Business Plan

The business plan aside, the Venture’s team and their experiences in the field in which it operates is reflected throughout the start-up’s lifecycle – from the recruitment phase in which the investor examines the capabilities of the founders, to the management of the company.

An individual entrepreneur will find it more difficult to raise money and execute their business plan, in terms of both convincing the investor and strategically implementing a business plan on their own. The optimal number of founders for a start-up is three entrepreneurs, with at least one of the entrepreneurs having a technological background for product development CTO and the other having relevant business experience as CEO.

In the go-to-market stage, it is advisable to recruit the CMO marketing manager with experience in a specific industry you want to enter and be able to implement your business plan. A business plan is a dynamic document and at every stage of the entry of a professional staff member, the business plan will change according to its guidelines.

Introducing the Team in A Business Plan

In contrast to a business presentation where the team is presented in a minimalist way. In a business plan, it is advisable to dedicate about a quarter of a page to each team member. It is advisable to introduce the following topics:

• Pictures
• A role in a start-up
• Relevant professional experience that will help advance the startup’s goals
• Successes passed in the field of venture capital
• Companies in the field in which he was a partner or played a significant role

The recruitment process for a business partner is very similar to the investment recruitment process. An entrepreneur needs to convince a potential partner that their product has a future. At this stage, an entrepreneur should already have produced a business plan including extensive research and goals. As mentioned a business plan should be updated at every step and stage.

Analyzing competitors is one of the most important parts of the business plan building process. A competitor’s websites are an excellent source of information. Check out which products/services they offer, what are their marquee technologies, and at what price. Sites such as AppsFlyer, similarweb or alexa make it possible to understand a numbers of competitors’ sites and provide a means to search for information on potential customers. Some of the services on these sites are provided on a subscription fee, while others are free for use…

When analyzing competitors for a product or service, the following issues should be considered:

• A thorough analysis and description of a competing product or service
• The strengths and weaknesses of the company’s products that you may compare to similar points in your company.
• Company size and sales turnover
• Competitor’s target markets and market share
• Competitor’s marketing strategy
• Recruitment rounds and scope

The goal is to show the investor reading the business plan that there are alternatives in the market, and prove to them that you know the market, its structure, the key players and their characteristics. To summarize, you should present a detailed analysis that demonstrates that there is room for a new player in the market. Once you have establish this, you must assert the competitive advantage of your product with which you will be able to draw in and convince potential customers to use your product, rather than your competitor’s.

A business plan should also present the competitors who are not directly competing against you, but rather offer a different solution to the same problem. Amazon and is a direct competitor of eBay, but is also an alternative to Shopify. The presence of a major competitor may be an opportunity for an exit, since there have been many cases where an established company will prefer to collaborate or acquire a new competitor in the market, rather than trying to compete against it. The reason for this is because these established companies will be required to invest valuable time and resources to compete with the latest technology it offers.

After listing all the competitors, both direct and indirect, it is advised to build a table to summarize and clearly present a comparison between the existing solutions and your product. The table can be presented in both a business plan and in the investor presentation. Example table:

Beyond the table, it is important to present the competitive advantage at the concept level in the business planning process. Investors are looking for a different solution to an existing problem and are less impressed with products based on adding to existing solutions. Spend the time formulating the benefit you offer in this part of a business plan, as it can be a crucial factor in the investor’s decision making process.

A SWOT analysis is a strategic planning model that is used by an entrepreneur or startup in order to identify the Venture’s strengths, weaknesses, opportunities and threats related to the business’s competition or planning. The SWOT model summarizes the research phase and the internal aspects of the business plan such as MVP definition and the description of the Venture itself. Also the other parts of a business plan like go-to-market plan or business model, will be based on the SWOT model.

The SWOT model is intended for use in the initial stages of the decision-making process. The intention is to indicate the goals of the start-up goals and to identify the positive and negative internal and external factors for achieving these goals. In the SWOT phase it is advised to ask and answer questions in order to generate meaningful information for each category, establish the usefulness of the model and identify your competitive advantage.

