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How important is Building a Business Plan in a Startup?

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business plan

Everything is not easy.
Being an entrepreneur and writing a business plan to build a business is not easy, especially with an IT startup that could have various technicalities to consider.

Every startup company has different difficulties, but there are so many tips and tricks around the web right now to guide you every now and then. Still, some become successful when following every step, while some are not.

What could seem to be the problem? What should be done to recover from it and not make the same mistakes when starting again in the future?

Everyone needs a plan. Maybe you need it, or maybe you don’t.
But does it really matter?

Maybe you can do anything without it, but what about when you are trying to build a business? Do you think you will need any kind of plan when you start one?

Do you think you need a business plan for it? How about a marketing plan? Or a financial plan? How about creating a business model?

Unsure about it? You need a Business Plan

Unsure about your business plan
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Let’s say you have an idea. Like you want to create a website or start building mobile apps for your IT startup, don’t you think you need a plan for it? Like what it’s going to be about? What is going to be the theme? What features do you want to add for it? What message do you want to deliver? or what do you want to sell?

Not because you already want it, you don’t need to plan for it. It must be because of that same reason why you should need to make a plan especially before you build a business. Don’t you think it’s time for you to start asking yourself how to start a business?

Most businesses, planned or not, either end up becoming one of the big names of every industry in this generation, or FAIL. And that’s the REALITY. But again, it’s your choice. As they always say, either you plan to fail or you fail to plan. Anyways, if you fail, it’s either you win or you learn. It’s all about your mindset in becoming if not the best, then at least one of the successful entrepreneurs no one could have expected you to become.

It’s not just about the idea, it’s also what you are going to do about it. Like how do you want to plan for it?

Start planning from your Idea

Start planning from your idea
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Imagine a tree.

Your business is the trunk. Your people are the leaves. And the fruits are your products and services. Now, how do you think the tree would grow without the roots?

As you know, without a strong root system, the trees would not be able to stand tall, much more withstand the storms and high winds. Now, think of your idea as the roots of that tree.

Don’t you think those roots must be strong enough to hold the tree as a whole?

Recommended Reading: How to Build Your Own Product in 10 Steps?

Don’t stop with just an idea to build a business. It must be properly planned to create a strong foundation. That’s where your business plan could come in.

Besides, ask yourself:
What idea do I have? What kind of business is going to come out of it?
What message am I going to send with this idea?
What kind of product or services am I going to provide to the people?

Or more importantly,

How am I going to plan for it to build my own business?

And,

Why am I doing this? What do I want to accomplish? What do I seek to achieve?

Execute your vision and learn to prioritize

Execute your vision and learn to prioritize
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It doesn’t mean that just because you already have the idea then you’re going to directly start building your business.

Good things take time and you must learn to prioritize as you execute your vision for your startup company to be successful, or more importantly, at least have a chance to prosper in the future.

Understanding the “why” behind why you want to build your own business in the first place will make it easier and more achievable to do the things you want to include in making plans before building your business. For some aspiring entrepreneurs, it could take years of research and thoughtful consideration, but for others, it may happen too fast.

But whatever the case, an idea should take root as you’re building the foundation no matter how fast and furious the process would take or how slow and steady it would be considering that a plan should be followed when building a business.

Exceptional Businesses started from various versions

Exceptional businesses started from various versions
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Once you know the basics of growing your idea for an IT startup or any startup company, you would think that you’ll just end it in a single swift with your single plan just for that one, single idea.

But little you should know that the first version isn’t always your last. It usually takes years of carving and cultivating to make that idea into reality, and you should be mentally and physically ready for it.

As mentioned before, if things are going to go easy for you right away then that would be really great, but unfortunately, it’s not the case for most. Most of the successful founders and business owners today spent years planning and tinkering their way to reach their big breakthrough.

Let’s see.

“I am convinced that about half of what separates the successful entrepreneurs from the non-successful ones is just pure perseverance.”

