SINESS PLAN

ABSTRACT A business plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals. It helps early-stage, small and middle-market businesses grow through design and execution of sound business strategies.

BUSINESS PLAN What is a Business Plan?

A business plan is a 20 to 40-page document that serves the dual role of being an internal road map for your company and an external sales tool for potential investors customers and partners! "our business plan describes the entirety of your venture# the problem you$re solving your solution the technology behind it and the si%e of your target mar&et the customers the competition your business model team financial needs and exit strategy! 'he ma(or benefit of )riting a business plan is that it forces you to thin& things through early* it ensures you have )ell-defined venture goals! +lear goals help generate a clear path for you and your team to follo) as you begin to implement your venture!

+hange is inevitable
,tart )ith a strong but ad(ustable plan that you can modify according to your ultimate goals! -t$s almost guaranteed that your business plan )ill change over time as you verify your pro(ections and identify potential problems! .ie) your business plan as a living document* the plan gro)s as the idea matures! Writing the plan is not a one-time effort!

/othing but the truth

0irst be careful )hat you put in your business plan! ,omeone1perhaps an investor1)ill hold you to it! 0or example the plan normally includes milestones that investors expect you to meet 2and in fact your next round of funding may be contingent upon doing so 3 so don$t ma&e cra%y promises you &no) you can$t &eep! 'a&ing money from an investor because you intentionally or unintentionally provide misleading information is not a game you )ant to play4 /ever lie or even exaggerate about your technology your bac&ground or your capabilities! 'he truth )ill come out sooner or later!

'he business plan covers )hat you intend to do )ith your business and ho) it )ill be done! 'he process of )riting do)n )hat is involved in bringing your idea to reality re5uires dealing )ith the why, what, who, how, where, when, and how much of your venture! Writing a business plan forces you to ta&e a deep loo& at your idea and ho) you )ill turn it into a business! 6oing so helps you recogni%e areas that need rethin&ing or support! "our business plan )ill typically include the follo)ing! Business description

What do you plan to do* Why are you starting the venture? 7ar&et analysis1Who )ill be your customers* )hat do they )ant from you? +ompetitor assessment1Who )ill you compete against* )hat do these competitors offer? 7ar&eting plan18o) )ill you reach your customers? 9perating plan18o) do you plan to implement your idea? 0inancial plan18o) much money )ill it cost and )here )ill you get the necessary funds? :xecutive summary1What are the fundamentals of the venture?

Who uses a Business Plan?

What is the need or purpose of a business plan?

1. Set

specific objectives for managers. ;ood management re5uires setting specific ob(ectives and then trac&ing and follo)ing up! -<m surprised ho) many existing businesses manage )ithout a plan! 8o) do they establish )hat<s supposed to happen? -n truth you<re really (ust ta&ing a short cut and planning in your head--and good for you if you can do it--but as your business gro)s you )ant to organi%e and plan better and communicate the priorities better! Be strategic! 6evelop a plan* don<t (ust )ing it! 2. S are !our strateg!" priorities and specific action points #it !our spouse" partner or significant ot er. "our business life goes by so 5uic&ly# a rush of ans)ering phone calls putting out fires etc! 6on<t the other people in your business life need to &no) )hat<s supposed to be happening? 6on<t you )ant them to &no)? 3. $eal #it displacement. 6isplacement is probably by far the most important practical business concept you<ve never heard of! -t goes li&e this# =Whatever you do is something else you don<t do!= 6isplacement lives at the heart of all small-business strategy! At least most people have never heard of it! 4. $ecide # et er or not to rent ne# space. >ent is a ne) obligation usually a fixed cost! 6o your gro)th prospects and plans (ustify ta&ing on this increased fixed cost? ,houldn<t that be in your business plan? 5. %ire ne# people. 'his is another ne) obligation 2a fixed cost3 that increases your ris&! 8o) )ill ne) people help your business gro) and prosper? What exactly are they supposed to be doing? 'he rationale for hiring should be in your business plan! 6. & et er !ou need ne# assets" o# man!" and # et er to bu! or lease t em. ?se your business plan to help decide )hat<s going to happen in the long term )hich should be an important input to the classic ma&e vs! buy! 8o) long )ill this important purchase last in your plan? 7. S are and e'plain business objectives #it !our management team" emplo!ees and ne# ires. 7a&e selected portions of your business plan part of your ne) employee training! 8. $evelop ne# business alliances. ?se your plan to set targets for ne) alliances and selected portions of your plan to communicate )ith those alliances! 9. $eal #it professionals. ,hare selected highlights or your plans )ith your attorneys and accountants and if this is relevant to you consultants!

