Like any entrepreneurial activity and business idea, a startup needs a business plan. Because it’s important? What elements is it composed of, and how can it be drawn up?
Importance of a startup business plan
The first step of a startup, and more generally of any entrepreneurial activity, is certainly given by a product or a service that meets the market demand or of which the market itself is not yet aware, especially for startups, especially innovative startups.
And suppose a business idea is the first step. In that case, the business plan gives the road that must be followed to reach the customer. It is an essential tool, like a compass, that allows the startup to orient itself and orient potential investors, or credit institutions, to raise capital.
The business plan is a road map that guides a startup in outlining its action plan by objectives and helps startups define short, medium, and long-term objectives, in a time that can include the individual year to arrive at a five-year plan for achieving the objectives.
From the point of view of investors, then, the business plan is the document that allows you to understand why investing in a startup, what risks, and what potential for ROI (return of investment).
What is meant by a startup?
Before dealing with the definition, elements, and drafting of a business plan, it is necessary to define what exactly a startup is. To do this, it is necessary to clear away some clichés. The most distorting cliché sees the startup as a generic enterprise, perhaps with a reduced share capital, small and recently founded. The reality, even legislative, is, however, quite different.
It is possible to define a startup as a temporary organization whose business model focuses on innovation. Characteristics of this business model are scalability, sustainability, and repeatability. A startup is essentially an innovative company that manages to solve a problem (of the market, of the customer) to which no solution has yet been given.
Based on the different requirements required by the legislator, an innovative startup must:
- Be a company whose establishment does not exceed 5 years.
- to have as its object, exclusively or predominantly, the project, the development, and therefore the marketing of a product or service with a high technological impact
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What is a business plan?
For startups to pitch (a presentation) their startup, it is necessary that a business plan has been conceived, studied, and drafted, which, in a nutshell, is the backbone of the business idea.
The business plan is essentially the document in which a business project is described. This document details the objectives, strategies, sales criteria, and marketing project.
Two essential parts make up a business plan:
- A descriptive part indicates the business project.
- An economic-financial one contains the forecasts of an economic and financial nature, the break-even point (i.e., the break-even point between the total costs of the Company and the total revenues) that account for the project’s profitability.
A business plan must also be focused on the objectives to be achieved. Objectives such as:
- fundraising and attracting partners
- Carry out a study of the commercial potential of the Company
- Make sure to obtain financing from credit institutions, banks, or investment forms such as equity crowdfunding.
What elements a business plan consists of
A business plan for innovative startups not only requires the presence of specific items and elements to achieve its goals. And the net of individual examples of business plans for startups, which vary by market and objectives, the following must be present:
- A cover page with logo, name, and contacts. This page is vitally important, as it is the first thing potential investors will see.
- An executive summary is a summary that will allow potential investors a glance at the contents that will be deepened. There must be a brief and concise description of the startup.
The business model must also be present within the executive summary; therefore, the method that the startup intends to adopt is to generate revenue. In addition, the business model should be sustainable: higher revenues must match certain costs.
Additional items included in the business plan are:
- The Company, the voice in which vision and mission must be described, and the needs of the market for which the Company has found solutions
- Technology and product voices answer the question: how does the Company’s product or service differ? Are there already patents or trademarks? What is evolution foreseen?
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Economic and financial plan
A series of items of an economic and financial nature close the business plan, which includes:
- The financial strategies that will be implemented
- a forecast of sales
- the overall budget
- The income statement serves for the financial statements of each Company.
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