Start with a Compelling Idea
The soundest and most articulately written business plan will not count for much if your idea is worthless. Entrepreneurs today need to identify a problem that no one is solving and develop a product or service to fix it.
Likewise, entrepreneurs must remain open to pivoting their idea to meet fast-changing consumer demands, and the rapidly evolving pace of technology.
Facebook started out as a desktop web application. But in a famous pivot to mobile the social network acquired smartphone photo app Instagram, which has largely propelled its recent growth.
It will come as little surprise, then, that the mantra in the global innovation hub, Silicon Valley is: “fail fast, and fail often”.
But beware: tinkering with your business plan can be an ill-gotten process. While the content of the plan may — and likely will — change, the end destination should remain the same.
Facebook’s end goal is to be the dominant social media platform of the 21st century, and that has not changed with the advent of mobile technology.
Create a Review Schedule
Because markets, consumers and technology move so quickly, it has never been more important to create a review as early as possible and to hold one frequently thereafter.
Entrepreneurs should “ignore the traditional, formal cookie-cutter plans that other business planning resources offer, and focus on tailoring a plan to their company; allowing them to literally plan as they go and steer their business ahead while saving time,” Berry writes.
A good review will include a critical analysis of your online business, your competitors and your customer conversion rate.
The first step in creating a business plan is identifying your unique value proposition, and goals.
What is your product or service, who is your target market and what are your price points? This information is usually displayed under “company description” in a business plan.
In today’s gung-ho technology-driven economy, many would-be entrepreneurs simply create ideas, not business plans. They focus on rapid user growth over profit. Today’s most promising online businesses are often loss-making for several years (think Uber and Airbnb).
If you want to set up a site that doesn’t mint its profit from transactions, how else will you monetize it — through traffic-driven advertising? What does financial success look like for your online business idea?
A good business plan will include the following sections:
Markets, Metrics and Competitors
What are the demographics and users you’re hoping to attract with your online venture? And how do the costs of your product or service compare with what a user is willing to fork out?
You should list your existing competition, including a strategic analysis of what they are doing right, and wrong.
Use this section to show that you have innovative ideas that you can use to take on your competitors, and that you can avoid or overcome their pitfalls.
Must-haves include a social media and a marketing strategy — critical to show how you plan to attract and retain customers.
You must also show potential investors that you can measure your success. Online businesses can do this quickly and cheaply.
For example, a web analytics program such as Google Analytics, which is free, will track how many visitors are browsing your wares.
In addition, free web tools can track user engagement, searches, and traffic from referring sites.
Finances and Management
You need to establish the experience of your management team and list any financing or credit that you have already secured in this section.
Include CVs — qualifications and work experience — of the people who are running your online business. Be sure to make clear any digital expertise, which may help position your team as visionaries.
Do not forget to list how much capital you have — and how much you will need.
If you’re asking for equity funding in return for shares in the company, you need to provide a detailed plan for how you will spend the cash.
List what portion of the capital will be used to buy which items—equipment, marketing, or to cover payroll or other operating costs until cash flow or profitability improves.
Do not forget to provide potential backers with an idea of how they may exit. Their ambition will be to maximise shareholder value before selling, in the shortest possible time frame.
The exit will differ between each business, and each investor. Thinking longer-term can help you attract capital and ensure sustainable growth for your online business.
Other key financial data to include in this section are your expected operating costs and your accounting plan. Many online businesses prefer to save money and run their own accounting operation via a web platform such as Quickbooks.
If your startup is already running, you must include income, cash flow statements and your balance sheet. Be as specific as possible: use quarterly figures and stretch back as far as you can.
Also include a financial forecast for the forthcoming five years — an accountant can help estimate your run rate and other projections.