Start-up Entrepreneurs' Blog

Find Writing a Startup Business Plan Tedious? Start with a Concept Plan

April 14, 2010

Everyone tells an entrepreneur to write a business plan. Why? The act of writing the plan forces one to think about the important aspects of the business, to clarify one’s thinking, and to devise at least a rudimentary strategy to take your business from an idea to a product. Startup business plans need not be novels. They are short 30 pages documents.  Should you dive right in, start gather the information and write about your concept, product and business? No.

Start with a concept business plan, which is a much shorter document that can be taken to potential investors, customers, partners and advisors for feedback. This is an advice-only proposal that is to be shared with those needed to amke your vision a reality.  The intent is to engage in a discovery process.  It introduces the various stakeholders into the business process early.  The real opportunity in the market will emerge and the successful product will evolve over time. The entrepreneur is searching for the right product, the right customers, and the right way to market and sell the product.

Start with a concept business plan, which is a much shorter document that can be taken to potential investors, customers, and advisors for feedback.

Most people involved in the start-up community are verbally-oriented people, so don’t expect them to necessarily read the concept plan – some will and most won’t. They will expect you to speak about it. Most investors are used to reviewing executive summaries so put the concept plan into a similar format. When speaking with investors, first find out what they think of the idea. Next, most investors have portfolio companies, find out who those companies are, do some research to see if any of those companies have any similarities with your project, and ask those investors about those companies’ mistakes and accomplishments.  Once you have feedback from those who you will need to involve in your project, modify your idea and business model accordingly.  In the end, there are two aspects of your proposals you must validate before developing the more detailed business plan:  do the customers want the product (needing the product is better) and are they willing to pay for it, and is the project fundable.  

The concept plan is not longer than a five page document.  It has a product description – what are the problem and the solution.  It includes a market description – what is the size of the market, how many potential customers there are, what is the current value chain and what portion of the value chain do plan to address and capture. It has the back-of-the-envelope profitability assessment – how much revenue and what’s the profitability.  It has a resource plan – what will it take to produce this product. You may want to include a basic risk assessment. In my experience, if you can identify a risk, write a contingency plan and know how to mitigate the risk, then it’s a manageable roadblock. The real startup killing risks are those the entrepreneur didn’t even envision in their wildest dreams, they are the unknown ones.

Stakeholders have different perspectives.  There’s a difference between customer and investor presentations.  The customer cares most about the product and how it makes their lives easier or better.  Customers don’t care about the profitability or revenue projections of your business. An investor cares most about what is the return on their investment and timeframe of the return. Once you have the concept plan, you should create two versions: one for the customer and one for the investor.

As a general rule, you want to get the stakeholders excited about the proposals first.  You also don’t want to lead them in their thoughts too early in the process. You want their impressions and opinions. You want to start a dialogue, not a yes and no question and answer session.  While you want to develop a basic risk assessment, don’t include this in any version of the concept plan. Customers won’t care because they want you to solve their problem and don’t care about the risks involved in creating the product.  Investors evaluate many proposals and they look for reasons to not invest.  If they can’t find an objection, then it is potentially fundable. Even though you are asking for advice only, don’t mention risks and potential hurdles at this stage; let the investor bring up the subject.  Finally, when speaking with investors ask them what milestones you would need to achieve in order for them to consider funding the project.

The concept plan serves a few other purposes. As an entrepreneur, you want to validate you idea as quickly and cheaply as possible. It’s better to die a quick death then to endure a slow death.  There’s no point in working on a project for years that won’t work. It’s better to move on to a more worthwhile project. At the concept stage, stakeholders are more likely to be polite and agree that your idea has merit than not. If you feel you are meeting resistance at the concept stage, don’t try and swim upstream. Never fight the trend.  It’s a recipe for disaster.  Modify your concept to make it more palatable to the stakeholders.

 If you decide to proceed with this project, you should write the detailed startup business plan and write an executive summary. Not all business plans are equal. Keep it simple. Find one that works for your start up. It seems like a daunting process because most plans are structured for established businesses, the plan is more an exercise in accounting and seems as tedious as creating an SEC 10K filing.  Lastly, you should keep these stakeholders up-to-date on your progress with the project.  This update doesn’t have to be a formal meeting; it could be as simple as an email or a get-together for coffee.  If your project is to succeed, you are going to need these people again in the life of the company.

Filed under: From Concept to Start-Up

Tags: business plan, business process, concept plan, discovery process, entrepreneurship, investors, startup business plan