Building A Better Business Plan - In 25 Pages or Less

19th Oct 2008
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What sold investors on a company a few years ago isn’t cutting it in the new economy. The business plan model is changing in many ways; and is, most importantly, getting back to basics. The bare-bones, real-life basics.

What is the business and how much money you need?

But even the prototypical KISS-modeled business plan has some new fundamentals. For those of us who have been doing this for a while, it’s been a shock to the system. For anyone else who is just getting started as a small business owner: hang on tight, it’s going to be a bumpy ride.


The Executive Summary

Isn’t that a fancy title? All it means is tell the investors, quick and dirty, that you have a solid business model that makes a profit (or will make a profit very soon). But here is the trick: this is the most important place to be jargon-free and user-friendly. Reading this section with the bs-o-meter on high, all investors want to see is what your company does and why it makes (or, again, is going to make) money. Get technical later.


The Market Analysis


Investors see business plan after business plan filled with the same general market analysis. Digging up a study about total market size doesn’t make you a frontrunner anymore.


So what does?

Your competitors. Study ‘em. Talk about ‘em. In seemingly gratuitous detail. Identify your direct, indirect and even potential competitors. What are their offerings? Their market percentages (whether local or national)? Their funding? Their pricing? Promotional Strategies? You get the picture. Now why are you different and why are you better? Are you cheaper? A better value for the money? Do you offer add-on services that the competitors do not?

 

Show evidence that customers really do what to buy your product or service. Show off your secured contracts or orders. If you don’t have that yet, offer information on beta testers who have tried out your product, or guinea-pigged your new models or formats. Focus groups of potential customers can also be offered as proof of customer appeal. This doesn’t have to be a difficult project. A CPR Instructor who owned her own training company found a niche when she noticed a change in state law that required day care centers to provide employee training on Shaken Baby Syndrome. She polled several day care owners in her area, asking would they be willing to change training providers if SBS was included in the training package for a minimal fee increase. Most of them said yes, she used that information to get funding from a Hispanic business association, then she went back and landed the contracts.


The Management


One thing about the currently stalled economy, is that it’s easier to find management talent. And no, they don’t have to be full-time…or even drawing a salary at all.

It is possible to bring in an advisor to fill in any expertise gaps, at least temporarily (and these advisors getting offered company equity in exchange for salary is not a bad thing for investors to see). Just make sure that if their boss doesn’t know they are moonlighting (even gratis), that their resume remains “blind” in the business plans ( no names, contact info, or identifying stats whatsoever). This is especially important if they are a prospective hire if your funding comes through!


The Financials

Profit in three years is a thing of the past now…the new rule of thumb is one year to 18 months with detailed monthly projections that account for the slowing economy. And IPOs are considered a shaky prospect now (and for the near future), which makes buy-outs look better and better to investors. Since investors still want to be able to cash out in 5 to 7 years, consider including potential acquirers named in the business plan, even if you don’t intend to sell…it shows a good knowledge of your market.

 

In closing, the solid basics are more important than ever. Investors have lost a lot of money since the crash of the dot-com up-cycle. But they aren’t gone for good. It just takes a little more hustle to land an investment angel. There are some excellent web resources for business plan models, check out the American Express small business website for a more in-depth study.

Faith Harper is a small business owner and free lance writer who resides in Houston, TX. She can be reached at WredenHarper@aol.com.

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