10. Sell !our business. ?sually the business plan is a very important part of selling the business! 8elp buyers understand )hat you have )hat it<s )orth and )hy they )ant it! 11. (aluation of t e business for formal transactions related to divorce" in eritance" estate planning and ta' issues. .aluation is the term for establishing ho) much your business is )orth! ?sually that ta&es a business plan as )ell as a professional )ith experience! 'he plan tells the valuation expert )hat your business is doing )hen )hy and ho) much that )ill cost and ho) much it )ill produce! 12. )reate a ne# business. ?se a plan to establish the right steps to starting a ne) business including )hat you need to do )hat resources )ill be re5uired and )hat you expect to happen! 13. See* investment for a business" # et er it+s a startup or not. -nvestors need to see a business plan before they decide )hether or not to invest! 'hey<ll expect the plan to cover all the main points! 14. Bac* up a business loan application. @i&e investors lenders )ant to see the plan and )ill expect the plan to cover the main points! 15. ,ro# !our e'isting business. :stablish strategy and allocate resources according to strategic priority! "ou can find more information about gro)ing your business )ith a business plan by reading!

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%o# to prepare a business planSteps to Preparing .our Business Plan D! /esearc 0 ;et as much information on your proposed business as possible! 'al& to those already in business visit the library learn all you can from trade associations and trade publications conduct research on-line and find out )hat help is available from local and federal government agencies! 2! 1a*e !our projections0 'he more you &no) about your business the more accurately you can ma&e intelligent pro(ections of sales and potential profits for the first fe) years! 'his &no)ledge is invaluable! C! )apital0 7oney! Accept the fact that it al)ays re5uires more money than you$ve anticipated to start or improve your business! 8ave enough )or&ing capital on hand and bac&-up resources (ust in case the ne) business does not prosper as you had anticipated! 4! )ompetition0 Gno) thy enemy! ,tudy your competition carefully* they$ve been in the trenches and have already experienced )hat you are about to discover! >ead their literature! 'here is a reason your competitor is in business and you$d better find out )hat it is H and ho) you can turn their customers into your customers! I! Location0 @ocation! @ocation! -f you can$t go to your customer your customer must come to you H so ma&e it easy! Pic& a prime location or invest in targeted advertising! J! Image0 What &ind of public image do you )ant to create )ith your service merchandise 5uality dKcor pac&aging personnel vehicles advertising and pricing? 8o) does that image correspond )ith the customer you are trying to attract? L! 2eep /ecords0 +omplete accurate records are needed to file taxes to properly manage your ban& accounts and most importantly to give you guidance! Al)ays &no) )here your business stands financially! B! Professional %elp0 -n addition to professional and confidential ,+9>: counseling rely on a competent la)yer accountant ban&er and insurance bro&er to fulfill your business needs! A mar&eting professional in you corner may also be needed! M! Purc asing0 Gno)ing )hat )hen and )here to buy and ho) to gauge inventory can ma&e or brea& you! -t allo)s you to conserve )or&ing capital reduce obsolescence and meet and beat the competition! Gno) )hat sells! D0! Profits0 'his is the bottom line for )hich you are going into business! 7a&e sure that all expenses are accounted for including your o)n living costs possible losses shrin&age unseen costs such as fringe benefits and taxes! 'hen add a legitimate profit to your ris&! -f the profit does not come out right perhaps you should rethin& your idea!

