A business plan is a long formal written document that talks about the founders or executive team’s vision for the company and how they plan to achieve that vision.
Business plans are a huge amount of effort for a startup company that isn’t really selling to customers yet, might not even have a product, and still haven’t really found product market fit.
I don’t think that a startup should spend the time writing a big long drawn out business plan until they have started to feel product market fit. I think the time is better spent on other tasks like developing the product, using a lean canvas, researching the market and potential competitors.
Develop the Product
Start small, build a version 1.0 that will incorporate the minimum number of features that you need to launch. Version 1.0 won’t be perfect, it will have a lot of rough edges and bugs it’s really important to launch it fast and get feedback from real users.
The “minimum viable product” should be something you aren’t proud of six months after it’s launched but it should allow you to collect feedback.
Take the time and build something that your potential customers will love, think about a competitors product and make it slightly different. Slightly better can be good enough to get people to try as long as you aren’t selling enterprise software.
In my blog post about having a Product Mindset there’s a number of good points and strategies of how to start doing this.
What is a Lean Canvas?
A lean canvas is basically a 1 page business plan template that is really similar to the Business Model Canvas. It’s better optimized for startups and is much easier to maintain.
I think there’s a lot of potential benefits to the lean canvas: it’s faster to produce, it’s easier to read, and it can be a lot more effective when pitching to investors.
It’s much faster to produce because you can easily fill it in during an afternoon, it’s easier to read because it’s literally only one page which forces people to be clear, concise and to the point. I find it easier to use with investors because it’s already basically covered your pitch slides.
Researching the Market & Competitors
It’s really important that before you spend a lot of time building a product that you understand who your customers are, who your potential competitors are and how you will be different.
Every company has potential competitors; for a lot of SaaS business models Google Sheets and Excel are potential competitors. At Spinify, these were two of our largest competitors because they “cost nothing” as some people told us.
Are there potential partner opportunities? Partners have the potential to bring in a lot of revenue if they are cultivated correctly. Be cautious though as they can also be a huge time suck.
Business plans are outdated and really unnecessary for a startup that hasn’t yet found their way. Start with doing a lean canvas and constantly improving upon it as you learn more.