Practical AI for Everyone

Why bother with business plans when “agility” is the celebrated “secret” to innovation? Spoiler: They go together. A thorough, persuasive business plan is just as important for your venture’s success. It reduces uncertainties and wins you buy-in from needed stakeholders (investors, partners etc.).

In this (longer) “read” we’ll dispel common myths around business plans/proposals (“useless bureaucratic relics”) and I’ll give you step-by-step instructions to write it. We’ll cover all important chapters like defining your mission, relevant market trends, projecting financials, executive summary etc.

For each chapter, I provide you with practical questions, writing tips and “sample snippets” from a case study of a (fictional) AI startup. This should inspire you to write your own business plan. Finally, we’ll discuss the “art” of polishing business plans for the right “look and feel” and using innovative AI tools to streamline the entire creation process.

FYI: These concepts are useful for start-up entrepreneurs and corporate intrapreneurs as well as for AI and non-AI initiatives. When a “corporate innovator” pitches their ideas to executives etc., the business plan is often called “business proposal”, “board paper” etc.

Table of Contents / Summary

Why You Should Care About Business Plans

Done right, the business plan can be the backbone of your successful venture (or a massive waste of time, if done wrong). It shouldn’t be a suffocating corset but provide a roadmap to keep you on track with your startup or project. Before we get to the “how-to” let’s first have a look at the 3 key reasons “why” a well-made business plan can make the difference.

First, this plan is your venture’s compass. It enables rational decisions and allocation of scarce resources based on data rather than hunches. It helps you focus on what matters, navigating the “unpredictability” of innovation, without getting overwhelmed or distracted. This is particularly relevant for AI ventures as this field is volatile, uncertain, conflictual and ambiguous (“VUCA“).

A structured, methodical approach helps you avoid getting lost in all the hype, myths and poor planning. Otherwise, you’re setting yourself up for disaster.Strategic, process-like thinking is the antidote to this chaos. It helps you and your team stay aligned and work in unison towards a shared mission. Articulating your vision, deriving goals, milestones and strategies to achieve them is at the heart of business planning. Doesn’t sound too “useless”, right? It even gets better.

Second, a thought-out business plan is instrumental to manage your venture’s opportunities and risks proactively. Anticipating events, whether good or bad, lets you devise contingency plans early enough. This gives you a higher degree of agency and makes you adaptable in the “erratic” entrepreneurial arena. Put pointedly, it lets you be a hammer rather than a nail. Again, particularly the (Gen)AI industry is “full of surprises”…

Third, it’s a powerful “communication tool” to show your key stakeholders (strategic partners and financial investors) that you understand the good, bad and ugly of your business and market: This is a key criterion they use to decide whether to work with you. Show your stakeholders that you have done your due diligence – and are not just trying to ride the current AI hype train. That’s how you win them (rightfully) over and get what you need (funding, strategic partners, mentors etc.)

After all, that’s why you’re writing such an exhaustin-… -ive… document. Keep in mind the wise words of Eisenhower, confront the future and surmount any obstacles that arise: “Planning is everything, the plan is nothing.” Consider your business plan a “living document” and revisit the planning process regularly – i.e., whenever there are significant changes in your business/market.

Writing Your Business Plan/Proposal Step-by-Step

The following sub-chapters follow the typical structure/chapters of a business plan/proposal (which you may adapt to your individual situation). This makes sure that you cover all necessary aspects and can present a coherent, persuasive narrative to your stakeholders.

Chapter 1: Define the Problem and Define Your Mission

Purpose of this chapter:

For your venture to be valuable and attract investors or partners, you must show that it solves an important problem (better than alternative solutions). Use this chapter to prove that you identified and validated a gap in the market that you want to fill.

Follow these guiding questions:

• What specific need or market gap does your venture aim to address and for whom?
• Why is this problem “worth solving”, i.e., what are its implications / what would happen if it remained unsolved?
• What are the driving factors behind this problem (#FiveWhys)?
• How is the problem currently solved and why is that insufficient?

