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Business Plans Should be Simple and Passionate Business Plans Should be Simple & Passionate by Cletus E Olebunne Author of The Way It Is: Ideas & Solutions for Entrepreneurs
You've come up with a great idea for an invention or a new business. Or you've discovered a niche in the marketplace crying out to be filled. What's the next step? In a perfect world, you simply set up shop, watch your business flourish, and count the money as it flows over the transom. But in an imperfect world, you need seed money to launch your business. And to get that capital, you'll have to go begging for investment, either from a bank, a venture capitalist, an angel investor or your uncle/aunt. Most of these sources of funds, except maybe your uncle/aunt, will want to see a business plan. For many entrepreneurs, that's the most difficult part of launching a business: translating your idea, your vision, into a dry little document designed to win over a skeptical investor. It's even more difficult than closing the first sale for your business. A business plan has to convince an investor that your idea for a company is solid and that you're the right person to make the whole thing work. Venture capitalists and successful entrepreneurs stress that the best business plans should be: Short — and simple Extensive financial projections aren't needed. Clarity about the start-up's product or service is. The first piece should be an executive summary. Think of it as a calling card to get you in the door, to get potential investors asking questions. Do NOT write a 50-page business plan with five-year financial models, unless you’re writing a term paper, or interested investors requested a comprehensive 50-page business plan. It's garbage in and garbage out. It should be two pages. If you can't say it in two pages, you can't do anything. The plan should be precise, crystal clear about what the new company is all about. Never write a business plan where after investors read it once or twice, they still don't know what the company does. The key to describing your business is understanding what benefit you're providing to your customers. You have to learn what business you're in. The real key to being an entrepreneur who has a chance to succeed is knowing precisely what business you're in. If you don't, you die. Introduce the management team Obviously, investors want to know the ways in which you plan to build the better mousetrap. But venture capitalists will be most interested in the people behind the product. The management team is key. Investors invest in people, not ideas. You've got to pull a strong team together. Investors are always going to look at management. Who are these people and can they pull it off? What are their backgrounds? Contrary to conventional wisdom, it's not always a plus when the management team has vast experience in the industry in which it wants to launch the new business. If someone's too steeped in an industry, they think there's only one way things can be done. I'd rather look for someone on the periphery, someone who knows enough to be dangerous. People on the outside are usually willing to try new ways to do business. Anticipate problems and challenges Pollyannaism doesn’t make good entrepreneurs. Anybody can have a great idea, and anybody can be an entrepreneur, but the business plan has to explain that you've thought the problems through. Addressing your business' potential problems is a must. Writing a business plan, a formal business plan, forces you to answer the tough questions. It's one thing to be out with a bunch of guys at a bar, and you're having a beer and you're telling them about your business idea. Everything sounds great. You can do this and you can do that, and it all looks easy. A business plan forces you to address the holes in your idea. Finding those holes and thinking through your responses to them is crucial. Rather than have investors raise these issues to you, it's better if you've thought them through. Any sharp investor will figure out the weakness, so it's much better if you come out with them. Most people don't want to enter into the negatives, but it’s better for investors to hear it first from you. If investors have to bring up the negatives to you, it makes them think you haven't thought your business through very well. Show a path to profit A good business plan isn't stuffed with financial projections, but it does explain how the business will make money. Identifying the target market is an essential part of a good business plan · Identify the geographic location of your target market. · Describe demographic characteristics of target customers — traits such as age, income level, family size, gender and ethnic group. · Explain customer motivations and purchasing patterns. · Define the market's size. Is your market big enough to keep you in business? ... If you're looking for investors, you need to convince potential investors that your company can grow to a size that will make their investment profitable. Resources to assess a target market include: maps of the target market area; customer surveys; market-research reports; industry research indicating market trends; books, magazines and other media geared toward the target market; Census data showing customer demographics. The most important thing is sales. If you can't get someone else to open up his or her wallet and turn money over to you, it doesn't make any difference how great the idea is. There may be such an obvious need for your product or service that you figured the sales would be automatic. Because the need of your product or service may so great don’t assumed there would be an automatic payment source. Show details on how you’re going to close the first sale, how many sales you can make in the first year and how long it will take to close those sales. The more specific you are, the more credibility you will have. This is one area that people don't emphasize enough. The business idea can be great, but investors want to know how the new company will actually make its money. It's the end part that young entrepreneurs don't recognize. There's got to be an exit strategy so the investors get their money out, a financial plan that the money guys understand. They're in the business of building wealth, if you're not furthering that goal, why would they give you money? Make it personal Finally, a good business plan should not be a formulaic, fill-in-the-blanks document that looks squeezed out of some cookie-cutter computer program. They all have a common format. It just shows of someone going through the motions. Investors did rather see an entrepreneur's fire reflected in the executive summary. The passion that an entrepreneur has is fabulous. It's a burning desire to change the world. Investors love that when that comes through.
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