entrepreneurship

One of the jobs least relished by early-stage founders is the business plan. This essential document is the roadmap for the coming three to five years; but sometimes bringing it all together can feel like an insurmountable task.

In this blog, we’ll break down the elements of your business plan and show you why it’s easier to create than you might think.

A plan of two interconnected halves

A business plan has two distinct but complementary elements: the forecasts (your quantitative elements) and the narrative (your qualitative elements). The first is mostly composed of tables and graphs, the second is where you will explain your thinking.

The forecasts portion typically includes:

• Financial projections (3-5 years)
• Cash flow analysis
• Funding requirements
• Key metrics and milestones
• Market size calculations

The narrative portion covers topics such as:

• Your value proposition and market opportunity (including export potential)
• Business model and go-to-market strategy
• Team capabilities and structure
• Competitive analysis (both domestic Irish competition and international players)
• Marketing strategy
• Operations and scalability plans

How to prepare the financial projections part of your plan

You don’t need to be a financial expert to create credible forecasts. Begin with what you can control – your costs – as these are typically more predictable and concrete than revenue projections.

Calculate your costs

List predictable, fixed costs like office rent, employee salaries, software subscriptions, and insurance. Then consider your variable costs – those that are going to change based on your business activity. For a product business, this might be manufacturing and shipping costs per unit. For a service business, it could be contractor rates or commission structures.

Don’t forget to account for the one-off startup costs that you’ll need to get going – everything from initial equipment to legal services to your first marketing campaign. This exercise helps you understand how much investment you’ll need before you even make your first sale.

Calculate your revenues

Revenue projections are a little trickier, but don’t simply pick a number out of thin air (x percent of the market, for example). Smart founders work backwards more methodically. Start by researching your total addressable market size, then build realistic scenarios for how much of that market you could capture.

Break this down month by month for the first year, considering factors like seasonality and the decision-making process. Then project forward annually, creating conservative, moderate, and optimistic scenarios. Each figure should be backed by clear assumptions that you can explain and defend. Why do you expect to acquire 100 customers in month three? How did you arrive at your pricing structure? What drives your assumption about customer retention rates?

Remember that projections are, by definition, guesses. You’re predicting the future here, so your goal is to demonstrate thoughtful, logical planning rather than clairvoyance. To help you arrive at realistic projections, consider working with a financial expert who has knowledge of your business model and sector. You can find your own accountant or fractional CFO for this or get some time with a Local Enterprise Office mentor.

Identify metrics and milestones

As you build out the revenue and cost projections, important milestones and metrics will naturally emerge from your planning process. When you map out your customer growth, you’ll see at what point revenue will cover your monthly costs. That’s your break-even milestone.

As you calculate your marketing spend and expected customer sign-ups, you’ll uncover your customer acquisition cost. While forecasting revenue, patterns in customer behaviour will help you estimate lifetime value and churn rates. Your hiring plan will reveal key moments when you need to expand the team, while your market expansion timeline will highlight when you need additional funding.

These metrics and milestones aren’t arbitrary targets – they’re the story of your business growth told through numbers and will emerge organically as you think about how your business will evolve.

How to prepare the narrative part of your plan

It’s now time to write the narrative part of your business plan. Before you run for the hills, remember that all you’re trying to do is tell the story of your business in a structured way. By this point, you’ve prepared your projections and you’ve done your research (business model, competitor analysis, market validation, etc.) so it is simply a matter of getting this information written down.

You can start with a template like this one offered by the LEO to give you a sense of what to include – although you may need to add sections or move things around. That’s fine, because there is no right or wrong way to structure your narrative.

The writing process

The biggest mistake new founders make is to let this writing process stretch out indefinitely, agonising over every word and punctuation mark as though they are writing a novel. Don’t get too bogged down in the detail – your mission here is to paint the broad brushstrokes of the business and make it clear that you have thought through your decisions rather than detail every tiny task you anticipate.

Give yourself two days to complete this task – one day to get your thoughts down on the page and one day to tidy it up and ensure there is nothing missing. Block these two days off in your calendar (with a short reflection time between them) and don’t allow any meetings or distractions to interrupt your flow.

There are a couple of reasons not to let your writing time run into the weeks or months. The first is that a business plan not static but a living document – one you should refer to regularly and update as your business evolves. The second is that every funding organisation or support agency you work with will have their own template for you to use – meaning your carefully crafted plan will need to be regularly reworked into a variety of formats.

What to include in your plan

The narrative should clearly articulate your vision, the problem you’re solving, and why your solution is compelling. This is essential for potential investors or partners but also for your own clarity, ensuring that every decision aligns with your core purpose. Discuss the market opportunity, demonstrating a solid understanding of industry trends, customer needs, and how your business is positioned to succeed. A strong market analysis demonstrates that you understand your industry, target customers, and competitors, showing where your business fits and how it can gain traction.