Addressing these questions, follow these tips:

• Conduct thorough market research: Identify “pain points” and unmet needs by analyzing your target market, talking to potential clients and examining existing solutions.
• Validate the problem empirically: Use factual evidence and examples to prove the problem’s existence and urgency. Avoid falling for the bias/assumption that “it’s universally accepted”.
• Tie it all together in a captivating, clear and concise mission statement: Your mission statement should encapsulate your business’s purpose, values and commitment/focus to solve that problem. Use a standard template or try my dedicated ChatGPT prompt.

Example snippet for a (fictional) “food delivery platform” business plan (of course with a fancy AI-powered recommender system under the hood):

“The problem we address is that professionals have a tough time finding convenient yet healthy meal options […]. Our mission is to promote a more balanced lifestyle without compromising convenience by providing nutritious, tasty and easy-to-make meals for busy professionals […].”

Chapter 2: Showcase Your Winning Value Proposition

Chapter’s purpose:

Your innovative (AI) idea/solution is the centerpiece of your business plan and startup. Here, you present your value proposition as the answer/”puzzle piece” to the question/“market gap” introduced in the first chapter.

Guiding questions:

• What exactly is the use case of your product or service in plain terms? How does your solution specifically address the identified market gap/problem?
• What unique features make it better than the existing solutions?
• How will customers (and other stakeholders) benefit from (using) your solution?

Writing tips:

• Describe your product or tech clearly and concisely: If it’s a AI (or other tech) startup, don’t overdo the “tech deep dive” in the business plan. The reader likely doesn’t care half as much about your tech as you do and just assume it works. Don’t bore them with details (or put them in the appendix). If they want to know more, they’ll ask.
• Don’t be vague about what your solution is or does: It should be clear which part of the “value chain” your solution covers and what “product category” it is. For example, if your product is a “SaaS GenAI market research tool”, then call it like that. Avoid confusion and frustration.
• Show a development roadmap: Outline your progress to date, key milestones (e.g., when you plan to achieve which TRL (“technology readiness level”) etc.), growth stages etc. Your readers want to know where your tech and business development are standing and that you’re following “some kind of methodology” (e.g. the well-established “Lean Startup” framework).

Example business plan snippets for the (fictional) “food delivery service”:  

“Finding healthy, convenient meal options is difficult for busy professionals […]. Our solution is a meal delivery service that supplies fresh, tasty meals straight to your door prepared with local, natural ingredients […]. Among our unique features are personalized meal plans based on proprietary machine learning (ML) algorithms, flexible shipping options and an intuitive online shopping experience […].”

Chapter 3: Analyze Your Market and Competition

Purpose:

Demonstrate that you really understand the market you’re intending to do business in as this is a key selection criterion of pot. investors/partners. Showcase the market potential and competitive landscape to prove that the pie is sufficiently big and you can grab a sizeable piece of it.

Guiding questions:

• Who are your target segments and why?
• What are the key market trends and drivers (e.g., what makes customers buy)?
• How big is the market, how will it grow and what is your expected share of it?
• Who are the main competitors and how do you stand out?

Tips:

• Benchmark your business with key competitors: Objectively analyze their strengths and weaknesses and use a tool like the “value curve” to compare your value proposition to theirs. Try to avoid competing on price alone and risking a race to the bottom but carve out your own niche by differentiating your value proposition (i.e., blue ocean strategy).
• Use handy frameworks like “personas”: Succinctly summarize your target segments’ key characteristics (demographics, psychographics, socio-economics, etc.). Put selected takeaways into this chapter and the rest (i.e. “whole persona onepagers”) in the appendix.
• Calculate key market metrics: Outline your target market’s expected size and growth (CAGR) and your venture’s share (period after period) etc. Most importantly though, explain the underlying drivers and validate your calculated metrics through market research.