3utline of a Business Plan

Business plans vary from company to company but most use the follo)ing outline! A business plan consists of# N 'he executive summary N 'he problem or need you$re meeting N "our solution N 'echnology and -P N ,i%e of opportunityAmar&et N +ustomers and ho) you )ill reach them N +ompetition N Business model N 'eam N 0inancial needs N :xit strategy N Appendices We$ll loo& at each individually! 'he e'ecutive summar! is a very important 2 to I-page document included at the front of the business plan that summari%es the plan$s main points! -t$s not an easy tas& but in a fe) pages you need to convey the essence of the venture! -t must be &ept short and should contain only the &ey points from the important sections of the full plan! 'he importance of the executive summary can$t be overstated as it$s often used as a stand-alone document and can be a po)erful selling tool! -t may be the only chance you have to catch an investor$s attention* initially it$s probably the only part of the business plan they$ll read! -t$s common for a potential investor to say O,end me the executive summary and if that interests me -$ll get bac& to youP1so ma&e it good! 4 e problem !ou5re solving or t e need !ou5re filling -n this introductory section state the problem you )ill solve the need you )ill fill or the OpainP you )ill alleviate! 6on$t shy a)ay from aggressive terms and phrases in this section1you )ant to grab the reader$s attention! 0or example let$s say you$re trying to commerciali%e a treatment for Al%heimer$s disease! "ou could say OAl%heimer$s disease is a gro)ing )orld)ide problem expected to affect Q number of people in the ?, alone by 2020! +urrently there is neither an effective diagnostic tool nor a recogni%ed cure for this crippling ailment )hich devastates not only those )ith the disease but their relatives and friends!P 7a&e people stand up and ta&e notice! .our solution -n this section state in general terms ho) you )ill solve the problem fill the need or alleviate the pain! +ontinuing )ith the Al%heimer$s example you could say O9ur solution is based on technology originally developed by and licensed from 7assachusetts ;eneral 8ospital! -t is based on using the same molecule to act as either a diagnostic test in con(unction )ith an 7>- machine or as a therapeutic cure! -nitial tests have provided very positive results for both applications and so far there have been no signs of toxicity in laboratory mice!P

.our tec nolog! and IP -n this section provide more detail about your technology! :xplain specifically ho) it )or&s but don$t overdo the technological details* the explanation should be comprehensible to an intelligent layman )ith some &no)ledge of the field! 'ell your audience if the technology is yours or licensed 2or optioned3 and if so from )hom and under )hat general conditions! 6escribe the status of your -P protection! What patents have been granted applied for )ill be applied for? ,upply the patent numbers or the application numbers if you$ve already published! -f you$re protected by other forms of -P include them! Be careful not to reveal any truly confidentialAproprietary information at this stage because it$s rare that you )ill have signed a +6A 2confidential disclosure agreement3 )ith the person receiving the plan! By same to&en don$t be so paranoid that you fail to discuss enough of your idea to help people understand the concept! .enture capitalists )ill rarely if ever sign a +6A1 if they do it$s usually in the due diligence or later phases of your relationship! "ou and your management team need to sit do)n 2preferably )ith an advisor mentor or -P counsel3 and decide ahead of time (ust ho) much you )ill reveal )ithout a +6A! Si6e of opportunit!7mar*et -f you$re creating a brand ne) mar&et it can be difficult to gauge its potential si%e! 0or example in the DM40s the estimated number of future computer purchases )as bet)een D0 and D00! -f you$re introducing a better technology into an existing mar&et the estimate can be more accurate! But regardless you and your potential investors need to feel comfortable that the potential mar&et is large enough to sustain a profitable business! )ustomers and o# !ou #ill reac t em Points to emp asi6e -n this section include )ho your target customers are your strategy for selling to them )hat channels you )ill use and )hen! 'he more your can demonstrate an understanding of your target mar&ets and customers the better! 'he ideal situation is to already have actual satisfied paying customers* this adds credibility )hen loo&ing for funding particularly if they supply letters of reference! 9f course this may not be possible in the early stages of your venture but never forget the po)er of a paying customer to ma&e potential investors feel good 2i!e! sign a chec&!3 )ompetition As )ith customers the better you &no) the competition the better you loo&! Who are your competitors? Are they selling the same or different technology? Who is already in the field and )ho are the li&ely ne) entrants? Are they both domestic and foreign? What are their strengths and )ea&nesses? Business model A business model is a general outline of the )ay your company )ill ma&e a profit and ho) long it )ill ta&e you to become profitable or at least become cash flo) positive! 'he most basic business model is simply producing a product or service and selling it directly to customers* if revenues are greater than production and business costs the company ma&es a profit! -n this section you need to explain ho) and )here you )ill design or manufacture your product 2in-house outsource to )hom etc! 3 as )ell as )hat the basis for generating revenue )ill be 2e!g! selling advertising as part of a search engine!3 -n addition you can use this section to explain your competitive advantage and )hy it$s sustainable in the long term! 6emonstrate your a)areness of the ma(or ris&s in each category 2technical mar&et business and environmental

