I've been approached by some investors who want to invest in my startup. They've asked me to put together a business plan - listing costs/revenue etc. Do I include my salary costs in this or do I assume that I won't be taking a salary? Any feedback/reading material will help!
Ask HN: How to write a business plan for an Internet startup?
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Re: Ask HN: How to write a business plan for an Internet startup?
#2I just took a 10 week entrepreneur course called FastTrac, there are many local versions of the course throughout the US. I took a version in NYC. The course met once a week for 3 hours and was a great networking and social gathering. It was taught by a Professor at Fordham University who has his own startup company and used to be a VC.
The goal of the course was to teach you how to run a business and complete a working business plan after 10 weeks. Each class had a guest speaker and round table discussions. They focused on a different topic every week: market research, sales, accounting, legal needs, financial projections. I highly recommend the course if you want a crash course in how to write a business plan.
Re: Ask HN: How to write a business plan for an Internet startup?
#3I think that depends on if you need the salary for the timeframe in your plan. The investors want to make sure you'll be around to see the startup succeed so unless you're independently wealthy (or at least have enough to cover yourself for a few years) I'd include it.
Re: Ask HN: How to write a business plan for an Internet startup?
#4A related question, how much is a reasonable salary for a startup founder? Do investors usually assume the founders will be living in squalor, eating noodles and paying themselves nothing until profitability, or are investors usually open to founders that have existing financial commitments - family, mortgage etc.
Probably varies massively, but I've often assumed that investment often requires you don't take a salary, or very much at all anyway.
Re: Ask HN: How to write a business plan for an Internet startup?
#5Good business plans are tough. I was taught at Northwestern by a very successful entrepreneur how to build the presentation, business plan, and financial model.
You need to cover the basics. Here's what my last one covered:
- Executive Summary
- Project Information
- Company Description
- Market and Industry Analysis
- Marketing and Sales
- Operations
- Management
- Capitalization and Structure
- Development and Milestones
- Financial Projections and Models
- Summary and Conclusion
It's no easy matter. This was a 30 page plan. I'd love to talk about the breakdown via IM or skype; it's just too much information to put into one comment.
Re: Ask HN: How to write a business plan for an Internet startup?
#6While I realize much of the capitalist world still operates this way, I'd be hesitant about anyone who asked for a business plan. While a business plan isn't entirely a waste of time, there's just so much of it dedicated to pulling meaningless numbers out of your ass as to be an exercise in futility, and it gives them something to be pissed at you about later if you miss your fictional quotas.
And if I even heard the phrase "pro forma" I'd run.
Re: Ask HN: How to write a business plan for an Internet startup?
#7I've written more business plans than I care to think about. This is my experience:
1) A business plan is a marketing document. Usually you are using it to sell your business to banks, investors or partners. You have to think of your audience when you write it. An investor likes to see projected revenues that are high and don't mind that there's a risk - banks are the other way around.
2) Don't use business plans as a plan of how to run your company, write a one page strategy note instead. I have never seen a businessplan that was followed 100% and turned into a successful business. Everything changes fast in a startup, and you have to adapt accordingly.
3) Make sure you don't write something in your businessplan you can't honor. Investors and banks will look at it and blame you if they invested money and you don't live up to what you have written. Make sure to have escape routes. (If this and this market condition is true we will do such and such, if it isn't we can't do jack shit, we expect to do such and such but require this or that to reach these lofty goals) This will give you leverage and deniability in later negotiations.
4) Make sure you use a lot of sources to underpin and validate your assumptions (Gartner projects that within the next five years this trend will do something, making it inevitable that we will make loads of money since we're currently the only ones in this business) This will lend you credibility.
5) Make good budgets, and talk about your assumptions in the business plan. Budgets are the first thing investors look at. Particularly the assumptions behind the numbers.
6) Beware of investors that think everything in your business plan is a road map that simply needs to be followed in order to attain fame, glory and fuck-you money: They don't know what they're talking about.
Re: Ask HN: How to write a business plan for an Internet startup?
#8While I realize much of the capitalist world still operates this way, I'd be hesitant about anyone who asked for a business plan. While a business plan isn't entirely a waste of time, there's just so much of it dedicated to pulling meaningless numbers out of your ass as to be an exercise in futility, and it gives them something to be pissed at you about later if you miss your fictional quotas. And if I even heard the…
The purpose of a business plan is to show that you've given some thought to how you'll run and grow the business. Anyone who thinks that's an exercise in futility will have a hard time getting funding.
If you have an idiot investor, sure they might be pissed at you because of missed quotas, but you can also use them to look at your cash flow. If miss my Q4 quota by 30%, does that cause me to go bankrupt in Q2 this year? If I've spend the time setting up a cash flow budget, I'll know ahead of time, and can plan accordingly, if not, some day you're just going to hit a wall.
A business plan is basically a collection of things that are pretty smart to think about and write down. Things can change, and should change, but that is also easier with a business plan - you'll update it, and that'll give you an idea what else you need to change to accommodate the new environment.
Taking things as they come may work reasonably well for a 1-2 person setup, paying the bills with on-the-side consulting, hoping to go bootstrapped some time, but once someone is ready to dump real money in your lap, I'd be very hesitant about anyone being quite so lax about the sense in putting to paper what you're going to do with that money, and how the investor can hope to get paid.
Re: Ask HN: How to write a business plan for an Internet startup?
#9I'll second mattmaroon's comments and say that you're probably barking up the wrong tree. You should try to self-finance or go after love-money (family and friends) first. Once you have traction and revenue a commercial or short-form business plan might make more sense - until then it's all wishful thinking.
With that said I have found SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis to be a useful tool...
Cheers
Re: Ask HN: How to write a business plan for an Internet startup?
#10I've written more business plans than I care to think about. This is my experience: 1) A business plan is a marketing document. Usually you are using it to sell your business to banks, investors or partners. You have to think of your audience when you write it. An investor likes to see projected revenues that are high and don't mind that there's a risk - banks are the other way around. 2) Don't use business plans as…
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