Situation, Complication and Resolution (SCR) is a common storyline used at McKinsey but is also a great framework for a business plan that lets VCs get it. In consulting, Situation refers to an overview of the industry and the company. Complication refers refers to a problem that the company is facing. Resolution refers to the solution (that consultants are providing.)
It turns out that it is also a great way to write a business plan. As my daughter once said when she was four, every fairy tale goes like good, bad and good. There is something to be said about how our brains like to listen to stories.
Here’s how SCR can not only help you structure a compelling story for VCs but actually sharpen your thinking.
Situation – this is a recap of the industry that you operate, but focus on why VCs should care. Usually, this means its an area that’s witnessing high growth and major disruptions.
Complication – something is broken. There is a pain point that customers are facing. In addition, big corporations can’t tackle this and smart people have tried and failed.
Resolution – my startup is uniquely positioned to tackle this pain point. I can do it because of my experience. My startup has technology break-throughs that big corporations and other smart people do not.
If you lay out your business plan this way, you will find that VCs will get it. VCs will get excited about the opportunity (“situation”). They know customers are in pain (“complication”). And they know your company is uniquely positioned to solve the pain point and win (“resolution”).
It also forces you to think through what customer pain points are, what your competition is doing, why they can’t solve the customers’ pain points and what is the most compelling value proposition you can offer.
This framework also addresses the key questions that VCs like to ask. Why now? Why you?
“Why now” is a question VCs like to ask because it is critical we are not too early nor too late. By clearly articulating the situation (there is money to be made now and in the near future) and the complication (others are not making money yet), you are answering the question, why now?
“Why you” is about VCs why they should back you. They will back you because you have understood the complication, and your resolution is in spite of and with the knowledge of this complication. You know what your competition can and cannot do, and you have come up with a novel and unique resolution to a complication that you have a clear perspective on.
When you write your business plan, think Situation, Complication and Resolution (SCR) or as my daughter says, good, bad and good.