11 Things Every Startup Needs to Include in Their First Business Plan
First off, congratulations if you’re still reading after seeing the words “business plan” in the title.
So why not give yourself a better chance at success by creating your own business plan as you kick off building your business?
This article will guide you through the least amount of work needed to create a startup business plan. We call this approach Lean Planning, which basically means that you’ll first make your best guesses about your business needs, and then you’ll revise those guesses regularly, ideally once a month.
This simple format means you can apply the Lean Planning process to your business at any stage, from “maybe I’ll leave the cubicle one day,” to an investment-ready startup, an Etsy store that might want to expand, an up-and-running bagel shop, and anything else you can dream of.
The Lean Planning cycle for startups
As you read through the steps below, jot down what you would include about your business in each section.
If you’re using a business planning app like LivePlan, you can follow along step-by-step, and revise each section every time you learn something new.
Let’s get started.
1. Your headline statement
Can you summarize the unique elements of your business in one brief sentence? It’s difficult to condense that much information into just a few words, but you’ll need to so you can recite it to mentors, partners, employees, and anyone else interested in your startup.
This is the headline of your entire business plan so it should give a basic overview of your idea, and then get someone excited to hear more.
You may be tempted to insert a marketing statement here. Please don’t.
If I sell yogurt, I might think my headline should be “smooth and creamy and organic.” If you’ve written a customer-facing statement like that, try rewriting it to communicate the key elements that investors, partners, or employees would ask to hear.
I might revise “smooth and creamy and organic” to something like:
“Nature’s Biome yogurts offer superior health benefits and textures our customers prefer, available from premium natural grocers on the West Coast.”
Another pitfall is obsessing over the taglines of hugely successful businesses. For now, stick to the basics so you can grow into a company that tells customers to “Think Different,” or “Just Do It.” But don’t start with those taglines here.
Try this exercise:
For now, your goal is to write something quickly and move to the next sections. As you develop your business plan, you’ll find ways to revise this headline to more accurately summarize your unique business, vision statement, and the specific value you bring to customers.
Let’s move on to the next sections, knowing we’ll return to make changes often.
2. The problem you’re solving
This is the most important section for many early-stage startups since it ensures that your product is not a “solution in search of a problem.” You must prove that real people are willing to give you money for your product.
A nicely worded example is:
“80% of our market would pay a 25% higher price for meats from a local butcher, as long as the location is accessible.”
Use this section as an opportunity to leave the office and interview real customers. Ask people if they experience the problems you believe are worth solving. Avoid questions that lead them to your solution—this is a learning experience for you, so trust the responses you hear.
Do this work now, before you invest more time and money into a business idea that might need to pivot. Once you’ve talked to a significant number of people, you can combine your customer interview notes with market trends and industry research data to make a solid case.
Once you’re confident in your list of problems worth solving, condense them into three to five of the most important issues that real customers encounter.
3. Your solution to that problem
For each problem you wrote down in the previous section, describe how your product is the best solution for your target customer.
For example, if your problem states that all local solutions are too expensive, then your answer might emphasize that your price point is more appealing to your customers.
Focus on matching each problem with a specific solution. Combined, these solutions form the foundational elements for you to focus on as you build your startup. These problem/solution pairs will also become the “value proposition” for your business
4. Your target market
Defining a target market can be tough work for startup founders who just want to get started, but it’s worth the effort.
Your marketing efforts will be way more effective if you know exactly who your customers are. More importantly, your entire business model relies on having enough paying customers to fuel your daily operations and growth.
For this section, we’ll list the groups of people who could possibly buy your product. For each group,
- Guess the number of people and
- The amount of money they currently spend on solving this problem
You might feel like you’re just making up the answers here, so here are some tips to help.
Create a persona (or multiple personas)
A persona represents the customer that you would expect to buy your product. Assuming you did some customer interviews in Step 2, begin with the customers who are the best fit for your solution.
Close your eyes, give them a name, and imagine their face, home, salary range, and everything else you can about them.
Once you’ve fully imagined who this person is, you can research their behavior. You might even conduct more focused interviews with people from that specific demographic to help refine your problem and solution statements.
Use only one characteristic to segment your customers
In the target market example below, we see a product that appeals only to men who are 14 and older, with a dramatic spike in spending habits among men who are between the ages of 25 and 40.
Startups can use this type of demographic segmenting to focus their marketing activities, the types of business partnerships they seek, and nearly every other section of this planning activity.
You might use demographics like age or gender to define your market, but you could also use other traits like spending levels, technology knowledge, or family size, if they’re meaningful to your product or service.
Industry research reports can also help define your target market. These reports are often expensive, but you may be able to find a Small Business Development Center (SBDC) or local library that can provide a report.
The more you know about your target market, the greater chance you have of creating product features and marketing messages that they’ll respond to.
5. Your competition
Never say that you “have no competition.” Instead, describe everything that might prevent your ideal customers from buying your product.
For those who have local competition, like a sporting goods store or restaurant, it’s essential to visit other businesses that serve your target market. Walk in and see how they operate.
If you have online competition, call their customer support line. If you can afford it, purchase something.
Imagine your target persona doing all this. Then ask yourself:
How will you improve on what your competitors offer?
Keep this list brief by grouping similar competitors together, as shown below:
One last tip: Consider reasons that your target market doesn’t already buy the type of solution you’re offering. This could be a market trend, social trend, or local fashion.