ris&s3 and sho) that you$ve thought about )ays to minimi%e them )hen and if they arise! -n addition it loo&s good to investors if you can demonstrate that your management team is sufficiently experienced to deal )ith unpredictable ris&s and problems should they occur! 'his leads us to team! 4eam ?se this section to convince potential investors that they can trust you and your team )ith their money! 6oes your team# N have the &no)ledge experience diverse s&ill sets integrity drive persistence and passion re5uired to ma&e it happen in spite of the adversity and obstacles that are li&ely to arise along the )ay? N understand its limitations? Are you )illing to see& help and listen even if it means hiring your o)n replacement or boss? N )or& )ith solid experienced directors and advisors? Although important this section of the plan is only the first step in the convincing process! Personal interactions and the due diligence process also play an important role! 8inancial needs 'his section should include# N 'he amount of money the venture is see&ing and over )hat time frame N 8o) the money )ill be used N 'he ma(or assumptions involved N When you )ill achieve cash flo) brea&-even and profitability 6on$t discuss ho) much e5uity the team is )illing to give up for the investment needed! 'hat discussion hopefully )ill occur later on if the business plan slide sho) and elevator speech have gone )ell! 'he detailed financial calculations 2e!g! profit and loss balance sheet cash flo) statement use of funds3 along )ith detailed assumptions should be contained in the appendix! 'hese financials must bear out and be consistent )ith your statements throughout the plan! E'it strateg! 'he exit strategy details ho) investors )ill get their money bac& 2hopefully )ith a healthy return3 and exit your company! ,ome exit strategies options are# N -nitial public offering N 7ergerAac5uisition N Buyout by a strategic partner ,et ever!one on t e same page When the business plan is done ma&e sure that everyone on your management team understands it and believes in it! "ou )ant everyone on your team to be able to demonstrate a complete &no)ledge of both the technical and non-technical aspects of the business! -n other )ords your team members must not only understand their individual specialty but also understand and communicate the fundamental purpose goals and business strategy of the venture! -nvestors )ant to see the total pac&age! 0inally be passionate about your idea and your venture4 -f you$re not excited and passionate about your idea )hy should anyone else be?

4 e slide s o# 'he slide sho) is a Po)erPoint presentation given in front of investors! -t should be brief 2about 20 minutes3 punchy and tell your story clearly and succinctly! 7a&e sure it includes the ma(or components of your business plan but &eep the details to a minimum unless as&ed! ,ome general tips# N Geep it short! 'he audience )ill as& lots of 5uestions if they$re interested! "our (ob is to ma&e the presentation interesting enough that they &eep as&ing 5uestions and invite you and your team bac& for further discussions or send someone to your facility to see )hat you$re doing! N ,tay a)ay from techno-spea& unless there is a technologist in the room )ho as&s specific 5uestions! :ven then be careful not to lose the rest of your audience! ,ometimes it$s useful to schedule a separate meeting )ith the technologist after the initial presentation! N As& about the next steps in the funding process before you leave the room! N @earn as much as you can about your audience before the presentation and tailor it to their needs and interests! N >ehearse rehearse and rehearse4 ?se advisors mentors and each other during rehearsals to role-play as tough audiences provide honest feedbac& and prepare ans)ers to li&ely 5uestions ahead of time! N -f you$re using a pro(ector don$t handout the hardcopy until you are finished! N @oo& directly at the audience not at the screen behind you! N Gno) in advance ho) the e5uipment in the room )or&s 2very important43 N ,pea& slo)ly and clearly! N Ans)er 5uestions honestly! -f you don$t &no) the ans)er say so and tell them you$ll find out! N 9ne presenter is usually best1usually the team leaderA+:9! 8o)ever the leader should not ans)er all the 5uestions! 7a&e sure all team members get involved! N When ans)ering 5uestions don$t be defensive but don$t allo) people to steamroll you either! 4 e elevator speec Another important s&ill is to be able to explain your plan in J0 seconds or less 2the amount of time you might have riding an elevator )ith a prospective funder3! "our elevator pitch is a clear simple and concise description of the problem your venture solves ho) it solves the problem and the benefits involved! -t should also express your passion! -n person it can be used to get the listener to as& for more information or schedule a meeting! A good elevator speech isn$t an easy thing to pull off! Write it do)n revise it and practice it until you have it right! ?se your mentors and advisors for help* all team members need to &no) it cold!

