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Ask YC: Writing a business plan?

25 points by xenoterracide ↗ HN
Does anyone know or have any resources they like to reference when writing up business plans?

We are very early stage and don't have an alpha for our web product yet.

EDIT: we are planning on doing this so we have something to show VC/Angels when we seek funding. which we are needing (somewhat) now.

27 comments

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kyro
What do you expect to gain from a business plan?

Keep working on your product, get a user base, and worry later about verbalizing the specifics of your projected market share and what day exactly you plan to go cash flow positive.

Sure, a business plan will force you to really question what your value proposition is, and how you plan to differentiate your product, but that can all be done by creating a brief outline.

But if you must: http://www.microsoft.com/smallbusiness/resources/startups/bu...

xenoterracide
we want something to show potential investors.
spencerfry
Investors don't typically look at business plans. They look at your elevator pitch and about a 10 page PPT slide highlighting your main points: your technology, your team, and the market.
Alex3917
"Investors don't typically look at business plans."

That's only going to be true if you're making something like a website where the market and the monetization strategy are limited to a few well-understood choices. If your business is something like, for example, selling handicapped-accessible home swimming pools to parents of children with disabilities then a business plan is key.

spencerfry
Yes, but the focus of YCN are Internet businesses for the most part.
bluelu
You also get no loan from a bank or (free) state financing without a business plan.

They don't invest their money in hot air :-).

skmurphy
Customer testimonials and a business model.
marketer
Sequoia has some interesting bullet points (right side of page): http://www.sequoiacap.com/ideas/

Granted, most online business won't meet all of those requirements, but they also aren't likely to be funded by Sequoia.

wumi
use that like an outline then make your slidedeck:

Company Purpose

    * Define the company/business in a single declarative sentence.
Problem

    * Describe the pain of the customer (or the customer’s customer).
    * Outline how the customer addresses the issue today.
Solution

    * Demonstrate your company’s value proposition to make the customer’s life better.
    * Show where your product physically sits.
    * Provide use cases.
Why Now

    * Set-up the historical evolution of your category.
    * Define recent trends that make your solution possible.
Market Size

    * Identify/profile the customer you cater to.
    * Calculate the TAM (top down), SAM (bottoms up) and SOM.
Competition

    * List competitors
    * List competitive advantages
Product

    * Product line-up (form factor, functionality, features, architecture, intellectual property).
    * Development roadmap.
Business Model

    * Revenue model
    * Pricing
    * Average account size and/or lifetime value
    * Sales & distribution model
    * Customer/pipeline list
Team

    * Founders & Management
    * Board of Directors/Board of Advisors
Financials

    * P&L
    * Balance sheet
    * Cash flow
    * Cap table
    * The deal
fdschoeneman
So long as you're writing the business plan with the purpose of helping you think through your new venture, rather than with the purpose of being able to drop it off John Doerr's lap and have him be, like, "Sweet plan, dude, here's three million dollars to go make it happen," it's a good idea. But be careful about writing the perfect business plan without working on your product simultaneously; business plans go through many revisions and iterations, just as do most software development projects.

Having said that, I'm one of those guys who really did find the process of writing a business plan to be personally helpful, whether or not a potential investor likes the result. So here's my .02. I'd start with John Nesheim's books, both "High Tech Startup" and "Unfair Advantage." I'd also check out his blog and his reading list. Somewhere in there he has a template that many successful tech companies have found useful for their own business plans. He also has a sample business plan, written by students, that you can take a look at.

Again, a rough 10 or 15 page business plan can't hurt at this stage, but you should be focused on making your product awesome, so that people will want it. Get that handled, and then worry about writing a really tight executive summary and you'll be good to go.

Good luck.

rms
There's software called Palo Alto Business Plan Pro, available for $99 I think or illegally. It will do all the numerical calculations involved in a business plan. You can use it to crank out a bullshit business plan in an hour.
iamelgringo
From what I understand, VC's and Angels in tech startups don't use business plans. They use a 10-15 slide PowerPoint deck, and the elevator pitch, or a 15-30 second pitch.

If you're building a web product, and you're in a tech hub like the Valley, Boston, NYC, Austin, etc... I wouldn't bother with a business plan. If you're not in a tech center, I'd bet you're going to have a hard time raising funding with or without a business plan, but YMMV.

If you're gung ho on a business plan, the "Business Plans for Dummies" is a decent start. SCORE: http://www.score.org/index.html offices usually have a lot of good resources on business plans, bus. plan writing software you can use, etc... They would probably have someone who would be willing to look the plan over and critique it for you. And, I know it was mentioned elsewhere, but the Small Business Administration has a lot of resources for small businesses: http://www.sba.gov/ You also might want to try your local chamber of commerce as well. If you're in a smaller/mid-size city, business people are probably going to be your sources of funding, so you might as well go where they are and start networking. You could make your business plan and ask for a critique from a couple of them and see if it gets you anywhere.

xenoterracide
"If you're building a web product, and you're in a tech hub like the Valley, Boston, NYC, Austin, etc... I wouldn't bother with a business plan. If you're not in a tech center, I'd bet you're going to have a hard time raising funding with or without a business plan, but YMMV."

