Business plan

Business plan guidelines for a startup?

David Lynch Firmware and Python Automation Engineer

January 8th, 2014

I have never written a business plan.    I have read some recent articles lately that you don't even need a business plan, or that the business plan should be only one page.  What do you think?

I am considering using LivePlan.com because it is sort of a wizard that asks you questions and then creates graphics from that interview.  That could point me in the right direction.  All for $19.95 per month.  Any experience on that?

I have a fully functional prototype that can be demonstrated live for investors.  It is an interactive toy for boys, teens, and adult nerds, and a new invention.  How do I find the size of the market?  It's all going to be a big guess because no one will know how the sales will go until we try it for real.  

David Rauschenbach

January 8th, 2014

The Business Model Canvas (2008) is considered by many to be the state-of-the-art replacement for business models. Some argue that old business models died over a decade ago. Business models are about executing a fundable model, whereas start-ups are about the discovery process. Canvanizer has a free business model canvas form that is like Google Docs. You make a change in one of the 9 boxes each week or so, and call that an iteration, until it dials in customers and becomes a fundable thing.

Lawrence Lerner Digitalization and Transformation Coach

January 9th, 2014

Yikes! FD stripped all the formatting.  Resending

Whatever you call it, you want to have a document that describes: The premise for your product or service The product or service itself The addressable market Plans for product development and marketing What you need (optional for some audiences) Your team It should be as short as possible but no shorter. That is, use the minimum amount of words or pictures to fully describe the above items. 

The size of the market should be something you can estimate within an order of magnitude. I call this the addressable market. Addressable markets are what and who you can reasonably target. 

As an example, anyone should be in the market for a Kindle. If you start the filtering to make it addressable (this is only an example and not meant to be 100% accurate): 
  • Total population of Earth is about 7 Billion 
  • Worldwide literacy rate is 84.1% (http://www.indexmundi.com/world/literacy.html) - I havent cross checked this. It only includes adults over 15 years old 
  • Perhaps you want to only market in the US. Literacy rate is 86% (on 371 million people) http://www.huffingtonpost.com/2013/09/06/illiteracy-rate_n_3880355.html 
  • 76.5% of the US population are over 18 http://quickfacts.census.gov/qfd/states/00000.html Using the above numbers we are down to a market size of about 244,000,000 
  • The cost of the Kindle makes it a luxury. Say only 30% (and this is where some research should have been done) can afford the Kindle. About 73 million people. A large number but thats market you can address. It doesnt mean 100% of them will buy it 
  • The device is small and portable which means it can be sold through any brick and mortal retailer willing to put up the shelf-space. 
This is the type of process you should go through. It takes a bit of time and research on the part of you and your team. From what you've told us, you can probably re-use a little bit of the above thinking. 

Some other thoughts to consider: 
  • Is the toy shelf-size or is it more like an exercise set that requires a large showroom and analogous space to install at home? (e.g., Not good for apartment dwellers) 
  • You characterized it as boy or nerd toy. With the push to get girls into STEM, is that a good market? Might you get a boost from that? 
Good luck and feel free to reach out. 

Lawrence I Lerner 
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Direct: +1.630.248.0663 
Blog: RevolutionaryInnovator 
Twitter: @RevInnovator

Tim Scott

January 8th, 2014

You might consider starting with a business model canvas instead of business plan document.  There are a few sites like this one that help create an manage it.  At an early stage, a canvas might be better than a more elaborate plan with detailed long range financial projections which are probably transparently phony anyway.

Brian McConnell

January 8th, 2014

A live service trumps a business plan. What investors are looking for in most cases is mastery of the problem space, ability to react to what-if questions etc. The classic MBA business plan is helpful as an internal planning and research exercise but nobody reads them. My $0.02

Craig Green

January 8th, 2014

It never hurts to put yourself through the rigor of thinking things through. Not just the market size/share, but what about how things will cost, etc. 

Stan SF Manager

January 8th, 2014

David, first thing first...search "business model canvas" and use that as the initial template and structure to shape your thinking. Leave the thick business plans as a last step. Sent from my mobile device Stan

Leena MBA Content & Publication Manager at NetApp

January 8th, 2014

If you have a fully functional proto, then focus on getting traction. Then see if you really need a business plan or not. If you have traction, investors come knocking on your door.

Investors look for:

#1 Extremely strong management team.
#2 Traction. This is usually tied for 1st place but, as Paul Graham (YCombinator) says, if the team is very smart and capable, then the ideas are less important. 

The b-plan is not for investors - they don't read them. The b-plan is strictly for you. It's a great exercise in seeing if you have a sustainable business model. Every entrepreneur should write at least one in their lifetime. On the flip side, I've found that if I'm busy futzing with explaining why my product is great, I'm not WORKING on my product. Plus, it can be really demotivating if you find that the logistics are too difficult, or you start to worry about money because the plan always has to be written ultra conservatively. Unrealistic statements of future revenues impresses no one.

If you still want to write a plan, let me know. I have written award-winning business plans and won a few competitions based on presentations from my plans. If you need pointers let me know, I'd be happy to help. But my 2 cents is to just screw the plan, and work like hell to get traction for your product. Then it'll sell itself.

Leena

Lawrence Lerner Digitalization and Transformation Coach

January 9th, 2014

One additional comment.  Once the Kindle has been sold, there is more revenue to be made on the books and associated media/apps that can be purchased through it. If that's applicable to you, then it should figure into your revenue numbers

Steve Karmeinsky CoFounder City Meets Tech / Lean Capital Ltd / Placeholder Ltd

January 9th, 2014

I think every start-up should do a business plan, even though the earlier the company is, it's more guess work than anything else, however it shows that you've at least thought about costs, revenues etc.

If you don't do one, why should someone invest, you've not even made an effort to show that you're going to grow etc.

Steve

Varun Mehta CEO of Disqovery

January 8th, 2014

Because I'm all for saving money, if you want to try out LivePlan register for the Rice Business Plan Competition (and enter!). You get a free subscription to LivePlan.