Your business model and operational strategy should outline how you will create, deliver, and capture value. This includes revenue streams, pricing strategies, and the logistics of running your business day to day. A well-developed marketing and sales strategy will explain how you intend to attract, convert, and retain customers, covering everything from brand positioning to distribution channels. You should also define your team structure, key roles, and any expertise gaps you need to fill.

While financials are covered in your projections, your narrative should provide context by explaining the rationale behind your funding needs and how investment will drive business growth. For instance, if your projections include €30,000 allocated to marketing, your narrative should explain why this amount is needed and how it will be used to drive growth (how the sum breaks down into actions and what results you expect).

What not to include in your plan

A business plan must be easily digestible. Don’t include unnecessary fluff or overly detailed explanations that won’t add strategic value. Avoid generic statements about industry potential without linking them to your specific opportunity. Company histories or personal backgrounds should be kept to the elements that directly impact the business strategy. You also don’t need excessive technical detail – stay focused on how you solve the problem, rather than getting lost in minor specifications.

Complex financial projections or deep accounting breakdowns belong in your financial section, not the narrative. Similarly, operational details that are too granular (like day-to-day task lists or minor logistics) can be left out unless they’re critical to your business model. You should also avoid rigid long-term plans that assume nothing will change; flexibility is key for a startup!

Depending on the complexity of the business and the level of detail required, 1,500 to 3,000 words is enough for a standard plan. Don’t pad the document with jargon, buzzwords, or unnecessary appendices – stay sharp, concise, and actionable. It can take around 20 minutes to read 3,000 words, so keeping your plan under control is a way to respect your reader’s time and ensure they retain the key information you want to communicate.

If you can see your business plan as an incredibly useful tool rather than an obstacle to overcome, you’ll be more likely to revisit, refine, and use it to guide your decisions, keep your strategy on track, and secure the support you need to grow your business.

‘When Frontline say we invest early, we mean it.’

At Frontline, 70% of our investments have been pre-revenue and 60% pre-product. At Pre-Seed and Seed, there is little to be learned from intensive quantitative analysis pre-investment (woo). That said, over the past year and a half at Frontline, I’ve built a qualitative framework, designed around four key questions, to help me quickly assess the companies I meet. Together, I believe that these four questions are critical in predicting success. 

1. Can you convince me to quit my job?

The first question I ask myself is, would I quit my job at the fund and work for these people on this problem? I know, it seems like a completely crazy idea, you (the founder), are here for the VC’s money, not to get them to join your team. Consider this though; when you pitch to a VC, you are looking to inspire and excite. At our stage of investment, it’s about taking a leap of faith and believing in your vision and your team’s potential. Surely, this is also what you do when pitching talent you are looking to hire. So, if you can convince a VC to invest in you, great. If you can get a VC to actually join your team, all the better.

Sarah Tavel was so excited after meeting the founder of Pinterest that she invested and swiftly left Bessemer to join the company. Pinterest is now a $15 billion business. It wasn’t that way when Sarah joined — it was still another startup trying to break through the noise.

So, why is this is a good heuristic to access early-stage companies? The key assumption we’re making in venture is that you’re going to build a big business and the essential ingredient in building a big company is the ability to hire the best. In the early days, you’re unlikely to be competing on compensation, option grants are a long way from ever paying the bills, and the hours will likely be long and hard. The one thing that will attract top talent is your ability to tell a compelling story, display a truly unique insight into the problem you’re solving and to be overwhelmingly impressive when you first meet candidates. The team isn’t assessed just on who’s in the room, it’s imagining who might be in 12 months time.

2. From Chihuahuas to exit, can you find a big enough market to scale?

At Frontline, we track all the reasons why we pass on companies — market size, competitiveness, price, strength of team, etc. We then review all the companies we’ve passed on and check in on how they’re doing using the metric of funds raised (not ideal, we know, but it’s a simple public indicator of success).

Surprise, surprise; our data has shown us that multiple cases where we liked the team but passed on the opportunity because we thought the market was too competitive, we were often wrong. The reality is that good teams can succeed in hot markets. In those cases where we also liked the founders, but passed because we felt the market was too small, we have found that founders go on to struggle.

“When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”

Warren Buffett

Warren Buffet lives by this mantra and the data proves it.

Even if you’re good — when you go after a small market in the early days you tend to go deeper into the niche rather than expanding outwards. This can cap your upside and in venture, if we don’t think there’s a viable route to an investment returning half our fund, we are likely to pass on it. Here’s how that practically plays out, on the back of an envelope:

• Frontline Ventures Fund II: $70 million
• Target ownership at exit: 10% – 20%
• Required company value at exit: $150 million – $300 million
• B2B SaaS forward revenue exit multiples: 5x – 10x (if growing minimum 2X YoY)
• Company revenue required at exit: $15 million – $60 million
• You can usually never expect to own more than 10% of any market, so the smallest addressable market we consider for an investment is about $150 million — in reality, to find that market segment you need to look for +$1 billion markets (or be able to make the case that the market is growing or that you can create it)
• This is fund by fund. Some funds don’t care about ownership/exit multiples – they just care if they think you can build a $10 billion company and can they get a slice of it.