What sucks is I'm not in a hub or really anywhere near one. I'm hoping to find something/someone locally who is willing to fund me (and my co-founder) enough to get to one. Until then... I keep hacking.

pk
There are a few good brief articles up on Guy Kawasaki's VC firm's site (Garage Technology Ventures). The most memorable points from the articles were:

1. The purpose of a business plan / pitch is to sell your company to an investor, not just describe it. (This is a pretty self-evident point, but it's helpful to hear from my perspective as a hacker who's usually very interested in how things work, and sometimes needs to take a step back to think about those kinds of issues.)

2. Don't try to fool an investor - they see hundreds of business plans a year, and already know all the tricks out there. Just be honest and rely on the merits of your product / team / strategy. If you have a good idea and a plausible way for it to be successful, you've already got all you need. (Another simple idea, but it's nice to hear from an investor that honesty is appreciated, and that a hacker with good communication skills has a chance against a smooth-talking MBA.)

http://www.garage.com/resources/index.shtml

dmv
If you want a book, the best one I've read (and over time, I've read more than my fair share) is "Business Plans that Win $$$": http://www.amazon.com/dp/0060913916/

It looks old and outdated and cheesy. But while it is from 1987, the differentiating principles are the same ones that you hear echoed by pg, 37signals, Sequoia, etc. Sound business principles (the kind that an investor who has not drunk of the kool-aid, yet, should possess and be looking for) have not changed in those years. The book pushes you to answer the same hard questions that a good investor will, and position your plan in the best possible light.

bigtoga
No doubt - that is one awesome book. I have purchased copies for friends and they've all come back mclovin it.
swombat
There are many, many books on the subject. They're all fairly standard. Go to your bookstore and get the one you prefer.

Daniel

stealthstartup
I was recently talking to some VC's and asked what they thought of my one-page business plan concept. (We're not sending it out to VC's yet.) They loved the idea though. They also said that they believe that a well crafted business plan should be less than 9 pages.

They also distinguished between an operational plan and a business plan, saying most combine them. The "how" you are going to accomplish your goals can be in a separate document for later.

Here is more info on the one-page approach: http://www.mystealthstartup.com/2008/04/15/a-different-appro...

Here is what we used to model our business plan from: http://www.ftpress.com/articles/article.aspx?p=385536

eisokant
I've read over the comments and I absolutely don't agree with those saying a business plan should not be a priority. If you do it right and spend a lot of effort on it from the start, it's not just a documentation for possible investors but becomes a set of guidelines for your company. It forces you to sit down and really analyze your product, market and the goals of your startup.

Personally I've read my fare share of literature on business plans but must say the book "The Definitive Business Plan" by Richard Stutely stands far above all. It's not written with a specific focus for a Web 2.0 firm but will give you a really clear overview of what you would want to include.

I hope I have been able to be of some help.

Best regards,

Eiso Kant

bdouglas
here you go guys...

a small business opportunity. allow people to post their redacted business/operational plans for funded/non-funded entities.

allow people who are looking for live plans to be able to search through abstracts/text of the plans to get a feel for what's there... charge people something small, like $10/year for the rights to access/view x number of plans.

charge them something less if they post their own plans...

also, have the ability to have plans (anonymously) reviewed by given trusted people within the site...

to deal with someone's fear that a given idea might be "stolen" the actual idea portion of the doc can be left out... for the purpose of this site, it wouldn't be that important/critical...

thoughts/comments...

if you want to build something like this, let me know.. i'd probably be willing to personally throw a few grand into something like this....

-bruce caliventures@yahoo.com

bdouglas
here you go guys...

a small business opportunity. allow people to post their redacted business/operational plans for funded/non-funded entities.

allow people who are looking for live plans to be able to search through abstracts/text of the plans to get a feel for what's there... charge people something small, like $10/year for the rights to access/view x number of plans.

charge them something less if they post their own plans...

also, have the ability to have plans (anonymously) reviewed by given trusted people within the site...

to deal with someone's fear that a given idea might be "stolen" the actual idea portion of the doc can be left out... for the purpose of this site, it wouldn't be that important/critical...

thoughts/comments...

if you want to build something like this, let me know.. i'd probably be willing to personally throw a few grand into something like this....

-bruce caliventures@yahoo.com

kynikos
It's important to illustrate strong market potential in size ($$$) and scope (long term growth.) Your business plan should make a compelling argument that illustrates a strong understanding of your operating environment, market trends, and how your business will strategize to use these trends to your advantage.

It's also important to not overlook the risk analysis section. Go a step beyond a simple SWOT analysis and describe your most primary risks, how you will mitigate them, and what your contingency plan is. If you don't have this section in your business plan, investors will undoubtedly grill you with questions on how you plan to deal with risk.

Keep terms consistent and be sure to PROVIDE CITATION for sources used in your market analysis. Yes, it can be a pain, but it goes a long way in showing the reader that you've done your homework.

Following a template is not a sure-fire way to write a success business plan. The outline posted here is a very good starting point--take it and adapt it, add sections, and remove sections to make the plan more relevant to your business and its operating environment. Above all, avoid using business plan software. In any business plan, your primary goals are to illustrate that you know what you're doing (strong team, market and competitive analysis sections), you know how to deal with risk, and that you are passionate about what you're doing. When writing for investors, try to avoid coming across as desperate--give the impression that whether or not you receive money from them, this is what you're doing, the investment would just make things a little easier.