How vague numbers-wise can a business plan be for a startup still in its idea phase?


2

Let's say I have a small team of technical and creative specialists but absolutely no one with any financial knowledge/skills, and I'm in the process of writing a business plan for an Internet-based startup, which is still in its idea phase (nothing has been actually developed and cannot be without first acquiring the necessary investment).

How vague can the business plan be in regards to financial requirements, expenses, etc.?
How vital are specific financial numbers?

Basically, can a startup business plan consist entirely of the technical and conceptual aspects of the project, or does it absolutely have to have specific numbers?

If the latter, does this mean every single startup ever absolutely has to have financial specialists on board when creating its business plan? How can technical/creative specialists alone go about creating a business plan with no financial expertise or knowledge?

Any advice would be much appreciated.

Startup Costs Business Plan Investors Internet

asked Aug 3 '13 at 05:41
Blank
Shadow Master
13 points
  • What is the purpose of the business plan? – Bhttoan 6 years ago
  • To find an investor (angel or otherwise). And while that may seem like it would make the answer to my question obvious, I'm still at a loss regarding whether absolutely all investors need exact numbers right off the bat in the business plan, and also how exactly technical/creative specialists manage to put together business plans for their startups without any actual financial expertise, if financial data is such a large part of any business plan. – Shadow Master 6 years ago

1 Answer


2

Experienced and smart angel investors:

  1. Always ask for financial numbers.
  2. Know that the numbers you provide at an early stage are guaranteed to be wrong.

So if we (or they - I have been both entrepreneur and investor) know the numbers are wrong, why ask for them? Look at them as an intelligence test. The types of things we are looking for are the following:

  • what are people considering paying themselves? Now? After they're making money?
  • do people expect to sell their product? Ever? For any money?
  • how long until this company will make sales?
  • do they expect the product to sell itself? Is there a sales and marketing budget?

It is crucially important to do a financial model. Yourself. To answer these questions. Make it really simple: revenues up top. Expenses below. How much you need in investment to cover losses. Put basic categories. This is basic addition and subtraction. If you can graduate high school, you can do basic, specific, financial numbers.

It is possible, to hire someone who will ask you these questions and then will put it into a fancy spreadsheet. It's unnecessary. Do a basic one yourself, understand every number that goes into it. Explain that it is your best guess, and how you came to it.

I have run a 48 hour startup bootcamp, where we gave teams 1 hour to do their financials, and expected something reasonable. If you give your whole team one 8 hour day, you can get a very reasonable starting point.

answered Aug 7 '13 at 09:20
Blank
Kamal Hassan
1,285 points
  • I assumed something along these lines (by using my imagination to put myself in an investor's shoes), but I figured getting confirmation from someone with actual experience in these sorts of dealings would be better. Your advice is much appreciated, especially the points that the financial data should cover. – Shadow Master 6 years ago
  • My pleasure. By the way, at an advanced level, the two key statistics for most businesses are cost to acquire a customer (sales dollars divided by number of customers added), and lifetime value of a customer (how much does a customer pay you per order/month, times the number of orders/months) – Kamal Hassan 6 years ago

Your Answer

  • Bold
  • Italic
  • • Bullets
  • 1. Numbers
  • Quote
Not the answer you're looking for? Ask your own question or browse other questions in these topics:

Startup Costs Business Plan Investors Internet