8INAN)IN, A BUSINESS PLAN

'his critical section discusses the various forms of capital available to you their advantages and dra)bac&s and the ramifications of ac5uiring the funding for you and your venture!

-n this section you learn# N 'he different forms of capital including# R Personal debt R :5uity R ;rants R +ustomer advances R @icense payments R Ban& loans R >eal revenues and profit N 'hat not all money is the same1each form of funding comes )ith its o)n set of expectations obligations and responsibilities N What investors are loo&ing for in your venture?

4 e seven forms of capital ,even different forms of capital are available to you as an entrepreneur! We$ll go into detail on each form in a moment but first there are a fe) things you should &no) about capital! 8irst the money needed to start and operate your ne) venture can and usually does come from many different sources! ,ome sources are more relevant than others depending on )here your venture is in its life cycle# personal debt e5uity and grants usually come earlier )hile customer advances license payments ban& loans and revenues come later! ,ome sources are more difficult to obtain than others* for instance the large ma(ority 2greater than B0S3 of technology startups do not receive venture capital 2.+3 money! :ach source of funding has a different set of obligations and responsibilities that goes along )ith it! And lastly it does not al)ays ma&e sense to accept money (ust because it is offered! ,ome money isn$t good for your health1for example accepting money from unsophisticated angel investors )ho then try to manage your company* or from venture capitalists )ith a timeline and set of expectations very different from yours! 'his can severely affect ho) you operate your business1or even )hether you are able to operate your business at all! Personal debt

7ost ventures start )ith the founders$ o)n money! 9ften this means going into debt! 'he founder can max out credit cards ta&e a second mortgage borro) from )homever she can or loan her o)n savings to the company! While this is an easy option if you happen to be )ealthy it usually provides only limited funds1usually in the range of TD00G-T200G1and comes )ith the potential for personal financial ruin! "ou could lose your house and could end up ma&ing enemies out of friends if you can$t repay on them on time or )orse not at all! While this sounds terrible &eep in mind that entrepreneurship is all about ta&ing ris&s and that historically most ventures have been started )ith some of the founders$ o)n money! E9uit! :5uity financing is the purchase of shares of stoc& in return for money invested in the company! A company typically has no formal obligation to repay e5uity! "ou give your investor a piece of paper called a stoc& certificate in exchange for a cash investment! 'he catch is that the investor expects there )ill be a li5uidation event at some point your company )ill be sold or go public! 'he investors )ill sell their stoc& and hope to ma&e a big profit! @i&e all forms of capital e5uity has an upside and a do)nside! 'he upside is that investors share your vie)point because they ta&e the ris& )ith you! 'hey get their re)ard )hen you do! -f you need additional e5uity to gro) investors often have extensive contacts and can help! -nvestor cash can help attract top-notch management teams! 'he do)nside? 'he founder gives up a percentage of her company$s o)nership! ,he loses a measure of control and outsiders even have a say over her salary! 2Although this is not al)ays bad as having outside investors can help &eep you on your toes43 Another danger of e5uity is that a company can get into the Omore )here that came fromP syndrome al)ays loo&ing for investors but never ma&ing a profit!