Example business plan snippets (“fictional food delivery service”):

“Health-conscious millennials (LOHAS) are our primary target segment, with an estimated market size of 5 mio. people in the U.S., of which ca. 100k are in our current service area (before we expand nationally) […]. To reach our 5% market share goal, we estimate a CAC (cost of acquisition) of $50 per customer with a 1st-year marketing budget of $250k. With targeted online ads, we expect to acquire 5k customers (=$250k/$50) in the 1st year […]. Local, organic ingredients and a personalized menu powered by superior ML algorithms help us stand out from competitors […].”

Chapter 4: Develop Winning Marketing and Sales Strategies

Purpose:

You need to show that you have both the right market entry strategies as well as subsequent growth strategies in place to attract and retain customers sustainably. Outline here how you want to capitalize on the market insights from the previous chapter.

Guiding questions:

• Which marketing channels can best reach your target audience?
• What is your branding strategy and how does it resonate with your target segments?
• How will your go-to-market strategy help you overcome identified market-entry barriers and drive initial traction?
• How does your growth strategy look like (e.g., how will you sell more to existing or further customer segments later)?

Tips:

• The key guiding principle is “where do your customers want to be reached/informed/buy/etc.” It’s not about which marketing channels you like or are trendy right now. Design a corresponding AIDA-esque sales funnel.
• Don’t underestimate the power of a strong brand game. Use practical frameworks like “brand ladders” and “brand positioning statements” or try prompting/asking ChatGPT for it.
• Design your go-to-market (G2M) strategy including market segmentation and segment-specific marketing mix(es) (i.e., product, pricing, distribution and promotion tactics). Relate your G2M to identified market-entry barriers and how to overcome them, e.g., economies of scale or brand loyalty of incumbents, high capital needs, access to distribution/supply channels, IP, regulation, network effects, switching costs of customers/partners etc.
• Use methods like the “Ansoff Matrix” to devise growth strategies in terms of further market or tech/product developments. Capture these in your “product roadmap“.

Example business plan snippets (“fictional food delivery service”):

“Our plan is to reach our digitally savvy target audience through social media ads and influencer marketing on Instagram […]. Our brand strategy emphasizes health benefits, ethical sourcing and high-technology AI […]. Offering a limited-time discount to 1st-time customers is part of our go-to-market strategy […]. Our growth strategy focuses on expanding our product line to include meal kits, partnerships with local grocery stores. The subsequent national roll-out […].”

Chapter 5: Assemble a Winning Team and Efficient Operations

Purpose:

Make it clear that you have the A team/management and that investors/partners are betting on the “right horse”. Highlight that your team has the right skills and knowledge of the market and tech and a relevant track record. Also show that you have the right organizational setup (structures, processes, systems etc.) in place for your venture. If your organization is already rather complex (#KISS), you can dedicate an own chapter to it.

Guiding questions:

• What relevant qualifications and experiences should/does your founding team have?
• What about the “extended” team (advisors, mentors, other investors/partners etc.)?
• What is the best business/legal structure for your business?
• What are the critical activities, partners and resources needed for efficient operations? Is everyone and everything already on board?

Tips:

• Build a diverse team with complementary skills, experiences and views. Consider the key functions of your business and make sure you have experts for all areas (marketing, tech, finance etc.)
• Use frameworks like Porter’s “value chain” or flow charts to determine the activities/functions of your business. Adapt such generic models to your specific case by including more specific functions, e.g., “data engineering capabilities” for your AI venture etc.
• Choose the legal structure that best fits your business objectives, taxation situation and governance preferences etc. Consider consulting a legal expert to ensure you make the right decisions here. This article is not legal advice.

Example business plan snippets (“fictional food delivery service”):

“We have a team of experienced chefs, nutritionists, logisticians, data scientists and software engineers, as well as marketeers […]. We choose a limited liability company (LLC) as our legal structure to limit personal liability […]. Critical activities include sourcing ingredients, cooking, packaging and delivering meals. We also focus on developing and maintaining our ML algorithms and data pipelines. Additionally, we partner with local farmers and delivery companies to perform tasks efficiently and effectively, etc. […].”