Steve Jobs, Founder of Apple

“We met all these investors and they just wouldn’t invest. So we started funding it ourselves. We sold collectible breakfast cereal and did other crazy things.. We went door to door with cameras taking pictures of all these apartments to put them online. I lived in their living rooms. And home by home, in each block, communities started growing.”

Brian Chesky, CEO of Airbnb

“Timing and perseverance, as well as ten long years of real hard work will somehow eventually make you look like an overnight success.”

Biz Stone, Founder of Twitter

Do you think they planned to become the best? Or at least, one of the best?
Do you think they have a business plan for it? How about a marketing plan? Or Do they have a business model in the first place? How about a financial plan? or business forecasting perhaps? Were they able to do all these to reach the top and be one of the big names in their respective industries?

Given the right mindset. Now, Let’s PLAN!

Start your business plan
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Many of today’s most successful founders and entrepreneurs began by managing small businesses or simply building small applications for some small side projects that seemed to be interesting for them.

Some would even seem likely to come from nowhere. This gives the impression for many aspirants that success was instant but the truth is, it took them years of pain and fighting to be able to reach where they are now.

There’s no problem with experimentation especially when you create your business model or construct your own business plan with the right mindset. It could become a defining piece that could lead to something special or your much-awaited defining moment and big breakthrough.

Take for example the case of Mark Zuckerberg, the founder of Facebook, where he began experimenting with a small product he thought would be fun for him and his sisters, then he built this music app, next was the Facemash, and finally, the Facebook.

Recommended Reading: What Does It Take To Build a Food Delivery App Like Zomato and Swiggy?

When building a business, may it be an IT startup or another startup company, each step of the process is very important, and you can not just simply skip this one crucial phase, which is the planning phase. You’ll have to focus on the essential plans to give your startup the best chance of survival.

It’s best to start with creating a business model first then process it with your business plan, then move onto your marketing plan and leave your financial plan for last. You will need to know the details on how you want to launch and promote your business first before you can estimate any capital you will need to meet your goals.

The business model comes FIRST

Business Model comes first
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It’s been a question on which between creating a business model or writing a business plan comes first. So think of it this way, which do you think comes first? Is it the car? Or its engine? Do you think a car can be useful without its engine?

A business model is a blueprint for any startup companies or small businesses towards success, while a business plan contains the description of your business model. So similarly, you won’t be able to have a significant business plan without a business model just like a car without its engine as it simply would not make any sense at all.

Creating a business model involves the fundamentals of your business. You must be able to determine core elements which include product or service, target customers, value proposition, pricing, channels, customer acquisition, revenue, costs, expenditures, among others, as it defines the core of the business and answers the questions from how to start a business to how does this business make money? Like in what way will you be able to have your products and services delivered to your customers? And how will you be able to stay longer and still be competitive?

DON’T RUSH! You must take your time in creating your business model. This is the time you need to brainstorm either on your own or with your team. Jot down all the possible name ideas, product prices, ideal location, and any necessary details, but NEVER GUESS! As much as possible, DO YOUR RESEARCH! Or do a survey on your friends, colleagues, or business network to uncover the true value of the solution that your product or service offers to the marketplace. So never underestimate or overestimate anything.

You don’t want to be caught unprepared when running a business so make sure it is thorough and covers all the bases, as well as consider all possible areas of concern to create the best business model for a more comprehensive business plan.

Got your Business Model already? Now, let’s write your Business Plan

Writing your business plan
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But wait! Do you think you already know what a Business Plan is? Is it enough to just describe it as a plan for your business? Like a 50-page document that has every single intricacy and layout of your business idea?

Well, first and foremost, a Business Plan as defined by Entrepreneur is “a written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement. A business plan could also be a road map that provides real directions so a business can plan its future and helps it to avoid bumps in the road.”

