice is to build and share a document that reflects a business model, competitive landscape analysis, team profile and vision.
The stuff you know about your business.
Add very high level financial assumptions after the first four quarters:
The document should have two page of financials reflecting 3-5 years at a high level – a sketch based on shared assumptions:
- Cash movements on one,
- P&L on the second.
I recommend an application of funds page after these two
- This sets out how you would spend every penny raised in this round
- Your assumptions on the outcome of every cost line item
- The impact you think each line item will have on shareholder value
- Set expectations for a next round value based on a successful application of funds from this round
The prose would be:
- The problem defined and its scale investigated.
- The solutions available in the market today – an x-y diagram showing hopefully a gap in the market for your solution.
- Your solution in detail operationally and how it addressees that gap
- Your business model – the detailed process where €X inputs are added to your model and through hard work and alchemy get turned into €Y.
- Your unfair advantage – why your team will succeed
- Your team’s experience, expertise and connections
- Your Intellectual Property if you have any
- Your intimacy with key people in the market – customers, channel partners, strategic partners
- Your pre-sales or sales commitments if you have them
- The vision for the project
- How fast and how far will you bring this project
- The risks defined in detail and with honesty
- The funding plan
- The exit plan if there is one
- The three pages of financials
That’s my tuppence worth.
I have been thinking about this and talking about it for a long while so I hope these ideas are useful to you and your team.