Questions

How do you create a business plan around a company (app company in this case) that doesn't yet have a monetization plan or revenue model?

some followup questions I have for a call if you could provide some insight: What are the most important metrics? How do you calculate your run rate? how do you pitch investors when you aren't projecting any revenue or monetization? (personally i think its strange, but there are plenty of apps that seem to do this..)

3answers

You don't create a business plan in the traditional sense of a business plan. It's a totally inefficient and outdated way to think about how to start, run and grow an app-based business.

The best way to pitch investors is with the app itself. That is to say, unless you and your team have relevant prior success such that you could be fundable without a product, the likelihood you will raise prior to your app being launched is very low.

The most important questions are *always* around engagement and growth. The questions and metrics vary depending on what kind of app you're building but people want to know that your target audience is hooked on your product and there's some evidence they will continue to be so and that you have either proven a scaleable way to cheaply acquire customers or better, that there is evidence of strong word-of-mouth (only a few apps achieve this) or a quantified viral effect (a viral coefficient of at least .3).

Happy to talk to you in a call. I'd encourage you to read my reviews that other Clarity members have left. The intersection of fundraising and product advice is an area I have a lot of experience with.


Answered 5 years ago

Hello,

Yes you should certainly have a business plan just to get the other parts of your business model working right, and to organize your own ideas. The important things to get right will be how you will market the app and get a large volume of downloads.

I actually made a video on how to write a business plan for a mobile app which may be very pertinent to your question:
https://www.youtube.com/watch?v=EV_TWcrar0c

Because mobile apps are innovative, many things are unknown (not just monetization) so it is more difficult to plan than traditional businesses. Nevertheless, you have to get 3 parts very right:

1) Building a product that will be competitive within the niche you choose
2) Eventual monetization
3) How you will get hundreds of thousands or millions of downloads (yes that many!)

I hope that was helpful. Is that the kind of an answer you were looking for?

Best,
Alex


Answered 5 years ago

I agree traditional business plans aren't necessarily required but if there is no monetization model then I can only assume that you are trying to make a massive audience play. (Think "Instagram" and to a degree "what's app") At the very least I would put together a lean canvas which will give your potential investor the confidence that you understand your business, your app, your market place and your customer and how you are going to leverage that knowledge.

Check out http://businessmodelgeneration.com/canvas and https://leanstack.com/

Happy to talk to you in a call if you need more detailed advice


Answered 5 years ago

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