Thus, this includes the vision of your company, its products, and services, the markets, competitors, personnel, marketing strategy, operations, along with financial projections pertaining to a specific scenario, etc.

Do you still want to continue?

Well, the good news is in writing a business plan, it doesn’t have to be massively long which could take much time to create and can sometimes lead to over-planning, in which case may delay you from building your own business idea.

Also, it could be boring and painstaking to create but you will always have a choice to set it into an exciting tone and motion with just the needed information in making your business fully equipped and ready to be in the market.

To guide you a little further, you will need to have a streamlined business plan at a minimum that focuses on:

  • Vision: What are you creating? And what do you think your business look like in a year? Or 3 years? How about in 5 years?
  • Mission Statement: What is the purpose of starting your business?
  • Objectives: What are your business goals? How do you measure success in achieving these?
  • Strategies: How are you going to start building your business? What is your Unique Selling Proposition (USP), or what makes your business different from the competition?
  • Startup Capital: How much do you need to launch your business?
  • Expenses: What will it cost monthly to keep your business up and running?
  • Projected Income: What do you expect to earn? Like how much? (Make sure that you back this up with research!)
  • Action Plan: What tasks and specific action items do you need to accomplish now? What are your future milestones and how do you accomplish these in order to meet your objectives?

This working business plan could be the beginning of a more comprehensive and traditional business plan that you may use to pitch investors or to apply for loans. By focusing on the important items only as listed above, you can get down to figure out the best for your business much more productively.

Still, know that there are many ways to write your business plan. You will just have to explore and see which one is appropriate for your business.

Can I do the Lean Startup Method?

Lean Startup Method
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Hmmm.. what is it in the first place?

In recent years, most entrepreneurs have been interested in an approach to build technology products. This contributes to the rise of popularity to what is called a Lean Startup. The lean startup philosophy is about reducing waste as entrepreneurs investigate, experiment, test, and iterate when developing a business or product.

In such cases, you don’t need to make a very detailed, multi-page business plan which is not dynamic and ineffective enough to keep up as you build and evolve your startup business from scratch.

To complement the lean startup method and its philosophy, a document called Lean Canvas was created as an alternative to a comprehensive business plan. Rather than a complex analysis that could take months to create for your business plan, this alternative focuses on only the most important elements of your business just like the working document which you may already have, but this is within a single page snapshot only.

Actually, it’s your choice if you follow some of the ideas in the Lean Startup method or not as the Lean Canvas can aid you to spot flaws and other problems that could be present in your business model which you might not have considered previously and now you need to focus on it.

The purpose of Lean Canvas is to fill everything out perfectly so you don’t need to overthink when creating a Lean Canvas. If you don’t have the answers or if you don’t know what to put in certain sections yet, then just leave them blank. This will not mean that you are incompetent enough to start or your business idea is not good, they’re just areas in your concept that need to be thought out or test further.

The best thing about creating a Lean Canvas ahead of time is it helps you notice many of the things that could be most impactful for your business even though you will most likely to adjust and modify your responses in it as your business progresses.

Business Plan for Marketing Strategy

Plan your Business Marketing Strategy
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Marketing is considered as one of the important aspects of every startup company. You need not have to include this in your business plan, but a separate marketing plan will be essential to help you in attracting your customers as you begin to create a revenue stream.

You may have more than one marketing plan which you can use to promote your business or startup company as you introduce new products or services while targeting new niche markets to reach and attract potential customers.

Considering that this is your first time to create your marketing plan for your business marketing strategy, you must first focus on an initial marketing plan, which should include:

  • Strategies: How do you want your marketing plan for your business?
  • Mission Statement: What is the purpose of starting your business (This is the same mission you made in your business plan)
  • Target Market: Who are your ideal customers?
  • Competitive Analysis: Who could be your competitors?
  • Unique Selling Proposition (USP): What makes your business different from the competition?
  • Pricing: How much are you going to charge for your products and services?
  • Promotional Plan: In what way are you going to reach your target market?
  • Marketing Budget: How much money are you going to spend, and on what?
  • Metrics: In what way do you plan to track the success of your marketing activities?

