Planning is useful. Plans are most often useless. Especially in startups.
A startup is trying to be a small business and the difference is uncertainty. There is so much uncertain that to try and write a business plan, even with ten MBA’s and PHD’s, you’d still be left with a laundry list of assumptions.
That being said, the process of planning is important and my suggestion is to scale your planning with your business.
- Before you start – keep it very simple and do a one page business plan, business canvas or my version of the canvas. Mick’s Focus Canvas
- Discovery phase – Use your canvas until you have spoken to at least 5 customers and done at least 5 experiments. After that, start a brand new canvas. Don’t edit the old one.
- Validation phase – Do a pitch deck to present, not to read through. Start with the Universal Pitch Deck and make sure all questions are answered satisfactorily. Make sure it flows as a story and there are no gaps. It is OK to say that an area needs work.
- Efficiency stage. You can either do a pitch deck to read through, as this will lead to a better flow, or you can do a 5 page business plan. No longer. Most of this should be dedicated to how you are going to make it efficient and your current hypothesis on scaling. Plus capital requirements. If you are raising more than $1m at this stage, you might need to refer to this as an Information Memorandum or IM in Australia. It’s a non-audited investor document.
- Scale stage. If you are looking for real scale capital (which means that 90% of the money raised will be going to growing sales or customer acquisition) then you might need a 10-15 page business plan or IM. You’d be raising $2-10m at this time.
Important note. A business plan will never get you funded. It will only stop you not getting funded. Does that make sense? So if you have a good plan it might answer all the questions an already interested investor has and show to them that you’ve thought it through.
Here are some amazing decks on how to raise money and what you need to show;