People )ho can have an e5uity share in your company include# N .ourself1as mentioned above some founders invest their o)n money usually in the earliest stages! 0ounders usually have e5uity even )ithout putting in money ho)ever as they receive it for starting the company creating the technology etc! N 8riends" 8amil! and 8ools :888;this money is also early-stage and tends to be smaller in amount than angel or .+ dollars! 'he money is generally invested out of friendship and is based on less sophisticated or no due diligence! 0urther 00U0 investors are typically unable to help the founders )ith adviceAmentoring customer or other contacts recruiting etc! N Angels1angel investors are high net )orth individuals )ho often invest for both fun and profit! Angels usually invest from T2IG to TD00-T200G! Angel groups )hich consist of professionally managed angels banded together might invest up to TD to T2 million! N (enture capitalists1though you$ve probably heard a lot about them .+s fund a very small percentage of all startup companies! :ach .+ group has its o)n criteria regarding the industry it invests in the si%e of the investment the stage at )hich it )ill invest etc! 8o)ever almost all .+s invest significant dollars and are loo&ing for a D0x or more return on investment!

N Strategic partners1many ne) ventures form a partnership )ith a larger company 2particularly true in biotech!3 'he larger company may ma&e an e5uity investment 2usually for I20S of the company3! 'he partnership may sometimes involve a license or the large company may only )ish to have a O)indo)P on the technology and an option to license it or buy the company if things go )ell! Partnership money is usually invested after you$ve developed a proof of concept or prototype but sometimes the partner )ill produce or pay for the prototype itself! N 4 e public1an -nitial Public 9ffering 2-P93 is a li5uidity event! 'his is the part )here investors have an opportunity to get their money out hopefully )ith a significant gain! -P9s do not provide funds early in the life of the venture and normally only ma&e sense after the company has a history of real revenues and profits! ,rants ;rants are inexpensive# there is no interest charged no need to pay it bac& and you don$t give up any e5uity! 'here are t)o popular government programs that give grants to high-tech companies# the ,B-> 2,mall Business -nnovation >esearch Program3 and ,''> 2,mall Business 'echnology 'ransfer3! 'hese grants are distributed in t)o phases )ith the first providing up to TD00G to pay for a proof of concept and the second up to TD million for development! ,olicitations are usually t)ice a year* many )or&shops around the country provide information on applying for the grants! 20or a good explanation and more information on ,B->A,''> visit http#AAgrants!nih!govAgrantsAfundingAsbir!htm A )ooperative /esearc < $evelopment Agreement :)/A$A; is a grant in )hich a government lab )or&s )ith a company to develop or test a particular technologyAproduct! 'he government doesn$t provide any money to the company but +>A6As can be an excellent )ay to obtain s&ills and e5uipment and to test a product! 0or more information on +>A6As see http#AA)))!usgs!govAtech-transferA)hat-crada!html And then of course there is the )orld of private grants! 'here are numerous foundations and other organi%ations around the country 2including the /+--A3 that provide funds to technology entrepreneurs!! ,everal )ebsites are devoted to this topic1'he 0oundation +enter 2)))!foundationcenter!org3 is a good starting place! Business plan competitions provide another &ind of grant money! -f your school runs a business plan competition you$re probably already familiar )ith its benefits! /ot only do you get the chance to )in some hard cash for your business you have a motive to get your business plan )ritten and probably some guidelines to help you ma&e it )or&! )ustomer advances An often-overloo&ed source of capital is customer advances! -f a customer needs your product badly enough they may provide up-front progress or milestone payments prior to actual delivery of the final product! 8o)ever unless you are doing contract research or are running a product development company it$s rare to obtain an advance until the product or service has been at least partially developed! +ustomer advances rarely serve as start-up capital! License pa!ments

License pa!ments1up-front and milestone payments1are a useful source of capital! 'hey do not have to be repaid re5uire no interest payments and do not re5uire giving up e5uity! "ou do ho)ever have to give up some rights to the use of your technology! @icense payments may be paid at the very early stages of a company1generally as soon as you have applied for a patent! ,ome companies use licensing as a financing strategy by licensing their technology to mar&ets that they are not interested in or capable of pursuing!

