Although an essential stage in the launch of a small business like a restaurant, creating a business … [+]
A business plan serves as a roadmap towards startup goals and objectives. Some of the biggest assumptions of a completed business plan is the viability and validity of the solution and the path to predefined goals. The reality is, chances are a 50-page plan will go down the drain the day founders turn their execution mode on. Most startups iterate or pivot their model before creating a valid solution.
A good startup idea is an educated guess about customers’ needs and the effectiveness of a proposed solution. Creating a business plan for a startup means outlining a roadmap for executing on an educated guess under several assumptions. With all of those success conditions, a business plan can turn into a plan for failure if the founders are not open to change directions.
Although an essential stage in the launch of a small business like a restaurant, creating a business plan for a startup should be different. In a startup, tomorrow’s plan is going to depend on the execution of today’s hypotheses. Data and customer insights will dictate what you need to do next.
Here are the most important questions you need to answer and update as you test your hypotheses and move closer to business model validation and scalability. The answers to these questions will become your business plan.
1. What Is The Problem I Am Trying To Solve?
Try to quantify the consequence of the problem for the customer. Are they losing money or valuable time? Are they missing out on an opportunity to make money or gain time? Are they unable to accomplish an important goal or task because of this problem?
Quantifying the problem is the first step of idea validation. It will allow you to evaluate whether the quantitative benefit of your solution such as increasing sales, productivity or efficiency by X percent or dollar is a strong enough value proposition for your customers to adopt or switch to your product.
2. How Big Is The Problem?
Essentially, your answer to this question will help you size the opportunity and the market. How many people face this challenge? What’s the estimated loss per user whether it is time, money or any other key metric for your business? How much money are people paying to solve this problem today? How long has this problem existed?
Do your homework to understand the market and its direction. Answering those questions will show you how your solution can emerge and innovate.
3. Who Are My Direct And Indirect Competitors?
Carefully analyzing the strengths and weaknesses of your competitors is the easiest way to identify buyer segments, unique differentiator for your solution, pricing and lessons learned from entrepreneurs who are solving the same problem. Conducting this research will help you ask the right questions when interviewing customers.
4. Who Has The Most Urgent Need For A Solution?
In other words, who is your target buyer? The group with the most urgent need for a solution. In my opinion, this is the most important question of all. If you know your ideal buyer, they can help you answer almost every other question based on their needs and experience with existing solutions.
5. What Is My Proposed Solution?
A common startup mistake is starting with a solution and trying to find a place for it in people’s lives. However, when you start with the problem and talk to customers, you gain insights that help you connect the dots about the best solution for the problem. Nonetheless, at this planning stage, it is important to have some ideas about how you could solve the problem as long as you are not set on one solution no matter the signals you find.
6. How Will My Solution Be Different?
Based on the problem and the competition, write how your solution will be different. You don’t have to compete on features to be unique. You can stand out by tailoring your solution to an underrepresented and underserved market even if your solution is not significantly different from the competition.
7. What Is My Validation Plan?
This is the roadmap part of your business plan. The difference is, it focuses on one stage at a time. This question can later become, what is my growth plan? For now, list the most important steps to validate or invalidate your answers to the first six questions. The steps can include interviewing potential users, preselling the product, creating and testing the first version of the solution with core features.
8. Who Do I Need To Recruit?
Based on the roadmap you created for the first stage, what are the complementary skills you need? For example, if you are a non-technical founder, you may need a programmer to help you build the first version of the product.
Finally, remember that your answers and the plan is all based on hypotheses until validated. Update your answers as you move from one stage to the other. At the end of the day, what matters is creating a product people use and pay for. Until you reach this stage, most of the time, planning what will happen in the future is a waste of time.