June 29, 2010
Still havenâ€™t finished your business plan?
And here are a few concepts to memorize while creating your business plan:
Pens Down, Eyes Open
Before starting writing your business plan, do the research. Find out if there is a market for your product or service. See whether you are capable of filling that market, and that it is realistically profitable. You may discover challenges that will force you to rearrange your idea before spending weeks constructing a business plan.
The Yin and Yang of Profitability
If investors and lenders are to be attracted to your business plan, you must show:
that your competition is large and plentiful, proving you operate in a large and growing industry
that you can outmaneuver that competition by niche marketing and setting up barriers to entry
Many entrepreneurs make the mistake of claiming they have no competition. This may or may not be true in your case, but investors don’t believe in one-business industries. Healthy competition is evidence that your industry is growing, which allows your business to grow within the industry.
The paradox is that you must show you can overtake said competition somehow. You can do this by proving a) you have identified and can master a niche market within that industry, and b) you have created barriers to entry (e.g., proprietary technology, exclusive information, a unique management team, etc.) This shows that your company is the only one equipped to fill the market need.
The Four Pillars of Logic in a Business Plan
A business plan is essentially a logical argument for why and how a business will succeed. The logic is as follows:
1. Opportunity: There is an unmet market need.
2. Resources: Your business has the resources to fill that need.
3. Methods: Explain how your resources will be used to fill the need.
4. Results: Show how you and your investors will profit from the way your business uses its strengths to fill an unmet market need.
Financial Assumptions: Spell It Out, From Seed to Exit
The imagination of the investor is where fundraising efforts go to die. Do not let them imagine. Show your figures. Explain revenue and cost projections, from the start of your business all the way through the liquidity events that will benefit the investors. Use industry research and case studies to support your pro forma (projected) financial assumptions.
Just Say No to Format Creativity
As sure as there is grammar in an English sentence, every business plan has a standard format. That format, in this exact order, is: Executive Summary, Company Analysis, Industry Analysis, Customer Analysis, Competitive Analysis, Marketing Plan, Operations Plan, Management Team, Financial Plan, and Appendix. Yes, you can be creative in the content of your business, and the ways in which you go about marketing and running operations. Creativity is what allows entrepreneurs to win. But the format of the business plan must be absolutely adhered to.
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