Chapter 6: Create a Robust (Mouth-watering) Financial Plan

Purpose:

Demonstrate the financial viability of your business idea and convince investors of its potential for growth and profitability. Project your cash flows, i.e., how much money you “forecast” to flow in and out of your business each period. These projections show why and how much money you need to request from investors. That amount should be enough to “bridge the gap” until your business “earns more than it burns” or gets follow-on funding.

Guiding questions:

• What is your business model and how will it generate revenues and incur costs?
• What are your sales forecasts and profitability metrics (e.g. unit economics, IRR) projections per period?
• What are your funding requirements (i.e., how much money do you need from investors, creditors etc. and why from them)?

Tips:

• Use the “business model canvas” for the qualitative analysis of your business model and then, e.g., Excel for the quantitative part (aka financial model). In that order. There are many templates for financial models (“business cases”). It’s not as difficult as it sounds, really.
• Cash is king: Provide a “cash flow statement” for the profitability analysis. Unless your plan entails fancy joint ventures, SPVs etc. there is no need for other financial statements (balance sheet or income statement) yet. Break cash flows down on a monthly basis for the first 1-2 years. For the next 2-3 years, quarterly. In total, you project ~3-5 years.
• Show a conservative, a neutral and an optimistic scenario for your cash flow projections. Avoid “hockey sticks” though; nobody believes them. Explain your assumptions for revenues and costs (i.e. what factors drive them?) and be transparent about how you validated them.

Example business plan snippets (“fictional food delivery service”):

“We are using a subscription-based model where our clients can select from different meal plans and delivery frequencies […] If we invest $250k, we expect to gain 5k customers and generate $500k in sales in the 1st year. Operational expenses, incl. ingredient costs, delivery fees, cloud compute and payroll, are expected to be $400k, resulting in a net profit of $100k and IRR of X%, as shown in the table below […].”

Chapter 7: Plot a Realistic Implementation Roadmap

Purpose:

You are a (wo)man with a plan. Demonstrate how your big ideas translate into a concrete timeline with key milestones and activities. This chapter shows what the funding you’re asking for will be used for (and when).

Guiding questions:

• What are key activities (e.g., marketing campaigns, product development, AI training etc.) and milestones (e.g., product launch, company registration etc.) to achieve your business goals?
• How do these activities fit into your schedule, i.e., what needs to be accomplished by when and which activities/work packages build on each other?
• How will you use your resources and funding to support these activities? Does this plan match what you’re asking for ($)?

Tips:

• Use practical frameworks like a GANTT chart to visualize your project timeline and the dependencies between work packages/activities/milestones succinctly.
• Show the first year on a more detailed basis (e.g. monthly), the second year on a quarterly basis and then 1-3 more years on an annual basis (although this is “crystal ball gazing”).
• Consider the “Magic Triangle” of project management: Scope, time and costs are in conflicting relationships. Speeding up development typically leads to higher costs or worse quality; cutting costs usually means higher time investment or worse output etc. Be realistic.

Example business plan snippets (“fictional food delivery service”):

“Establishing relationships with local farmers for organic ingredients, developing our AI models, launching an e-commerce platform, hiring chefs, establishing delivery logistics, creating a marketing plan and reaching 5,000 customers in the first year […] are key activities and milestones in our roadmap […].”

Chapter 8: Assess and Mitigate Risks (and Chances!)

Purpose:

This is a catch-all for “the good”, “bad” and “ugly” which aren’t sufficiently covered through the other chapters yet. Obviously, you already talked about market risks, e.g., in the market chapter, but there may also be other factors like “succession risk” at play. In the “grand scheme of things”, prove that “the good” (chances, strengths) outweighs “the bad” (risks, weaknesses) and that you have contingency plans for “the ugly”.

Guiding questions:

• What are key “other risks” your business might face and how will you prevent, mitigate or adapt to them?
• What are the main opportunities your business could get significant tailwind from and how will you seize them?
• How will you address founder-related or succession risk and ensure a running business in case of unforeseen events?

