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Sep 17, 2018, 10:21am
Don't Waste Time On A Startup Business Plan -- Do These 5 Things Instead
Richard Harroch Contributor AllBusiness Contributor Group
Traditionally, startup businesses draft a business plan for three specific reasons: to articulate their vision for the business, to document how they plan to solve key challenges, and to pitch their business idea to potential investors.
But what if I told you that business plans for startup companies are usually not worth the effort?
My many years of experience working with startups, entrepreneurs, and venture capitalists has led me to conclude that business plans are largely a waste of time for the following reasons:
  • They     are time consuming. Thorough business plans take a long time to     prepare, even if you use business planning software.
  • They     get outdated quickly. Your business plan quickly becomes obsolete as     you encounter operational and marketing issues.
  • Nobody     has time to read them. Prospective investors and venture capitalists     don’t usually have the time or interest to slog through such a document.     They review hundreds if not thousands of startup opportunities, so you     have to grab their attention with something much shorter.
So instead of wasting your valuable time preparing a business plan, I suggest that you do these five things instead when launching your startup:
Business plans for startup companies are usually not worth the effort. Learn what you should be focusing on instead.© bernardbodo -
1. Prepare a Great Investor Pitch Deck for Prospective Investors
Developing an engaging “pitch deck” to present your company to prospective investors instead of a business plan is the new norm. The pitch deck typically consists of 15-20 PowerPoint slides and is intended to showcase the company’s products, technology, and team to the investors.
Raising capital from investors is difficult and time consuming. Therefore, it’s crucial that a startup seeking funding absolutely nails its investor pitch deck and articulates a compelling and interesting story in the short time it has during the presentation.
  • Company Overview (give a     summary overview of the company)
  • Mission/Vision of the     Company (what is the mission and vision?)
  • The Team (who are key team     players? what is their relevant background?)
  • The Problem (what big     problem are you trying to solve?)
  • The Solution (what is your     proposed solution? why is it better than other solutions or products?)
  • The Market Opportunity (how     big is the addressable market?)
  • The Product (give specifics     on the product)
  • The Customers (who are the     target customers? why will there be a big demand from these customers?)
  • The Technology (what is the     underlying technology? how is it differentiated?)
  • The Competition (who are the     key competitors?)
  • Traction (early customers,     early adopters, partnerships)
  • Business Model (what is the     business model?)
  • The Marketing Plan (how do     you plan to market? what do you anticipate for customer acquisition costs     vs. the lifetime value of the customer?)
  • Financials (actual and     projected profit & loss and cash flow)
  • The Ask (how much capital     you are trying to raise?)
Too many startups make a number of avoidable mistakes when creating their investor pitch decks. Here is a list of preliminary do’s and don’ts to keep in mind:
Pitch Deck Do’s
  • Do include this wording at     the bottom left of the pitch deck cover page: “Confidential and     Proprietary. Copyright by [Name of Company]. [Year]. All Rights Reserved.”
  • Do convince the viewer of     why the market opportunity is large.
  • Do include visually     interesting graphics and images.
  • Do send the pitch deck in a     PDF format to prospective investors in advance of a meeting. Don’t force     the investor to get it from Google Docs, Dropbox, or some other online     service, as you are just putting up a barrier to the investor actually     reading it.
  • Do plan to have a demo of     your product as part of the in-person presentation.
  • Do tell a compelling,     memorable, and interesting story that shows your passion for the business.
  • Do show that you have more     than just an idea, and that you have gotten early traction on developing     the product, getting customers, or signing up partners.
  • Do have a sound bite for     investors to remember you by.
  • Do use a consistent font     size, color, and header title style throughout the slides.
Pitch Deck Don’ts
  • Don’t make the pitch deck     more than 15-20 slides long (investors have limited attention spans).
  • Don’t have too many wordy     slides.
  • Don’t provide excessive     financial details, as that can be provided in a follow-up.
  • Don’t try to cover     everything in the pitch deck. Your in-person presentation will give you an     opportunity to add and highlight key information.
  • Don’t use a lot of jargon or     acronyms that the investor may not immediately understand.
