Before you start:
- Record every bit of work you put into your business. By doing this, you will ensure that the hours you commit are not undervalued should you ever choose to sell your share.
- Breakdown and document the exact portion of intellectual property each person involved owns. If you are married, know that your spouse owns half of your share by default.
- Consider hiring a lawyer. Given the number of legalities affecting today’s competitive landscape, consulting a lawyer regularly will help you avoid unnecessary legal mishaps.
Research
What is the current state of the market you are trying to enter? Is it stable, growing or in decline? Are there any legacy systems in place that might keep your business from achieving its potential? By demonstrating your awareness of industry trends, as well as environmental, economic, and political factors that may affect your business in the future, you will give potential investors confidence in your plan’s viability. If possible, conduct market research with a focus group or a survey in order to build your case.
Customers
State whose needs are met by your product or service, and demonstrate how you are going to get your message out to those people. Without a market, you have an idea, not a business.
Financial Models
Use financial models to play out all of the possible what-if situations. Show that you have a plan whether things go wrong, right, or anywhere in between. Demonstrate your commitment to your potential investors’ first priority — Return on Investment.
Pricing Strategy
Is your goal to maximize revenue or quantity sold? Do you want to be a price leader or a quality leader? Maybe you are just trying to minimize losses at the start. Will you settle in with the industry status quo in order to avoid a price war? A skim pricing strategy can help to recover start-up costs; a penetration strategy could be employed in hopes of building a large customer base. Back up pricing decisions with strong reasoning, and assure investors that you are prepared to deal with future shifts in the marketplace.
Burn Rate
How much money do you have right now? How much will you spend every day? Week? Month? How long can your business survive without making profit? Show that you understand the risks involved, and display a sense of urgency in regard to generating a positive return by including this information.
Exit Strategy
Decide when you are going to get out before you go into business, and stick to the plan. From day one, never latch onto any idea so much that you cannot let it go. Always be open to the possibility of change for the better.
The Elevator Pitch
You will not always have time to sit down and carefully review your business plan with potential investors. Knowing how to effectively convey your business idea in one minute or less will allow you to capitalize on chance meetings.
The Name
You would not have read this article if the title had not appealed to you in some way. Take care in naming your business. The name should convey credibility to investors. Also, keep in mind your target customers — you are trying to build a brand that they will embrace, so do not choose a name that will drive them away.
Competitive Analysis
Competition is not always a bad thing. The presence of competitors may be seen as a sign of your idea’s credibility. Still, be sure to highlight your idea’s distinct competitive advantage, and demonstrate how you will maintain that competitive advantage long-term.
The Kicker
Is there something about your product or service that will ensure its long-term success? If you want to strike a deal, make them an offer they simply cannot refuse. Present a piece of information that wows investors in a good way.
Know that…
Image Credit: Tojosan, linkedmediagrp, iconoclast020
View Comments (8)
The best tip I can give is to avoid building a business plan. Assuming you're a first-time entrepreneur, traction and a one-pager is way more important than a well crafted business plan.  Build your product, know your market inside and out, and create a 10 slide investor deck based on your results. When meeting with investors have a 1 sentence elevator pitch that clearly articulates your value add, and speaks to differentiation (if you're in a crowded market).Â
Form your team, build your product and start kicking ass.
Mike -- would you say that the 10 slide investor deck is a substitute for the traditional business plan? Â Do you know any links to examples? Â If so, please post one!
Absolutely, but if your goal is to raise money then you have to know your market inside and out and where your product fits into the competitive landscape.
My point is that if you're a 1st timer, the best business plan will (most likely) still not lead to 1 penny from anyone other than friends and family. Why? Because there are 5 teams out there right now building a business that can do what you are only claiming to be able to do.
By the time you finish your business plan, you're already behind.
Here's mint.com's investor deck. They were a later stage company at this point, but the slides articulate what you need to know when pitching investors:
http://www.slideshare.net/hnshah/mintcom-prelaunch-pitch-deck
All valid points, Mike. Â For a 1st timer, maybe a better strategy is to worry about getting investors attention with a presentation like that. Â After you've got their commitment, then might be the time to really nail down a business plan.
Like, but I don't use facebook, does it still count?
Yes... positive comments are always appreciated! Thanks.
Are you going to do a follow-up to this article and elaborate upon it? Perhaps you should consider it. Adding links to supplementary information you found valuable in your research might also be helpful to some.
Just about all of the info found here can be traced back to the class I refer to at the start of the article. Â That being said, I think you are right that links to supplemental information could be really helpful. Â In coming weeks, I'll reach out to some of my more experienced contacts in order to receive their thoughts on the article, and update the article with the new info they provide me. Â Also, anyone with a good business plan link should definitely share it here! Â Thanks for the comment.