Believe it or not, there is a big difference between a business plan and a startup plan.
The following stories come from experience and not rigid theory. I was sixteen and still at school when I started my first business in the UK. I designed jewellery and had it made and imported from Hong Kong, along with Indian and Brazilian style costume jewellery.
This was back in 1999 so the few pieces I actually sold were at car boot fairs and markets. It was fun, but not a lot came of this business other than my sister getting a huge box of stock once I was through with it all. But still I collected lessons and learnings.
Four years later, at age 20, I started Executive Hospitality, which later became taxiclub.co.uk. We created a basic website that could give you real-time taxi quotes driven by owner-drivers all around the UK. We also offered, minivans and executive cars in addition to normal saloon cars. We basically did half of what Uber does today, except back in 2003 so we were ahead of the game. We sold the company in November 2005 for an acceptable figure and it still operates today.
I took off and travelled around the world for three months before deciding to start over in bonny New Zealand. Although both experiences were helpful and I learned a lot, my fundamental mistake was having no business plan.
Without well thought out visions and strategies the businesses floundered. We had no problems working out our short-term tactics, which got us short-term gain, but we had nothing to help us attain longer term goals or even just a steady footing. Too many people out there assume that a business plan is the first thing you should do.
Don’t get me wrong, there is a place for a business plan, and it must be comprehensive, but if you are either thinking about, or have got beyond that to starting a business, then you need to begin with a startup plan. A startup plan will give you time to think about the business without being bogged down in trying to work out financials or marketing strategies when you should be thinking about your vision and initial strategy.
How do you proceed with a startup plan and what are the benefits?
The first thing you need to think about is your vision, which should not fundamentally change unless there is a complete change in direction.
My latest venture, LendYour, started out as a simple marketplace website to list holiday homes, motorhomes and boats, but that idea soon crystallised and we decided we wanted to be an international network providing mobile-first search, pricing, booking and review services for cars, vans, trucks and motorhomes — so, anything that’s driven on a road.
Our vision, however, barely changed and has always remained ‘to be the place people come to rent’. Rock solid. Do you have a grand vision for your business yet? If so, be sure to check your vision is not the same as what your product is meant to do. Your vision is what your legacy will say about you and your business.
Richard Branson’s vision for Virgin is to ‘improve society through the businesses we operate’. Some may call this idealistic, but it reminds everyone that we’re here to enhance other people’s lives. In other words don’t be selfish, help others first. Imagine if every business in the world was there to enhance other people’s lives, and their actions were held accountable by boards and shareholders.
This world would look very different. Next is your strategy, which is produced by thinking a lot about your goals and objectives. It’s expected that these change often, so don’t feel you are a dreamer that never does anything because strategy is the hardest and takes the longest. It’s also what your product is.
You should refer to your business idea as the benefit to your customer of using your product — don’t go around saying you are building ABC for the XYZ industry. Sell the benefits, not features because they are the things that a customer can relate to.
A company I have really enjoyed watching grow over the last six months is Groove. Their first description of the business focused on what they do, which quite rightly is ‘SaaS and eCommerce customer support’. It was bringing thousands of visitors to the site but did not get many sign-ups.
Why? ‘It doesn’t give me a single reason to do business with you’ was the feedback.
Groove’s team then spoke with customers, asked their advice and why they used Groove — a journey that could’ve happened at the very beginning. The outcome and new message was ‘everything you need to deliver awesome, personal support to every customer’. Conversions nearly doubled.
Perhaps building in Groove’s awesome customer support in to our software would be even more beneficial to my customers? Think about your tactics last, as they could change daily or even hourly. Don’t be tempted to think about tactics until you have your strategy nailed.
Tactics are ideas that turn your strategy into a business, which then absolutely requires a business plan, funding, sleepless nights and little social life. I decided to apply the above Groove example to LendYour by describing our benefits to target customers and asking them, ‘If this product existed, would it be important enough that you would make it one of the top priorities for you or your company this year?’
The first client feedback shifted our strategy slightly and after accepting and proposing that change he promptly said yes and committed to paying $25 a month for the basic plan. A sale! Talk about a confidence boost. It’s only at this point that you need to think about detailed financial forecasts, sales strategies and marketing plans with your team.
Must haves of a startup plan
Your startup plan should be no more than one page long, and answer the following:
1. What is the vision for your business?
A good question to ask yourself is what’s the purpose of your business even existing. Be honest.
2. Set your goals and objectives
Goals are not tangible things you can easily measure, whereas objectives are. Goals are also broad; objectives are narrow. This is how your strategies comes in to being, and are the two sentences on your Start Up Plan that you need to keep updating whenever your ideas change. Your objectives will reveal clues as to your competitive advantages too.
3. Your team
Do a SWOT analysis on them. If you do not know what a SWOT analysis is find out. At this stage your answers to each can just be one or two words. Pretend you are in a large company, then ask yourself if you would employ the team you are heading up to launch this internal project you are writing a business case for. Again, answer honestly, and write down the concerns you would have because in a few months time you may have overcome those issues and its useful to have them written down to remind yourself of the progress you are making.
4. Identify your three core markets or industries you are going to be involved in.
This is where you go looking for your target customers.
5. Identify what you can charge money for
Allow the answer to this question to influence your goals and objectives heavily. Neither of these questions has to be detailed at all, they are there for you to reflect on as your ideas change the strategy.
Once you have written this down, print it out and stick it on your wall somewhere you will see often. You are now ready to formulate strategies. Write them all down somewhere electronic and cloud-based so you can edit and add to them often.
I use Evernote that has been absolutely amazing for this exercise. Every now and then I scroll down through my various notes about objectives and goals, growth, revenue, markets, or quotes I realise how far the business and my thinking have come.
Once you have those fundamentals it’s time to start refining that elevator pitch but don’t be rushed in to working it out until you have given due time to thinking about your strategy. If you rush, you may make mistakes and the probability of you going bust will be much higher than they need to be.
Don’t be afraid of spending an extra two or three months thinking and talking about your strategy to target customers. You may have noticed I have not talked about friends and family during the thinking period.
Proceed with caution, because your ideas are going to change so often that you risk others close to you doubting your ideas and ability, which has serious knock-on effects to your confidence.
Talk to the people who would be paying customers before friends and family.
Next, if you are up to it, write about your experience somewhere because it will be extremely useful to many people out there struggling to get to startup ‘first base’. Good luck.
Nicolai Thomson is the CEO and founder of LendYour. Follow him on Twitter @nicolaithomson