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How to Supercharge Your Business Plan
Whether you are seeking capital for your company or are optimizing your
business strategy, the most important element, particularly for outside
investors, may be your written business plan. You can tune-up and supercharge
your plan using this 19-step checklist.
When your written plan firmly answers yes to each of these 19 questions,
your market/product strategy is in terrific shape. Plus, you increase
the odds of attracting investment capital.
If you don't already have a written business plan, WRITE ONE! Your business
plan is a blueprint for your whole company. It describes in detail your
goals, the financial and technical viability of your goals, and the strategy
you will use, or are using, to reach those goals. And your business plan
is a working tool. It is a yardstick to measure your progress and a compass
to keep you on course.
Must a business plan be written? YES! A plan which is not written usually
has not been thought through fully. And despite what you may have read,
it is doubtful that any business ever attracted capital on the back of
a napkin.
Use this checklist as a way to identify where your strategy, as spelled
out in your business plan, needs work. Each of the questions below highlights
an area considered critical to technology investors.
- Can the key ideas behind your product or service be stated in one
or two sentences? (y/n)
- Does your company have at least one unique and compelling competitive
advantage, which cannot quickly or easily be duplicated? (y/n) Examples:
a special feature * a cost advantage, * a technical refinement * a new
delivery system * special supplier
- Is your competitive advantage proprietary? (y/n) That is, can it be
copyrighted, patented, trademarked or otherwise protected? Can you keep
it exclusive to you?
- 4. Is your industry segment growing by 25% or more? (y/n) If not can
your new product dominate its segment? If the answer is no, you probably
won't be able to generate the kind of financial returns investors look
for.
- 5. Does your product or service create a new market? (y/n) Although
generally positive, this could be a trap. In a brand new market, the
potential can be slow to develop. Lotus Notes created a new category
but took years to create value for investors.
- 6. Is your market in "early momentum"? The market growth
phase where market revenues have recently taken off? (y/n) Venture investors
prefer markets in this stage because the time-to-create-value is shorter
and the growth potential still large.
- 7. Is your target market segment:
- 1) tightly defined over a population sharing common characteristics
2) large enough to support significant profits 3) served by communications
channels to reach that market, i.e., trade or special interest publications,
response mailing lists? (y/n)
- 8. Is your company filling a gap in the market, or do you have a "gee-whiz"
product which you think is so terrific that customers will surely want
to buy it? (y/n)
- 9. The benefit of your product or service to users is:
- 1) significant, 2) quantifiable 3) cost-justified? (y/n).
- If you provide a benefit which is important, and you can prove it,
there is a much higher probability of generating sales.
- 10. Is there a demonstrated market for your product? (y/n) If you
have an existing product, is your customer base expanding? Investors
would rather fund sales and production than product development.
- 11. Is there wide appeal for your product or service? (y/n) Are there
enough potential customers in the target market that you can earn significant
profits, for a long time? Are there follow-on products to sustain revenue
and profit growth?
- 12. Does your company have the ability to sell your product? (y/n)
Particularly in companies where the founders have technical backgrounds,
a question to ask is "Who is going to sell your product or service?"
What about outside distributors?
- 13. Is there an experienced management team? (y/n) Investors would
rather fund a solid team instead of one lone genius with a great idea.
The team should be highly qualified in marketing, sales, finance, and
the product/service area itself. Of course, a demonstrable track record
helps.
- 14. Can you demonstrate a likely return of 5-15 times investors' capital,
over a period ranging from three to seven years? (y/n) The actual parameters
used by venture investors will vary based on which stage you are in
(idea, startup, development, expansion, turnaround).
- 15. Is there a clear exit strategy for investors? (y/n) The most common
strategies for returning investors' capital are:
- 1) going public 2) acquisition of your company 3) new investors 4)
founder's buyback or management buyout
- 16. Have other investors already put money into the company, particularly
the senior management team? (y/n) This reduces the apparent risk, reduces
overall exposure, and shows that management "has its money where
its mouth is".
- 17. Have you clearly defined a structure for the investment you are
seeking? (y/n) The structure should include:
- 1) Who is involved? 2) How much capital is needed? 3) What minimum
investment you will accept? 4) How much equity that will buy? 5) Projected
return on investment?
- 18. Are your financial projections realistic? (y/n) Have you soundly
justified your projected growth rates and other financial assumptions?
- 19. Have you clearly examined the risks? (y/n) Investors like to know
that you have considered the risks. This is key: can you turn your risks
into opportunities?
Too many no's? Remember, each "no" opens up an area for you
to strengthen your business. Even if you aren't seeking capital, each
question highlights a critical success factor - which, when mastered,
will increase your profits, your performance, and your future success.
For a complete look at how to raise private capital and the documentation and structure you need, visit, Venture Map
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