Determining the metrics is usually overlooked considering that it’s the last step, but you should know that it is extremely important. Don’t be in a hurry. Instead, take your time again to think through on the details needed on how to track the success or failure of the various marketing tactics or activities you use. In this case, make wiser decisions with each marketing campaign you plan to launch.

With a proper and right mindset, you will be on your way to being competent and confident enough with your business marketing strategy as written in your marketing plan.

Finalize your Financial Plan

Finalize your Financial Plan
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We are nearly finished making plans before building your business.

Your financial plan should be the last. And as they say, the last ones are usually the most important and crucial ones.

Keep in mind that this is the part where the decisions you make could either break or make your startup company when entering the market. So without the funds needed to launch and maintain your business, it will very likely to slowly die especially when it runs out of financial fuel.

Also, a fact for many businesses when each of them started is it usually took them months or years to even begin making a profit which is why you have to make sure that you have your every side of your financial bases covered until you’re able to create and maintain healthy cash flow.

Now, begin your financial plan by identifying how much capital you’ll need to start your business and where that capital will come from. Organize everything. Make a spreadsheet of all the accrued expenses when launching your business, and sample items on your list may include:

Equipment
Furniture
Starting inventory
Insurance
Office space / Store location
Remodeling work
Public utility deposits
Licenses and permits
Legal and other professional fees
Employee training
Software
Website and other digital properties
Marketing collateral
Grand opening event
Advertising for the grand opening

You must never forget to include the estimated cost of each expense and make sure to total them to get an idea of how much initial capital you are going to need to get your doors opened.

After that, do the same process focusing on your anticipated ongoing monthly expenses, and your list may include:

Your salary
Staff salaries
Insurance
Rent
Utilities
Supplies
Telephone
IT services
High-speed internet
Website maintenance
Bookkeeping or accounting services
Shipping and handling
Advertising and promotion
Taxes

After this part, you should total the estimated cost of each of the items above to get the idea of how much your monthly expenses are going to be. Then multiply that number by 12 which represents the number of months in a year. That will show you how much it will cost to keep your business afloat for one year.

The final thing you’re going to do is to estimate what your business could possibly bring in immediately, especially when it grows. Be conservative in this step and use the information on your projective income from your business plan as a starting point, then opt to add in more additional details to fine-tune your estimates.

Now that you completed your spreadsheet already, it’s possible that you may have a very clear idea of how much you’ll need to start your business, and most especially, for how long.

No matter how perfect your business model would be, or how error-free your plans were written, you still need to do some more additional research to gather information about your potential market. Additional information is needed to develop more competent pricing strategies to reach cost projections.

Again, you have all the time you need to get all the necessary information when making plans before building your business. Yes, it does matter. So utilize it well and incorporate it in your plans to make it as comprehensive yet as accurate as possible. This will lead you to the direction you were planning in the first place.

Now that you are done making plans for your business, would you like to take it to the next level? With your business idea, you can further dive in with our exclusive network of verified IT companies, we can match it with your requirements within 24 hours.

Supersourcing provides free consultation and free requirement gathering as well. No commission. No bidding. No hassle. In the era of high-end technology in this fast-moving world, we need a better platform to do the job, hence we are here. If you have any queries, we are always here to assist you. Feel free to reach out to us, and stay tuned to read more blogs and success stories of your interest.

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Mayank Pratap
Mayank Pratap
Mayank Pratap Singh Top writer at Entrepreneur.com, the startup, Hackernoon, StartupGrind | Helped 500+ founders to build awesome Web & App products, Hire Remote Engineers | 30+ funded, 6 selected in Y-Combinator | More than 50 founders from MIT DeltaV & Harvard innovation lab has used Supersourcing

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