How To Create Your Business Plan Without Excel - Part 1
Hi there.
Welcome to the workshop “How to create Your Business Plan Without Excel (part 1)”.
I am glad you made it. If you're like most founders, project managers or sales leaders, there are things which probably come pretty easy for you.
BUT
what's not so easy is the thing that nearly every startup founder, project manager and sales leader struggles with whether their business is just starting up or even being further along:
Creating a business plan which can answer the simple questions
“Is Customer Lifetime Value (CLTV) significantly higher than Customer Acquisition Cost (CAC) ? ”.
It sounds pretty logic that it should be, right?
If entrepreneurs and business managers can answer this question for their projects, they win the blessing and support of investors and decision makers. And because this in an ongoing exercise, they should be able to create or update their business plan in hours and not struggle with it for weeks or months:
Evaluating a business idea or case to see if the assumptions make financial sense.
Why is this so hard to deal with decision makers? Think about it
All of us would, right?
More than 80% of spreadsheets investors receive are either too simplified, too over-engineered and have lots of errors – these are - what they call - OMG business plans!
So, no matter how great your product is, no matter how much your early customers love it, no matter how strong your team is, no matter how much you hustle…
…you'll run into the challenge of presenting your business plan – typically while being under time pressure.
You don’t want to send another OMG business plan. You want to make sure that you take every chance to increase your funding success.
What you learn
In this workshop, you’ll learn 3 things about the best way to present your business:
Today I'm going to show you how that's done in a lean way.
Who am I?
First who am I?
I'm Eckhard Ortwein. I am the founder of Lean-Case - a full-service business planning company and we offer a fully done-for-you business plan.
Why I founded this company? I’ve lots of scarce on my body and learnt it the hard way and would love you to avoid all these common mistakes:
The process of using spreadsheet is inefficient and broken!
We recently ran a survey among experts who create financial spreadsheet on a regular basis.
Can you believe that only 21% of them trust their own spreadsheets to make sound financial decisions?
With Lean-Case, we started working with some of the best companies and investors. They understand that they have to change.
The Get-Keep-Grow Customer Lifecycle Model
A Customer Lifecycle Model is fueled by your strategy to get customers, keep customers and grow customers. You may have heard about the Get-Keep-Grow Lifecycle before and I always like to refer to Steve Blank as the key originator.
This lifecycle is also relevant to understand the key metrics along the customer lifecycle to see the forest for the trees.
From a business perspective the Customer Lifecycle is essentially about answering 3 key questions which I'll tell you all about in today's workshop:
3 Key Questions for your Business Plan
From a business perspective the Customer Lifecycle is essentially about answering 3 key questions which I'll tell you all about in today's workshop:
Essentially these questions are the same for every business or project idea be it SaaS, ecommerce, advertising whatever. If you can answer and present these questions, decision makers listen to you, build trust and eventually decide to invest, fund or support you.
If your business already has paying customers, then you've probably figured out how your sales funnel works and know:
If you are early stage or are in search for your product/market fit and don’t have paying customers yet, you might say this is not for me yet. That’s wrong!
And I love to quote Michael Gilroy from Canaan Partner – a prominent VC:
So, don’t worry. Even if you might not know your numbers yet, we have benchmarks available which at least provide you ballpark figures.
Excel Is An Investor Trust & Deal Killer...
How to Create Your Business Plan Without It!
WATCH NOW:
Discover the Viability of Any Business Idea in 20 Minutes...
4 Metrics at play
At every step in the customer lifecycle there are the same metrics at play which you have to consider
So, answering the 3 questions and applying the 4 Metrics - this is where I'll focus the rest of the workshop.
A 1-page example on key assumptions
Let me start with an example of a SaaS B2B company so that you understand what I am talking about when I say let’s show all the assumptions on 1 -page:
Let's go one-by-one explaining the funnel from left to right:
How does the company create leads?
The company uses Paid Advertising (100) and Organic Traffic (100) to create prospects using a team of MDRs. The no of leads grows by 5% per month and the average cost per lead is $200.
How does it convert leads into paying customers?
The company converts leads into paying customers across 2 stages:
How does it grow its paying customers?
The company grows its customer across 2 stages:
Answering investor questions
With the assumption in mind, let’s have a look at the results and answer the typical investor questions:
Investor Questions | Zoom in for Example |
|---|---|
BUSINESS VIABILITY Unit Economics indicate that the long-term indicator “LTV over CAC” and the short term indicator “how long does it take to pay back CAC” are critical in the first year ... |  |
.. but turn healthy over time – on average, LTV is 5.8 times higher than CAC and it takes 8.6 months to pay back the CAC |  |
REVENUE POTENTIAL This will yield a revenue potential of 24M in year 5 with 2,300 paying customers. |  |
PROFITABILITY |  |
MAX. CASH_FLOW NEED |  |
After presenting all key assumptions on 1-page taking your audience through your customer lifecycle, you can model the lifecycle in Lean-Case and immediately analyse and share results. If you are working the old way, you have the option to export and also show all the answers to the Investor Questions on 1-page
You don’t need to deep-dive into a spreadsheet only to get puzzled looks. It only takes 5 minutes, you are demonstrating that you know what you are talking about, you create trust, you increase your chance to get support for your project.
Now, here are the 2 essential steps that you have to follow to come up with such a plan:
Essential Steps
No. 1 Think about your business along these 3 simple questions:
No. 2 When building a business plan - getting, keeping and growing customers,
there are always 4 different types of metrics at play.
Most common mistakes
I’ll share the 2 most common mistake with you and a couple of tips for you to get the most out of your planning.
First, most founders and project managers do not see the forest for the trees. They start at the wrong end and list all the expenses which are required to run a business such as rent, salaries, cost for tools, and the cost for their accounting.
I am not saying it is not important to know what your expenses are to control your cash flow. But in terms of presenting your plan, this comes last. Start thinking about how to answer the 3 questions:
How do you create leads? How do you convert leads into paying customers? How do you grow your paying customers?
And then understand the key metrics to see the forest for the trees along the customer lifecycle:
If you understand this concept, you can then answer the simple question is CLTV >> CAC?
If it is not higher and you are in early stages, it is not a drama, but then please don’t make the mistake to spend money to scale your business but continue to work on your product market fit.
If CLTV is at least 3 times higher, great - spend money to scale.
Second, the business plans most people build in excel are static, don’t show the conversion dynamics of a customer lifecycle model but only show the number of customers per month.
Why is this?
Well, it is super difficult to this in Excel. Many start to build a business plan trying to show the funnel conversions and time delays but end up like my friend Aran. This is what he achieved before turning to us.
They manage to create conversion mechanics for 1 month but then get stuck if they want to build them up month.by month for customer cohorts over 3-5 years.
And - as we learned - modeling time delay is only 1 of our 4 types of metrics which are at play at every stage. For example, modelling the financial metrics which describe cost at every conversion step is another major challenge in Excel. This requires you to model all possible cost drivers in a generic way.
Last but not least, if you don’t get your model right – it becomes impossible to calculate accurate key metrics like CLTV and CAC.