It is common to assume that strengths and weaknesses are often related internally, while opportunities and threats are usually used to analyze external factors. The name is an acronym for the four parameters that the model examines:

• Strengths: The strengths of the start-up / product that give it an advantage over the competition.
• Weaknesses:The characteristics of the start-up or product that put it at a disadvantage compared to its competitors.
• Opportunities:Elements in the market that the startup can take advantage of.
• Threats:Elements in the environment that can cause problems.

When talking about building a business plan, many people use the terms “business model” and “revenue model” as if they are the same thing, when in practice a business model includes far more just the revenue model.

The business model in a business plan describes how all the factors in the company relate to one another, or contribute to the success of the start-up (customers, suppliers, employees, etc.).

The revenue model in a business plan is merely a part of the business model. The revenue model is the process by which your startup will generate revenue based on the value you provide. There are simple models such as selling the product or SaaS, and there are more complex models like selling information or affiliation. The part of calculating the TAM in the business plan and financial plan in particular, is largely based on the revenue model of the startup, so it is important to conduct research into the market and competitors in order to decide which model to use. Targo helps entrepreneurs and startup companies formulate the optimal business model and revenue model according to a comprehensive and thorough market research process.

There are some common revenue models:

• SAAS subscription Fee
• Advertising
• Billing for Advanced Freemium to Premium Features
• Payment per Use
• Price per Unit (sale of a product at a fixed price)
• Monetization
• Information Trading

As we at Targo define the monetization process in the business plan, we define how you intend to market the more advanced services to Freemium users. i.e. how do you convert free users to complementary users. Not every business plan involves a monetization process, this predominately occurs when a startup employs a B2C business model.

The Go-To-Market strategy is an integral part of any start-up business plan at the seed stage, and even Round A if the product has not yet been launched. An effective GTM strategy includes all the important components that drive the startup:
Marketing and sales, distribution, pricing, brand development and an understanding of customer needs. It provides a practical roadmap that helps reach customers, and can be applied to both new products and existing products or services.

Comprehensive planning of this part of a business plan can take up to several weeks, and its successful implementation may take between anywhere one to two years; and sometimes even longer. It is important to remember that this is a long-term approach to establishing profitability, reducing customer acquisition costs, and enhancing the customer experience.

The GTM strategy has a number of objectives, including:

• Minimizing the time needed to reach the final customer / end-user
• Cost Reduction
• Better Adaptation to Change And Innovation
• A Successful Product Launch
• Avoiding Mistakes
• Defining the Ideal Path for Growth

In order for the GTM strategy to be effective and achieve the desired results, we at Targo make sure that your business plan includes the following sections:

• Market Definition – Which market would you like to conquer?
• Customer Definition – Who do you want to sell to? Who is your target audience?
• Marketing and Sales Channels – Where and how do your customers buy your product or service? Where and how will you promote your product?
• The Product – What is the product or service you are selling? What is the unique added value you are offering to each customer group?
• Price – What is the price for the product or service for each customer group?
• Branding and Differentiation – What is the main factor that sets you apart from your primary competitors?

As part of the business planning process for entrepreneurs and start-ups, Targo builds a robust strategy for the penetration process. We believe that an effective penetration strategy is essential for informing a company’s decisions on where to compete for the customer’s attention. Our approach allows the entrepreneur to reach and adapt to the market as it is continuously changing, and allows them to improve the product based on quick and reliable feedback. The GTM program can be part of the overall start-up business plan.

Building a business plan and an effective market penetration plan are always a combination of both in-depth market research and a deep understanding of where you want to go.

A financial model is in the final section of a business plan and looks at the business model numerically. Within Excel, sheets are linked together with the help of relevant functions. This model presents a company’s financial forecasts in quantitative terms. A financial model can simulate the impact of specific variables on company performance (sensitivity analysis). In start-up companies the main purpose of the financial model is to present an expected cash flow and a required budget for a defined milestone.

The financial model consists of 8 main sub-modes, with a model of manpower divided between the three models: G&A, R&D, and M&S. These three models together with the CAPEX model constitute the total expenses of the company and the budget for the defined period.

