Many entrepreneurs still overlook the importance of a technology startup business plan. In a space as competitive as the tech industry, a lack of preparation will surely pave the way to disappointment.
Instead of diving in without any concrete strategy, a plan provides a foundation for sustainable business growth.
In this article, we’ll explore the essential elements of a tech startup business plan, and provide the insights you need to create a plan for success.
What Is A Business Plan?
A tech startup business plan is a document that details the premise of your technology business, summarizing vital financial objectives and operational goals, as well as details on how you will accomplish these goals.
It’s a road map that describes what you intend to do, and how you intend to do it.
A typical business plan will comprise the following seven elements:
- Executive Summary
- Company Description
- Market Research
- Description of Products and/or Services
- Management & Operational Structure
- Marketing Plan
- Financial Plan
3 Reasons You Need a Business Plan
Before we dive into the individual aspects of a startup business plan, let’s first consider why you need one.
Just what are the benefits of a business plan?
1. It Offers Greater Clarity
Having a business plan will give you a much better understanding of your business and the objectives you are trying to achieve. Even the most basic technology startup business plan example will seek to define your goals in more objective terms.
For example, you can set specific targets for website traffic, sales volumes, or profit margins. This makes it easier to track and measure success and aligns your decision-making with sales and marketing initiatives.
2. It Increases the Chances of Success
A report from the Harvard Business Review found that companies with a business plan are 16% more likely to succeed.
Furthermore, companies that have a business plan also enjoy higher growth rates than companies without a plan.
3. You Are More Likely to Get Investment
Angel investors and venture capitalists aren’t in the habit of making bad bets. When they part with large sums of money, it’s a carefully considered decision they base on the likelihood of earning a positive return on investment (ROI). When you have a business plan, you give your startup strategic focus, which helps you create an identity that is built to succeed. This makes for a more attractive prospect in the eyes of investors, so it’s easier to raise capital for your startup when you have a plan.
How to Write a Business Plan for Your Tech Startup (7-Steps)
So, now that you understand the motivation behind creating a tech startup business plan, it’s time to see how it’s done. By including the seven elements below, you’ll have a plan that gives your company a much stronger footing.
1. Executive Summary
The executive summary is, without a doubt, the most critical element of your tech startup business plan. Despite this, a lot of plans fail here because the summary doesn’t captivate readers. If you can’t hook prospective investors, partners, or employees with your executive summary, they may never read the rest of your business plan.
Source: The Balance
This section should be compelling yet concise, giving people enough to understand what makes your startup unique, and how it will be able to offer solutions in an existing, competitive market.
While you want to keep it brief, there is a lot to pack into this opening section of your business plan. Here are the crucial components of an executive summary:
- Business Model - What is your product or service? How will you make money?
- Target Market - Who will benefit from this product or service?
- Business Opportunity - Why do consumers need your product or service?
- Marketing Strategy - How will these consumers learn more about your product or service?
- Competition - What other companies are competing for market share?
- Goals - How will your startup transform the marketplace with this product or service?
As the executive summary is such a vital aspect, it’s a smart move to write it last. By waiting until you have finished the rest of the business plan, you can draw from the other sections to craft an excellent executive summary.
2. Company Summary
The company summary essentially boils down to a single sentence, otherwise known as a headline statement. When it’s done right, this summary can be the perfect elevator pitch to capture the imagination of would-be financial backers or partners, and it will serve as a natural lead-in to your more detailed business plan.
Source: Gusto (credit: LivePlan)
The company summary or headline statement should do the following:
- Give people a brief overview of what your company does.
- Communicate the value you offer.
- Highlight the opportunity in the market.
Here is a good template to create your company summary:
<Your company> is a <type of business> who sells <product or service> to <target customer>, who needs <solution>, but doesn’t get it from <competition>.
Don’t worry if you can’t create the perfect summary now. When you develop your business plan, you will get a better understanding of what this headline statement should be, and then you can refine it to reflect your vision and value proposition.
We’re sure you have a great idea, but that’s no guarantee that everyone is going to love it as much as you do. No matter how good you think your startup may be, you still need to conduct proper market research to learn more about your ideal customers and competitors.
Identify your Target Market
Without a viable market for your product or service, your business is doomed.
Many startups have failed quickly because the owners were so obsessed with their own product that they were effectively blind to the fact that nobody else cared about it.
Source: CB Insights
Initially, you can adopt a broad scope to get a sense of your total addressable market (TAM), which is the potential revenue opportunity your new product or service could generate. Of course, with the competition, and changing consumer interests, it’s unlikely you will dominate the entire TAM.
Once you have this broad idea, you can hone your sights to go more niche. While this presents a smaller audience, it is more effective. By narrowing your targeting, you can market to a more engaged audience that will be more receptive and likely to purchase your product or service.
Consider the following factors when segmenting your audience:
- Demographic - What age group? What gender?
- Geographic – In what country or city do your prospects live?
- Behavior - What websites/blogs/news sources do they use? What are their purchasing habits? What retail sites or brands do they buy from?
With in-depth data analysis and evaluation of your prospective customers, you can create detailed buyer personas that help you refine your marketing strategies.
Perform Competitor Analysis
During the market research stage of your tech startup business plan, you should also carry out a thorough competitor analysis.
This will help you determine the key differentiators between your company and the competition.
Ask yourself these questions:
- Why should people choose my product or service?
- How can I improve on the existing solutions in the market?
- Why do people not already buy the products in the market?
By thinking about current trends or flaws in existing products, you can identify opportunities for innovation so that your business can connect with customers on a deeper level.
Knowing your audience is crucial, and therefore, your business plan must demonstrate a deep understanding of your target market, and your competitors.
