Is a Startup Business Plan necessary?

Why is a business plan required and what needs to be a part of it?

STARTUPS BUSINESS PLAN FUND RAISING

Shyam Vedantam

7/6/2021 3 min read

Several startup founders, and many advisors, believe that preparing a business plan is a waste of time. They believe that writing a detailed business plan is time-consuming and investors don't have time to read through a long document. Instead, they recommend that founders focus on putting together an impactful pitch deck.

It is true that investors don't have time and it does not make sense to begin an investor discussion with a business plan. A pitch deck is a better tool for the same. But, if you rely solely on a pitch deck, you are missing on capturing all the details that make your value proposition stronger.

Every single element in a pitch deck is essentially distilled from a business plan. Founders, especially first-time founders, might have trouble nailing down and various aspects of a pitch deck unless they have spent enough time in researching and defining the underlying elements. The business plan offers a structured framework for founders to define, research and articulate key aspects of their business. We strongly recommend all founders to spend some time in putting together a well-thought out plan. Once things progress to the next stage, the details that are captured in a business plan would be required for follow-up discussions with investors and also during the due-diligence phase.

So what constitutes a startup business plan? Business plan is centered of 3 key pillars and needs to provide insight into the same.

1. Company & Product - What is your concept or product? How is it better than the competitor’s products?

2. Business and GTM - How can you build a sustainable and profitable business selling your product?

3. Financials - How much investment do you need to build the business and what would be the return on investment?

All other elements in the plan are essentially elaborated answers to these 3 key focus areas. Drilling this down further, following are the set of questions for which we need to find answers in order to be able to define the 3 key focus areas.

Focus Area 1 - Company and Product

1.1 What is your mission? Where does you see itself 5 years from now?
1.2 Who are you? What are the skills that make you and your team uniquely suitable for building this business?
1.3 What is your product(s)? What are the top 5 qualitative and quantitative benefits of the product?
1.4 Why is there is need for your product? What are the stated/unstated needs of the customer that are met by your product? What pain points or problem areas are addressed by your product?
1.5 What is your value proposition to your customers and partners?
1.6 Who is your Competition? What is your USP, moats and competitive advantages? How different or better is your product compared to the competition quantitatively or qualitatively?
1.7 What is the market size – addressable vs serviceable? What could be the market share 3 or 5 years down the line?

Problem 2 – Business and GTM

2.1 Who is your customer? Describe your customer/buyer profile and buying patterns?
2.2 How do you intend to build and make your product at scale? Describe your input channel and ecosystem?
2.3 What do you plan to sell to your customers at scale? What is your sales process? Describe your sales network/distributor/partner channel?
2.4 What is the pricing strategy for your product? Cost-plus or Competition or Value-based pricing or other?
2.5 How do you intend to support your customers at scale after a product is sold?
2.6 How do you intend to market your product?
2.7 What kind of team would you need to be able to execute this plan?

Problem 3 – Financials

3.1 What is your current revenue?
3.2 What is your Unit Economics and Burn rate? What does it cost to build and sell? CapeEx, Cost of Customer Acquisition, Operating Costs, Variable vs Fixed Costs?
3.3 What are your COGS, working capital needs for next 3 years?
3.4 What is your quarterly/annual targets for order booking and revenue for next 3 years?
3.5 What is your P&L, profitability P&L for next 3 years?
3.6 What are the best case and ideal case scenarios for your financials?
3.7 What is the current ownership structure and funding till date?
3.8 How much is your funding ask and what is your company valuation?

Reach out to us at connect@nuvosadvisory and we can help you find answers to these questions!

Nuvos Advisory Services LLP

connect@nuvosadvisory.com