10 things a startup should know before starting a business plan
Starting a business plan is usually one of the essential things business owners have in mind.
Especially when it comes to convincing investors to get funding.
But there are important things that need to be dealt with before actually creating your business plan.
To make sure you get these things right from the beginning, we interviewed our Innovation Expert & Professional Business Advisor Kai Malzer – sharing his top 10 things a startup should know before starting a business plan.
Ready to get a jumpstart?
#1 Develop a scalable business model
In the end, most companies are about making money.
Many startups begin with an idea for a product or service and the ideal customer.
However, they often lack a concrete monetization strategy or a (hopefully) scalable business model.
And in developing a decent business model, you will get a clear picture of the exact steps your business needs to take to generate revenue long term.
In addition, you will gain the ability to present your business idea in an easier to understand way.
If you ever work with business consultants, you might also save a lot of money and time by already having a decent business model.
Besides, thinking in terms of business models requires you to deal with the central functioning and success factors.
My favorite concept is the business model canvas (BMC) combined with the magic triangle (MT). Both originated at the University of St. Gallen.
The MT allows for greater openness in brainstorming. Afterwards, the BMC provides a more in-depth elaboration of your innovation.
#2 Consider state subsidies and support programs
Free money is great, isn’t it?
We think so, too.
That’s why it’s essential to us to consider state subsidies and support programs whenever we start to work with startups.
To do that, one has to take an overall view of all the financing and promotion options.
And that in times of the information overload era can be quite difficult.
To help you out, here’s a simple yet powerful advice:
A distinction can be made between state promotion, such as the Gründungsbonus, and private support programs like accelerators.
Through these accelerators founders receive a salary and gain access to a powerful network
Want to skip dealing hours and hours with researching the right funding program? We’re here to help you out.
#3 Select multiple financing options
Start-ups cost money, a lot of money, and the equity capital and potential state subsidies are often insufficient for rapid growth.
It is essential to select at least two possible financing options.
Most of the time one of the options doesn’t work out and it’s fundamental to have a plan B.
Furthermore by selecting a financing option, the business plan can be directly tailored to it.
Note: Financing via a bank would require a different business plan structure and business language compared to targeting an investor.
Some financing methods don’t even require a business plan, but it can still help with the strategy and execution.
These methods don’t necessarily have to involve banks and institutions.
Especially modern start-ups with real benefits and social media strategies can benefit from modern strategies like crowdfunding.
In fact, one of our clients, Bird Buddy, raised more than 4 million euros with their first crowdfunding campaign.
#4 Idea testing
Innovations and ideas can often be hard to understand by third parties like banks, investors, or VCs.
But data speaks louder than anything.
A great way to test the potential of an idea is to make a market test and implement the results in the business plan, which makes it way more convincing.
This process is often called the lean startup method.
By interacting with potential customers, founders can learn a lot about their potential problems.
Through this interactive approach, most startup owners will work around the most common reason for failure: Building products or services that are not needed. Or not tailoring them enough towards a specific target group.
A practical example would be to build a landing page and send traffic to the website via Google Ads, even though the manufacturing and distribution channels aren’t in place yet.
This will give a great overview of how people interact with the website and if they are willing to order. The on-demand food app Doordash started with the same concept.
They had a landing page with menus from the included restaurants looking like a fully established business, but the founders did the delivery in the beginning.
#5 Permits and approvals
Not every activity can simply be carried out.
In some cases, a permit or authorization is necessary.
In Germany, this might apply to:
- financial services
- Investment advice
- investment brokerage and many more.
In most cases, the permit is granted by the competent municipality, provided that you submit the necessary documents.
Before starting the business plan, it is essential to clarify whether permits are required and to obtain them if necessary.
Elsewise it could take months to receive the permit.
If the process takes too long, it is always an option to include a co-founder with the business’s respective license.
#6 Fundamental financial planning
Before starting a detailed business- and financial plan, the founders should overview their costs over the first three years.
In the beginning, this could be the development costs of a website or app, registration fees for the company, and trademark registration.
In the long run, wages, hosting fees, and tax consultants might be considered regular cost items.
One of the most disregarded but significant topics is the cash flow calculation.
This often leads to big solvency issues for the company.
To overcome this issue, make sure to estimate realistically how long it will take clients to pay their receivables and payables and deduct potential service fees of payment providers.
#7 Timeline and milestones
As a basis for a business plan, it is inevitable to have a distinct timeline with specific milestones to reach over the following years. This could include:
- Conclusion of the research and development
- Design of corporate identity
- Development of the website
- Trade mark registration
- Contract with supplier
- Gaining the first reference customer
- Start of the marketing campaigns
As part of the timeline, it is also vital to define responsibilities for the milestones.
Especially if the founders are starting as a team, clear assignments are crucial.
By doing this it will be easier to track the process and find out where additional help is needed.
To sum it up: Specify by when and by whom the individual development milestones are to be implemented.
#8 Reference customer
Reference customers with a strong reputation can work wonders for new companies.
Before starting a business plan, founders should think about which reference customers they would like to win and whether they already have contacts or relationships that could help them.
Reference customers could also be included into the development process of the product or service to get authentic feedback and find the right product-market fit.
It is always a good idea to implement the reference customers into the business plan to convince potential investors.
#9 Marketing and external appearance
The perfect product or service will automatically draw the attention of new customers.
That’s often the main misconception of founders and big corporations.
But in today’s time and age of attention scarcity a distinct marketing concept has to be developed.
Before creating a business plan, founders should think about the channels they want to attract new customers from and the time and investment necessary to reach their target KPI.
Therefore, the goal is to create and implement a marketing concept that is optimally tailored to the target clientele to achieve the most efficient customer acquisition and customer loyalty and avoid wastage.
For example, Fiji water made a memorable presence at the Golden Globe awards.
The model Kelleth Cuthbert photobombed every picture on the red carpet by just standing in the background with a blue dress and a tray of Fiji water.
This led to massive publicity for the company through memes or TV coverage.
Depending on your concrete guerilla marketing idea, it might be extremely cheap compared to blown-out ads and video productions.
———————— Tip ————————
A cheap and effective way to market a new product or service is guerilla marketing.
#10 Advantage over the market
A new company always has the card of the underdog.
So optimally, the founders should think about the advantages that their company offers and how they could use it to their advantage.
Examples might include flexibility, access to new technology, or owning a patent for a new innovative product.
One of the most significant advantages is always being close to the client and already working in the field that the new company will be in.
A great example would be the Co-founder of MailChimp, Ben Chestnut.
In the year 2000, he ran a design consulting business and received numerous requests from his clients to create a newsletter.
As he and his team hated the design of newsletters, he built a tool to streamline the process, and Mailchimp was born
As you can see, there are quite a few things to look out for before starting a business plan.
If you follow all the given tips, you will probably be able to overcome the initial challenges most businesses face in the beginning.
Unfortunately, there are still more challenges your company will face, even while creating the business plan.
But don’t worry. You don’t have to work through thousands of pages as we did.
You can simply give us a call, and we will help you to get your business right from the start on – and guide you along the way.
Book a call right now to jumpstart your business.
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