How to Draw a Tech Startup Business Plan and Keep Up With It
Abraham Lincoln’s plan to chop a tree in six hours was to spend four hours sharpening the ax. If something as straightforward as chopping a tree requires a plan in advance, what about launching a tech startup in 2022? However, planning alone doesn’t pay off unless combined with persistence and commitment.
A well-structured business plan is a cornerstone for any tech startup. Although coming up with an idea is the starting point, organized and planned implementation is the real deal. Despite the intense competition in the tech industry, many founders with brilliant ideas overlook the importance of a business plan and launch startups immediately, which eventually doesn’t work. There will be consequences; there always are, and exactly how Winston Churchill described it, failing to plan is no more than planning to fail.
Business plans are the driving force behind growth and success. It allows tech startups to achieve high earning potential, layout goals beyond boundaries, track their progress and gather all required resources from the very early funding stage. This article provides a comprehensive guide on drawing a tech startup business plan and practical approaches to keep up with it.
What is a Business Plan, and Why Do You Need It?
A business plan is an outlined process documentation of a company’s goals and how it intends to achieve them by laying out the roadmap for all different business aspects like marketing, finance, and operations.
Before creating a business plan, knowing why you need one is essential. Writing a business plan for tech startups helps in assessing the startup opportunities realistically, in addition to other benefits such as:
- A better understanding of the business and its objectives
- Forecast the financial needs and expenses
- Build a development strategy
- Attract investors and support fundraising campaigns
- Pitch deck to prove the startup will last and grow
- Prepare the company to face critical challenges and overcome them
- Analyze the targeted market and competitors
Drawing a Business Plan for Your Tech Startup
Now that you clearly understand what business plans are used for, it’s time to take the first step. Therefore, we’ll demonstrate the practical steps of how to start a business plan.
Step 1. Prepare a Description of the Company
A startup description is an overview of the business that answers two main questions: ”Who is the founder behind the startup?” and “What will the founder undertake to guarantee the startup’s success?”. It provides extensive details about the business approach, includes all the required elements to grab investors’ attention, can be utilized as a startup pitch deck, and usually contains the following information:
- Tech startup business name and location
- The vision and mission statements
- Long-term and short-term goals and objectives
- The legal form of ownership, e.g., LLC, cooperation, etc
- Products, services, and targeted market
- Starting date with a brief history of how the idea came up
- The startup’s strength points and competitive advantages
- A summary of founders and team members
You can never learn how to write a business plan for a startup without drafting some fundamental ideas and then developing the content gradually until it covers all the requirements and conveys the complete business information.
Most importantly, everything about the tech startup must be explained in detail in this section. As for the business structure, the registration process could be tedious so it is advisable to consult experts before deciding if it is best to start an LLC, a sole proprietorship, or a corporation.
Step 2. Create an Executive Summary
While learning how to make a startup business plan, many founders confuse the executive summary with the business description. But the truth is, it’s like the difference between the movie trailer and the movie itself!
The executive summary provides a brief overview of the business plan using short, clear, and concise language. Although it has the same structure as a business plan, information must be demonstrated briefly and straightforwardly. However, the executive summary must include the following key elements:
- Startup goals and objectives
- Products and services
- Targeted market and potential opportunities
- Competitor analysis
- Marketing and sales strategy
- Financial outlines
Step 3. Target Market Identification
The target market is the core customer base, and identifying it ensures the business is on the right track and the cost-effectiveness of marketing efforts. Knowing the customers’ needs, motivations, demographics, and other relevant information will help determine what customers want and are willing to spend. The following questions help in target market identification:
- Who are the tech startup customers? Their gender, age, profession, income, etc.
- Where are they located?
- What do they think? What are their interests?
- What do they like and dislike?
- What do they do for a living?
- Are they online users or offline customers?
The more details are known about the target market, the tech startup’s success chances increase, and investors will become more likely to support the business. Moving forward, it’s time to learn about market research in detail.
Step 4. Market Research
The market research provides deep insight into the targeted audience and the startup product-market fit. It’s one of the best methods for target market identification that eliminates the concerns about whether there is a market for the startup or not. Instead of jumping in and dumping tons of investments on a tech startup doomed to fail, market research empowers informative decision-making based on real-life input.
Conducting market research answers the fundamental questions all tech startups ask:
- Is the product or service helpful for customers?
- Does it solve a current problem for end-users?
- Will they pay that amount of money for such a solution?
There are several methods to conduct market research, such as:
- Survey: online and offline surveys are the most used form of market research
- Interview: an individual conversation with members of the target market
- Observation: observing the ideal customer behavior while using the product or service
Step 5. Competitor Analysis
As a startup, it’s essential to determine what makes you stand out from the crowd. Competitor analysis helps to figure out market positioning by answering the following questions:
- Why should customers buy the startup product or service?
- Why wouldn’t customers buy the currently available products in the market?
- How can the startup improve the current competitor products available in the market?
Answering those questions and knowing who the competitors are, their strengths, and weaknesses will allow the tech startup founders to understand how to be unique and overcome competitors effectively.