  • Don’t underestimate or     belittle the competition.
  • Don’t have your pitch deck     look out of date. You don’t want a date on the cover page that is several     months old (that is why I avoid putting a date on the cover page at all).     And you don’t want information or metrics in the deck about your business     that look stale or outdated.
  • Don’t have a poor layout,     bad graphics, or a low-quality “look and feel.” Think about hiring a     graphic designer to give your pitch desk a more professional look.
For additional advice, and a sample pitch deck, see How to Create a Great Investor Pitch Deck for Startups Seeking Financing and Want to Raise Financing for Your Mobile App Startup? Here’s the Ultimate Investor Pitch Deck.
2. Focus on Building a Good Prototype Product
Build version 1 of your product. Having a prototype of your product makes it easier to sell your vision to investors. It also gives you some momentum and traction and helps you recruit partners and employees. Undoubtedly, version 1 of your product will not be as good as version 2 or version 3, but you need to start somewhere.
When starting out, your product has to be at least good if not great. It must be differentiated in some meaningful and important way from the offerings of your competition‎. Everything else follows from this key principle. Don’t drag your feet on getting your product out to market, since early customer feedback is one of the best ways to help improve your product.
Of course, you want a “minimum viable product” (MVP) to begin with, but even that product should be good and differentiated from the competition. Having a “beta” test product works for many startups as they work the bugs out from user reactions. As Sheryl Sandberg, COO of Facebook has said, “Done is better than perfect.”
3. Thoroughly Research the Market Opportunity and Your Competition
Make sure you are thoroughly researching the market opportunity and competitive products or services, and keep on top of new developments and announcements from your competitors. One way to do this is to set up a Google alert to notify you when any new information about those companies appears online.
Expect that prospective investors in your company will ask questions about the market opportunity and your competitors. Any entrepreneurs who say that “we don’t have competitors” will have credibility problems. So anticipate these questions from investors:
  • How big is the addressable     market? How much of it can the company realistically capture?
  • Who are the company’s     principal competitors?
  • What traction have those     competitors obtained?
  • What gives your company the     competitive advantage?
  • Compared to these other     companies, how do you compete with respect to price, features, and     performance?
  • What are the barriers to     entry in your market?
4. Prepare Detailed Financial Projections
It can be important to prepare detailed financial projections for the business, for the following reasons:
  • To determine whether the     business will ultimately be profitable
  • To determine your cash     “burn” before you get cash flow profitable, showing how much startup     capital you will need
  • To lay out your key     financial assumptions (price per product, cost of developing the product,     marketing expenses, employee expenses, rent and overhead, gross margins,     and much more) so that you and others can test the reasonableness of the     assumptions
  • To have those projections     ready and credible when investors inevitably ask for them
Financial projections will typically be for a 3-5 year period and will include:
  • Profit and loss statement
  • Cash flow statement
  • Detailed categories of     income and expenses
  • Balance sheet
  • Underlying assumptions
Of course, your financial projections will not be perfectly matched with your actual results, but your financial projections can be revised as you move through the stages of your business.
5. Make Sure You Have Thought Through the Reasons Why Startups Don’t Get Funded By Investors
There are a variety of reasons why investors turn down startups and entrepreneurs. So understand these reasons and make sure they don’t apply to you:
  • The business idea is too     small
  • Your executive summary or     pitch deck is underwhelming
  • You haven’t thought through     the questions that investors will likely ask
  • You just have an idea and     you haven’t gotten any traction yet
  • You don’t have the right     management team
  • You don’t understand the     competition
  • There are already strong     competitors who are well capitalized
  • Your financial projections     are unrealistic
  • You aren’t convincing about     the need for your product or service
  • You don’t articulate how you     plan to cost-effectively market to and obtain customers
  • You don’t have a good     prototype of your product
For more details, see 10 Reasons Why Your Startup Idea Sucks and Won’t Get Funded.
Remember, you don’t need a long business plan for your startup. There are more important things you can do to build a successful business.
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Copyright © by Richard D. Harroch. All Rights Reserved.
This article was originally published on Read all of Richard Harroch’s articles.
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