In the business plan itself, it is customary to insert only the summary table of the financial model, with a more detailed picture being displayed in a separate Excel file. Many new entrepreneurs often try to build a financial model without performing the relevant market research and synthesizing it with a clear strategy in a written business plan. Even an investor understands that the Excel in which the financial model that encompasses everything and is built in an unprofessional way is not worth the memory it takes up on their computer.

CAPEX – Fixed Assets Investments. Technological infrastructure or infrastructure for production and development.

G&A – Derived from general and administrative expenses that include most of the Venture’s operational expenses (OPEX) and all relevant personnel from the corresponding personnel tab.

R&D – Development expenses predominately composed of all relevant research & development personnel from the corresponding personnel tab and any outsourcing expenses.
M&S – Includes all expenses from the marketing tab in addition to all relevant marketing personnel from its corresponding tab .

REVENUE – Revenue model

CASH FLOW (CASH FLOW= REVENUE– (CAPEX + G&A+R&D+M&S

Budget – Budget for 12-18 months of activity of the company.

During the first meeting with an investor, it is customary to present the activities of the Venture/Company. Since the main points need to be conveyed in a timely manner, it is customary to present the business plan to the investor via a short, professional and matter-of-fact business presentation. The presentation is in merely a tool to accompany the business plan that aims to present the business plan’s essence in a concise and convincing manner. In our experience there is no second chance to make a first impression, so it is important to enlist the help of experienced professionals. You can create a presentation in a PowerPoint or Prezi format. The business presentation should be based on a business plan. When building the presentation, the product description should only account for 10% of the presentation, with the remaining 90% discussing other topics.

If the first meeting is successful, the investor will likely request a detailed business plan as part of the due diligence process. In some cases, the investor will not ask for a business plan, but will ask dozens of questions in order to verify if you have done your homework.

More Info about investors presentation →

Investors today do not have the time to read a long and tedious document and before they express interest and invest their time, they expect entrepreneurs to send them a one-page document, acting as a sort of marketing summary of a business plan. The one-pager should contain a summary about the venture including topics such as: the product, the market, the business model, the competitors, the team, the development status and more. For the entrepreneur who wants to pique the interest of potential investors, the single-page One-Pager is the most effective way forward. It is short and concise, eye-catching and comprehensive; touching every point and while leaving the investor wanting more. The purpose of the document is to begin the dialogue process with the investor and the investment process in general. The One-Pager should be synchronized and coordinated with the contents of your business plan.

It is important to understand that the time an average investor is willing to spend to get to know your Venture is between 20 seconds and a minute and a half, at most. It is key that you treat the One-Pager as a marketing document that should generate a meeting or phone call and nothing more. The first rule for a successful One-Pager is: “less is more”.

More info about One-Pager →

In an initial engagement with an investor, entrepreneurs/developers are expected to send a one-pager, executive summary or a presentation. These documents are short, yet touch on every important point in the business plan. It is important to understand that the one pager or presentation contains the essence of a business plan. If an investor shows interest, they will ask for the full business plan or just a dozen questions. If you have not prepared a business plan, this will give the investor the impression that you are not a professional and are unable to answer all the questions.

At the meeting, the investor will examine whether or not you are truly familiar with the market, and the competitors therein, and will ask you for an accurate breakout of the required budget and what processes the investment will be used for. Building a business plan is a necessary step in the process in order for you to pass the due diligence successfully. It is also a collaborative process between the entrepreneur, or the Company and Targo’s professional team. In this process, the entrepreneurs study the business environment, brainstorm and define the business strategy of the Venture with us.

If you recently sold your previous startup for $100 million, you probably will not need a business plan to raise investment for your next venture. Conversely, if this is your first venture, a professional and complete business plan demonstrates that you understand the issues and have a real execution plan.
Entrepreneurs with new technologies too often assume that the technology will sell itself. The fact is that your job is to show how the technology will be implemented within a solution that meets the customer’s need. Additionally, it is vital to define which channels will be used for sales and which business model will maximize the return on investment. A Targo business plan provides a comprehensive answer to these questions and will maximize your chances of raising an investment.

Our advice to entrepreneurs is to start doing your homework; research the market, build a lean penetration plan and a solid financial model. Startups without a business plan is an expensive hobby for investors to have.