3. Description of Products and/or Services
Here, you must highlight the link between what you are offering, and what people need, so you can prove that people are ready and willing to pay for your product or service.
Research Problems in Market
It helps to conduct some face-to-face research, asking potential customers about the problems they have. Don’t try to usher the conversation in any direction or shoehorn their answers to fit your product – instead, look to learn from their honest responses about the solutions they need.
You should do this research before creating the product. After all, it makes more sense to create a product for an existing problem, instead of trying to find a problem for your product.
Tailor Product to Problems
After doing your research on the existing problems in the market, trim your list to focus on a few of the most important issues. Describe how your product or service will be the ultimate solution to these problems.
For instance, if people believe the existing solutions are too expensive, you can offer a product with a more attractive price point.
By matching up consumer problems with specific solutions, you can develop a product or service that has a more significant value proposition.
4. Management & Operational Structure
The next stage of the traditional technology startup business plan template delves into the people that make up your company. You must highlight the strengths and experience of your existing team, as new partners effectively invest their money in the team as much as the business idea.
Ideally, your team will consist of several experts whose respective skill-sets complement one another. For example, your tech startup may have a coder, a graphic designer, an inbound marketing expert, and a sales professional. Discuss the merits of each team member to convey the value they add to the business.
You can also speculate about prospective new hires and the key attributes you will seek in future team members. If you haven’t already got a chief financial officer (CFO), it’s a smart move to mention adding one soon. This will add backbone to your business plan by reassuring people that you have good financial sense.
Here, your plan should clearly define the organizational structure of your startup. For now, it may just be you and a couple of business partners.
However, by including a graphic that visualizes the structure you intend to build, people will get a clear understanding of the distribution of power and chain of command.
For example, it may look something like this:
Having a hierarchy prepared before starting helps prevent any debates about who is in charge of each department, and makes it easier to understand who reports to who.
5. Marketing and Sales plan
No tech startup business plan would be complete without mentioning the marketing and sales strategies you intend to use.
To clarify the difference, marketing channels are used to promote your business, and its products or services, whereas sales channels are the mediums that enable people to purchase those products or services.
You may only have one direct sales channel to begin with, such as an online e-commerce store. Make sure you explain it in your business plan.
In this section, you must detail how you will acquire leads and customers.
At the base level, you should do the following:
- Launch a company website
- Develop strategy to get organic traffic (i.e. visitors from search engines like Google)
- Develop a PPC strategy to get immediate online exposure for your most important product/service keywords
- Develop channel partnerships
- Build an email subscriber list
Over time, you can use marketing to nurture stronger customer relationships, which in turn, help you build an audience of loyal followers that will, hopefully, become customers.
The marketing section of your business plan will need to account for several factors, including your goals, risks in the market, and your budget. Which brings us to the final aspect of your tech startup business plan.
6. Financial Plan
Lastly, any good business plan must include pertinent details about your company budget and sales goals.
This can be daunting for many new entrepreneurs and is all the more challenging when you have no balance sheets, cash flow reports, or even any stable income on which to base your projections.
That being said, it’s still possible to make educated projections – so long as you have done solid market research.
When it comes to financial matters, your business plan should include details about:
- Revenue streams - how will the company generate income?
- Major expenses - What high costs do you anticipate in the year ahead?
- Salary demands - Are you still bootstrapping or are you and the partners taking a salary? If so, how much?
- Financial milestones - Detail your expansion strategy by considering future hires or store openings that will impact the books.
Many startups aren’t profitable in the first year. Your financial projections should maintain a long-term view for success, keeping ambitions realistic and honest. That way, you’ll be able to produce a more accurate break-even analysis.
With these long-term projections, you must consider the financial impact of expanding. You may be making more money in Year 3, but opening a new store will set you back.
Keep everything in perspective and make sure you don’t set yourself or your investors up for any nasty shocks down the road.
5 Tech Startup Business Plan Templates
When you have all the elements above in place, your business plan will be in good shape. However, presentation matters. If you want to make the best first impression, getting creative with your technology startup business plan template can make a big difference.
Not only will your research and expertise shine through, but you will have a visually stunning presentation that catches the eye of investors.
Here are five tech business plan examples to inspire you.
Business Plan Infographic PowerPoint
This plan allows you to present in-depth market analysis, statistics, and projections in a professional visual infographic. With several hundred editable slide options, it’s well worth the $16 fee for the license.
Emaze Business Planning With Analytics
This is more than the average technology startup business plan template. Emaze has a diverse array of creative collaboration tools, making it easy and enjoyable for teams to create unique plans together from any of the built-in templates. Furthermore, you can incorporate analytics, which is perfect for impressing investors. That said, $19 per month for the premium version may seem a little steep for some small businesses.
Lean Canvas 1-Page Business Plan
A tech startup business plan doesn’t need to take weeks to create. In fact, with this template, you can have a basic – yet brilliant – business plan all together on a single page in just 20 minutes.
Source: Lean Stack
For $15, you can access the full array of colorful slides in this presentation, which are all customizable to your needs. This template includes many ready-made aspects of the typical business plan, such as SWOT analysis, competitor analysis, and project timelines.
This is another user-friendly tool for creating short business plans. You enter the information, and then LivePlan will generate a one-page plan in an infographic style.
Make Your Tech Startup Business Plan a Priority
It’s not enough to have a great startup idea.
If you want to stand out from the pack, secure investment, and build a successful company that can earn real profits, growth, and customer loyalty, then you absolutely must have a solid tech startup business plan.
It’s time to create yours.
Still sounds complicated? Find out how MassChallenge’s startup accelerator programs can provide the guidance and resources to get your startup off the ground.
This post has been updated from the original published on 07/16/2019.