For example, a fast-growing local vegan population might thwart the growth potential of a new all-you-can-eat steak restaurant.
6. The funding you need
Most startups will need some type of business financing to get from idea to sales.
Before you ask for any type of investment—even from friends and family—you should have a clear idea of what you’ll spend that money on, when you’ll need it, and how you plan to pay back your investors.
This is a great time to use something called SMART goals. SMART stands for:
- Specific dollar amount
- Measurable results
- Attainable from your intended source
- Relevant to growth, and
- Time you’ll need it
If you plan to bootstrap your startup or grow naturally from sales revenue, include that information. It’s an essential part of your growth story.
7. Your sales channels
It’s common for startups to confuse sales channels with marketing activities. Here’s the difference—sales channels are what allow customers to exchange money for your products and services.
So if you run a bar, your bartender’s transactions are a sales channel, and if you also sell T-shirts online and cater at festivals, you should include those as separate sales channels.
It’s totally okay if you have only one straightforward and direct sales channel, like a single checkout register or a business with orders that are all invoiced by a single client.
8. Your marketing activities
While the sales channel is the credit card customers hand to your bartender, your marketing activities are what got that customer in the door in the first place.
New customers are the lifeblood of your startup, so be thorough and targeted when considering where you’ll advertise to the target customers you listed above.
To start, have fun imagining everywhere you could possibly advertise your business. You might start with a long list of activities including billboards, magazine ads, online advertising (like Facebook), sign spinners, and more.
From there, edit the list to the five channels that you think will be most appealing to your customers.
If you only list “social media and online advertising,” I recommend that you revisit this section once you’ve completed the first pass of your Lean Plan and add more specifics.
Note that your business location might be your biggest marketing asset. A donut shop might thrive simply due to foot traffic. Some businesses pay a premium for location, so it’s important to acknowledge that extra cost as the marketing activity it is.
9. Your budget and sales goals
If you’re like most startups, the financials will be the most daunting part of your business plan exercise. Numbers seem to be the biggest cause of business plan writer’s block, so rest assured that this is a common obstacle.
Since we’re creating a lean business plan, let’s start as simple as possible:
- Identify your major revenue streams. (This is the stuff you sell.)
- List any big expenses you anticipate in the coming year. (This is the stuff you buy.)
- Are you paying yourself yet? (Hopefully!) If so how much and when?
- Key milestones you can imagine, such as hiring employees or changing store locations.
Just write something down and edit later. Do this a lot.
As you go through this Lean Planning cycle of Guess/Test/Review/Revise, you will find yourself asking increasingly insightful questions. The answers to those questions will narrow your focus and allow you to create a smarter financial forecast for your startup.
Once you have a framework for a financial forecast, an online business planning tool like LivePlan can make it easier to enter actual numbers, since the critical calculations are all done for you.
You can also work with a local SBDC to get help guessing your sales and expenses. Most importantly, make your best guess now, and revise it until you feel in control of a financial vision for your business. You can do it!
10. Your business milestones
Describe three to five of the most important events that will happen in the coming year, including launch dates, funding events, or major hires. Add dates to each, and assign a stakeholder.
Avoid getting overwhelmed by the complexity of the day-to-day steps, and focus on the major progress and achievements that will define the success of your business.
Be as brief as you can, and remember you can always change your target dates when things don’t go as planned (it’s okay!).
11. Your team
Investors often say that they invest in the person as much as they invest in the business. This section is your chance to shine as the most qualified person to bring your business to market.
For each business partner, describe why they’re the most suitable for their role. No need for a full resume.
An innovative new battery product should showcase the team’s technical savvy so the product is believable. On the other hand, if your team is heavy on engineering talent, be sure to indicate who will execute your sales and marketing efforts.
It’s common for people to have trouble writing a glowing review of themselves. Some folks just don’t like to brag. If that sounds like you, consider having a friend or family member write this section for you.
Finally, show off your vision for your business by listing future hires and describing their key attributes. If you’re not interested in working on the finances, you may hire a CFO soon. Including this vision solidifies the business plan and highlights your commitment.
Test your guesses and REVISE
One last reminder—anything you predict today is purely a guess. The Lean Planning process encourages you to take today’s best guess and revise it tomorrow, next week, and next month as you grow and learn as a startup founder.
The content in each section above is brief so that you don’t spend huge amounts of time making changes on the first go.
As you follow this startup business plan template, you’ll encounter topics that require a deeper dive. Common examples are:
- Marketing plans
- Store location research
- Engineering plans, or
- A detailed financial forecast (including profit & loss, cash flow, and balance sheets). As those planning elements become necessary, you can add them to the work we did above.
Ultimately, you should benefit by using your Lean Plan as a tool to manage your business plan on an ongoing basis.
Business plan writing tips
If you weren’t already scribbling down ideas while you were reading, here are some steps to get started:
- Write each section as quickly and briefly as you can,
- If any section gives you severe writer’s block, just make a guess and add a note to come back to it once you learn more.
- Read each section to a few friends (or SBDC consultant, SCORE mentor, family—anyone who will listen). Read the words you wrote exactly as written, and note their questions.
- Revise your notes to answer the questions.
- Get back to work on innovating your startup!
- Continue to revisit and revise your business plan over the life of your company. Come back every couple days during your startup phase, and once you’re up and running, you may only need to revise it every couple months.
You’ve now officially made headway on your first business plan. Now get back to the real work you’ve been waiting to do all along.