Tips:

• Apply the “SWOT” framework to analyze your venture’s internal and external environment, i.e., its relevant strengths and weaknesses (internal view) and opportunities and threats (external view). The magic then lies in correlating these insights, i.e., how can you use your strengths to mitigate the risks or seize opportunities etc. You can try my ChatGPT SWOT prompt.
• Use tools like the “risk matrix” to analyze the identified risks by “impact and probability” and then develop concrete contingency plans at least for the priority ones.
• Develop succession plans and face inconvenient questions like “What happens if the founder (or another key player) gets ill/dies?” etc. This counts for teams of any size (incl. “solopreneurs”).

Example business plan snippets (“fictional food delivery service”):

“Our key risks include supply chain disruptions, food safety concerns, cyber security and intense competition from established meal delivery services, etc. […] Mitigation strategies entail diversifying our suppliers, implementing strict quality control measures, ISO 27001 certification and a unique brand identity to differentiate from competitors […]. For succession planning, this means cross-training team members and documenting standard operating procedures (SOPs) for a smooth transition if key personnel exits etc. […]”

Chapter “9”: Write a Succinct Executive Summary

Purpose of this chapter:

“You only get one chance to make a first impression.” That’s where your executive summary comes in – written last, read first. Present a clear, concise and compelling overview of “your business plan in a nutshell”, including your call to action (e.g. funding request). This chapter should grab your audience’s attention and set the stage for the rest of the document.

Guiding questions:

• What are the key points of each chapter of your business plan?
• How can you synthesize and weave these key points into one winning storyline/onepager?
• Going through all your chapters again, are they all still coherent (e.g., after some edits or iterations here and there)?

Tips:

• Keep your executive summary to the point, focusing on the most important aspects of your business plan. It shouldn’t be more than a “onepager”. Use this article like a checklist to make sure you didn’t forget anything. Also, try my ChatGPT prompt to draft executive summaries.
• Apply a fitting storytelling framework like the “3 Cs”, i.e., focus your executive summary on your “compelling idea, competent team and cash flow projections”. For more, check out the “excursus box” below (“tip 3”).
• Don’t forget to mention your call-to-action here (e.g., funding needs, recommendations for action etc.), the most important info of this whole paper. Be clear about what’s in it for them (“WIIFT“) and for you (“WIIFY“). After all, this is about facilitating transactions.

Example business plan snippets (“fictional food delivery service”):

“We are a meal delivery service offering fresh, organic meals sourced from local farmers and matched to the preferences and dietary constraints of our users using proprietary machine learning models […] With a target market of health-conscious, time-strapped consumers […] We expect to serve 5,000 customers in the first year […] with revenues of $2 million and an IRR of X% […] We are seeking $500,000 in funding to scale our operations, expand our marketing efforts and develop the next generation of our AI model […]”

Bonus: 7 Sins & Wins of Business Plans That Get Read

“You eat with your eyes first!” Like so often in life, the packaging is just as important as the content (#PerceptionIsReality) for business plans, too. How you “package” your content affects how others perceive it (#FramingBias).

Follow these 7 simple tips to polish your business plan – no worries:

Tip 1) Ensure consistent visual appeal and readability.

• Use a professional tone and fact-based writing, while incorporating storytelling elements. Prioritize brevity and key points for busy executives.
• Consistently apply formatting, font type (Calibri, Arial or Times New Roman), font size (11 or 12) and line spacing (1.5) throughout the document.
• Use white spaces to avoid info overload and include visualizations (diagrams, tables) to clarify complex concepts.
• Create a simple cover page (logo, brand name, slogan) and a clean TOC. Aim for a total doc length of ca. 8 to 20 pages (incl. appendix); less pages with higher info-density are preferred.
• Save your document as a standard PDF file to ensure consistent formatting across devices.

Tip 2) Don’t be too rigid with the structure (#FormFollowsFunction).