Larger target markets give you flexibility in the early days to figure things out. Longer-term, you must then narrow your focus as you get closer to your customer because once you go deep on a customer segment, it becomes much harder to get back to a larger market without pivoting the company.

One of the best (non-software) examples of this is Chihuahuas. (Yes, you read it correctly). Imagine you’re starting a pet-food business and you decide to start with gourmet, home-delivered meals for Chihuahuas. Let’s say it’s a $50 million market (🤪) that no one is addressing specifically, you can get a big slice of this right? Sure, there are plenty of Chihuahua owners. Plenty of them might have a high willingness to spend on their dogs’ health. But what if it turns out Chihuahua owners aren’t as loose with their wallets as you thought? You’ve gone too deep too early and now all that adorable marketing collateral goes into the bin.

What you could have done is start with the pet food market (multi-billion dollar market). Move down into the dog food market (still multi-billion dollar market). Then go gourmet. Still a huge market and very competitive. But if you follow the rule that you’re never going to own more than about 10% of a market in a best-case scenario, it is always wise to target the larger opportunity. Chihuahuas might turn out to be the right answer — but so might the Maltese or perhaps Pugs. (Analogy inspired by the very cool Butternut Box.)

3. Can you spot the shift beneath your feet?

The world is changing by the day. Yet, major shifts in platform and underlying technology only really happen once every couple of years. The shift to mobile in 2009/10 and the shift to cloud in 2012/13 spawned dozens of new unicorns. In the UK, the opening up of financial regulation in 2014 has since spawned some of the most successful breakout European companies in recent memory.

Often the way these changes empower startups is by opening up new distribution channels. Founders are up against sophisticated sales teams with great brand awareness and multiple routes to reach their customers. But what these incumbents gain in scale they lose in awareness and speed. New routes to customers inevitable open up – and founders that can find these channels early are on their way to building great companies.

One of the best examples of this is the rise of self-serve in SaaS. Founders like Melanie Perkins of Canva that recognised the early trend rode the wave of lower acquisition costs and viral distribution when it was at its peak, and has now built a huge company. Older companies such as Hubspot had to transition from an inside sales-driven growth model to a freemium product-led strategy. For a company like Hubspot, making that transition is expensive and hard. As a startup, you can do it tomorrow.

As a founder, it’s important to recognize key changes in technology and/or customer behaviour that will allow you to create new value. Was there a missing piece of functionality that previously did not exist, and that you can now leverage? Old products become bloated by features whilst new paradigms make better, faster and cheaper products possible. This is a startup’s opportunity. Think about mobile-GPS enabling ride-sharing and food delivery, or AJAX enabling fast content consumption in a browser, or accessible machine learning frameworks like TensorFlow opening opportunities for new analysis.

4. Who are your beachhead customers?

Finally, when meeting new founders, I am always looking for beachhead customers. If a product is to be adopted by new customers, a general rule of thumb — pulled from Zero to One — is that it has to be 10 times better than the existing alternative.

Of course, on day one your product isn’t going to be 10x (lol) better for all your potential customers. It’s not even going to be close for a lot of them. But customer pain is a sliding scale. For most customers, your initial product might only be a 2/3x improvement. But there will be a group for whom the pain you are solving is most acute.

Find these customers and obsess over solving their problem. When you do, nurture them. Grow a loyal and effective group of early advocates who love your solution. Leverage this group to raise capital and as you develop your offering you’ll find you’re a 10x solution for more and more of the market.

TL;DR

Early-stage VCs don’t look that closely at the product or the technology as those are rarely the things that trip up early-stage founders. It’s almost always one of the below:

• The team isn’t right.
• The market is too small.
• The market isn’t ready.
• The company is unable to find early customers.

If you’re speaking to us, know that this is the lens through which I evaluate an opportunity. I know it isn’t perfect, but I hope this gives you some guidance on how to shape your approach. And, if a VC turns you down, don’t be too disheartened. I got turned down by Frontline when I was in the early days of fundraising.

There are myriad reasons why you can be rejected; some subjective, others less so. At Frontline, we try to give constructive feedback to all the companies we engage. It can be hard to tell a founder you don’t believe in them personally, but more often than not, that’s the real reason. For founders, figuring out why VCs make the decisions they do is another part of what it takes to build a big company.

And remember, the ‘picking’ part of venture is tough. It’s as much our job to get it wrong as it is to get it right (+50% of pre-seed investments fail). But we want to partner with founders as early as possible – and as soon as you have a vision and a plan together. Ping me on finn@frontline.vc if you want to chat or just tell me why most of the above is wrong.