Step 6. Draw a Financial Plan
The tech startup business plan template usually embodies a financial projection and analysis for the first five years of business activity. The financial plan will ensure the startup is profitable, supporting the investment’s decision-making.
It’s highly recommended to have a reasonable and realistic financial plan away from being optimistic not to mislead investors. Moreover, there’s no need to show an exaggerated profitable projection because investors know that startups can’t make profits from the beginning.
The critical elements of a successful financial plan are:
- Capital fundraising expectations and methods
- Revenue streams to describe how the startup will generate income
- Human resources cost spent on staffing and development
- Major expenses in the form of predictions of mega payments
- Financial milestones to provide a detailed expansion strategy
Step 7. Crowdfunding as a Fundraising Method
It’s vital to demonstrate potential fundraising methods for collecting the necessary capital to launch the tech startup. Crowdfunding is an efficient fundraising method, especially for innovative tech projects, and many international platforms are dedicated to organizing crowdfunding campaigns.
However, before raising the topic, startup founders need to check different platforms and examine their advantages to decide on the most suitable one. Check Kickstarter vs. Indiegogo as two significant crowdfunding trustworthy platforms, and explain the reasons behind your selection in the financial plan.
Step 8. Draw a Marketing and Sales Plan
No tech startup survives without sufficient marketing and sales strategies. While the marketing plan promotes the startup’s products and services, the sales plan provides channels that enable customers to purchase them, such as e-commerce.
This tech startup business plan section outlines acquiring prospects and converting them into buyers. It includes the following basic points:
- A well-explained description of brand awareness campaigns
- Pricing plans and potential sales channels
- Marketing campaigns and available platform
At this point, you might feel lost with all those details, and to make things easier for you, later in this article, we’ll demonstrate the most popular software for a business plan with a brief introduction for each.
Step 9. Draw a Team Structure
The business plan should include a team structure to assign responsibilities within a structural hierarchy. In other words, the team structure part of the business plan explains who does what. For example, a venture capitalist, a marketing professional, and an engineer founded LinkedIn in 2003. Another example is Amazon, which Bezos didn’t start on his own; Besides him and his wife, he had a handful of 21 employees to help kickstart the project; a software engineer, a catalog specialist, a merchandise website editor, an IT director, an information architect, a marketing specialist, and others on the operations side of the business.
A standard organizational structure of a tech startup consists of the following:
The members of the board of directors must be listed in the business plan. Each one of them must be introduced by name and board position. Additionally, provide a background including education, experience, skills, etc. Adding an appendix with the executive directors’ resumes is a plus.
Investors will be interested in the management team and their previous experience in the tech industry. Therefore, provide a detailed description of their skills, responsibilities, and proven track record of prior work.
The startup team will consist of specialists and professionals whose respective skill-sets complement one another. A tech startup team usually includes graphic designers, inbound marketing experts, and expert coders. Make sure to present their professional experience and the merits of each one to convey the value they add to the business.
Following, we’ll talk about the best software for creating a business plan:
Software to Help You to Write a Business Plan
Business plan software walks users through each section mentioned above and provides expert advice about the overall document. Here is a list of the top 3 software we recommend for this purpose:
Liveplan is software that provides a modern, rich template business plan with a superior user interface, easy-to-use features, and various options.
- Create as many business plans as you want
- Utilize a vast library of 500+ business plan templates
- Export your business plans ar Word or PDF files
- Build a creative pitch executive summary
- A step-by-step practical guide for software users
- Pay $15 per month for the annual plan
- Pay $18 per month for the six-months plan
- Pay $20 per month for the monthly plan
Enloop creates simple and fast business plans. It’s dedicated to creating business plans with automated text writing, financial forecasts, and real-time performance scores.
- Generate texts automatically and customize them later
- Generate editable financial statements
- Analyze and compare the financial performance
- Identify the business plan issues with pass and fail reports
- Utilize the 7 days free trial to test the platform
- Pay $19.95 per month for the detailed plan
- Pay $39.95 per month for the advanced performance plan
Gosmallbiz is a multiple business management tools platform. For tech startups, Gosmallbiz is an excellent choice as it offers not just business plan making but also access to business continuity planning software to create a road map or build a website and other features.
- Many business-plan templates relevant to the tech industry
- User-friendly business plan building wizard
- Free website building tool and hosting
- Library of business documents
- Advanced dashboard for digital marketing
- Library of helpful business courses
- Pay $39 per month with no contracts and a free cancellation program
Starting a new tech company is a thrilling journey. But to get your startup on the road, you must build a tight and concrete business plan and stick to it. Follow the tips mentioned above to score a high-quality one. If you don’t have time or think it’s hard to keep up with all writing and research, you may use one of the recommended business plan software above.
Heed Churchill’s advice and plan for your success, not failure. Then spend time preparing and sharpening your ax before moving to the next step and boosting your startup.
Gohar Sokhakyan. Gohar is a content manager and an SEO expert. She helps in creating and spreading content in a marketing niche. In her free time, she likes touring, sightseeing, and taking landscape and minimalist pictures.