• While you can view the previous chapters as a “standard framework”, please still adapt the chapters to fit your venture’s unique context.
• For example, you may want to create a separate chapter for competition (or legal stuff etc.) if it’s a bigger aspect of your business. I’d argue for an “AI venture” it makes sense to have a dedicated chapter for topics like AI safety, cyber security and data protection.
• After all, the goal is to ensure that you…

Tip 3) …tell a compelling story.

• Frame your venture as a captivating narrative focusing on the problem you solve (“start with why”), your innovative solution, the great benefits it brings to the world (esp. for customers and potential investors/partners).
• As a pragmatic framework, try the “3 Cs”: write about your compelling idea (i.e., problem-solution fit), competent team (i.e., why you have what it takes, e.g., right skills, track record or market knowledge) and cashflow projections.
• Another great framework is the trinity of “customer/stakeholder desirability”, “business viability” and “technical feasibility” because the sweet spot of successful innovations lies at the intersection of these (which should be the case for your idea, too).
• If you’re creative, you can even turn your pitch into a so-called “Hero’s Journey” which is the magic sauce of almost all Hollywood movies and sprinkles in some subtle AIDA. There are many frameworks – but better start with only one, preferably the “3 Cs” (#KeepItSimple).

Tip 4) Use ready-made business plan templates.

• There are countless templates, tools and exemplary business plans online just waiting to inspire you (like this great resource by SBA).
• Generally, learn to stay on the “shoulders of giants” instead of reinventing the wheel. In all areas of business and life. “Copy” (legally), adapt and improve with pride.

Tip 5) Don’t half-ass the executive summary.

• Even if motivation is low at the end of this exercise, put in the needed effort to make it clear, concise and compelling: It’s typically the first (and sometimes only) section your stakeholders will read and base their (preliminary) decisions on.
• It should convey the gist of your other chapters. That’s why A) you should write it last and B) use a “top-down”/”pyramidal” writing style (i.e., always put the key takeaways into the first sentences of each paragraph) in all your chapters.
• This writing style also makes it easier for the reader to understand your business plan. In general, it’s “good practice” in business to write this way, i.e., to “frontload” important info.

Tip 6) One size usually doesn’t fit all…

• You want to tailor your plan to your target audiences (investors, partners etc.) so it “speaks to them”, i.e., adapt its content and style to their individual needs and expectations.
• Persuading your audience (ethically) is a main goal of this document and reason why you should also write it from their perspective (not just yours).
• If needed, create multiple versions of your business plan/proposal for different addressees.

Tip 7) Automate boring stuff, focus your brains on tough nuts.

• Learn to use and collaborate with (Gen)AI tools like ChatGPT along the entire process of creating your business plan. For example, ChatGPT can help you “streamline” drafts, accelerate research and ideation (#FactChecking), challenge ideas, help with formatting, proofreading etc.
• There are many use cases for smart assistants in business, e.g. writing content for marketing, job descriptions etc. Invest a bit of time in learning proper prompting to get the answers you need from your chatbot. It’s like delegating work to an eager intern with limited experience.
• Also explore other generative AI systems like image or video generation to visualize your ideas etc. Some GenAI assistants (e.g., ChatGPT & Co) already have “multi-modal” capabilities, i.e. also image generation functionality included.
• I encourage you to keep experimenting with these tools and stay on top of the developments around this tech: It can amplify your productivity and creativity – key resources as innovators.

Wrap-up: All You Need for Business Planning

This post (hopefully) made a “solid case” for the “dreaded business plan”. It’s a valuable tool for innovators to garner funding and partnerships. It also provides strategic direction for starting and growing ventures in complex and uncertain terrains like AI.

You now have all the ingredients you need to create your own business plan: Content, “look and feel” and how to streamline the creation process with innovative AI tools. The ball is now in your court: Are there any (Gen)AI use case ideas you want to turn into a project or startup? What do you think about this approach to writing business plans (and in general)? Liked the “case study”?

Please share your feedback and ideas in the comments (and spread the word). I’d also be keen to hear if there are any other topics (e.g., building persuasive pitch decks) you’d like me to cover in future articles.

Cheers,
John