Ban* loans Ban& loans are rarely a source of capital until a company has revenue and profits or at least significant physical assets that could be used as collateral for a loan! 'hat said loans have a fe) things going for them# there$s no dilution of o)nership as the original o)ners &eep it all! As long as the debt payments are made the o)ners give up no operational control! And the company has a strong impetus to turn a profit as soon as possible because the o)ners must ma&e cash to serve the debt and have access to additional credit! 'here$s a do)nside too of course# not all companies have access to debt financing* lenders )ant collateral in land e5uipment or a patent! -f the company doesn$t ma&e payments it loses the collateral! Another interesting thing to note about ban& loans# )hen you don$t need the money ban&s are happy to lend it to you! -f your need is great your ability to pay bac& probably isn$t so good and then they$re less li&ely to lend to you! /evenues and profits >evenues and profits are the holy grail of financing! 'hough self-funding may restrict rapid gro)th and outside investment or debt may be appropriate for you being able to use your profits to fund your company is the right position to be in! -t is possible to do this# one example is the B9,: +orporation )hich never too& outside e5uity yet has T2 billion in revenue and is still private and profitable! B9,: accomplished this by using real profits invested bac& in the business to gro) and prosper! & at are investors loo*ing forAfter all )e$ve said about the different forms of capital and )hat they mean to you and your venture ho) do you position yourself so that you loo& good to potential funders? "ou can get inside investors$ heads by thin&ing about the six criteria by )hich they assess businesses! 8ere are some basic 5uestions that an investor as&s in each of these categories! >evie) this list and see )hether your ideaAventure really has a chance of ma&ing it or perhaps doesn$t have )hat it ta&es! 1anagement. -s the management team proven? -f it$s not proven )hat are its attributes? 8o) can the missing elements be filled )ith additional seasoned managers? 8o) committed is this team to the business? Angels and .+s )ill loo& closely at your management team!

1ar*et. 8o) big is the mar&et for this product or service? 'ypically a .+ )ants to see a mar&et for a technology product that is in total greater than TD billion! A good mar&et is one in )hich customers feel real pain )here they )ill readily adopt your product because of an immediate and urgent need! +ompetition! -s this company the first to mar&et? -s it defining the mar&et? Will it be able to 5uic&ly gain mar&et share at least in a specific segment or niche? 8o) many competitors are out there? 8o) good are they? Product7tec nolog!! -s the product difficult to replicate? 6oes it have some proprietary position 2meaning patents or other intellectual property protection3? Will it ta&e the competition a long time to replicate )hat the company does? Abilit! to forecast results! 6oes the business plan present a credible story that suggests that the company can forecast results? 'he financial plan is a financial expression of your business strategy! -t sho)s the interrelation of timelines functions and hires and reflects a detailed understanding of the business!

& ! is a Business Plan Important/early all business experts agree on one thing# the importance of drafting a business plan! A lot of ne) businesses are carried a)ay and figure their passion and optimism are enough to build a successful company! 9thers say they )ere (ust too busy to develop a formal business plan! But operating )ithout a plan can prove even more time-consuming in the long run! 4 e benefits of aving a business plan 'he time you invest in your business plan )ill pay off many times over! ,ome of the most obvious benefits you can gain from business planning include

An opportunity to test out a ne) idea to see if it holds real promise of success A clear statement of your business mission and vision A set of values that can help you steer your business through times of trouble A blueprint you can use to focus your energy and &eep your company on trac& Benchmar&s you can use to trac& your performance and ma&e midcourse corrections A clear-eyed analysis of your industry including opportunities and threats A portrait of your potential customers and their buying behaviors A rundo)n of your ma(or competitors and your strategies for facing them An honest assessment of your company$s strengths and )ea&nesses A roadmap and timetable for achieving your goals and ob(ectives A description of the products and services you offer An explanation of your mar&eting strategies An analysis of your revenues costs and pro(ected profits

A description of your business model, or ho) you plan to ma&e money and stay in business An action plan that anticipates potential detours or hurdles you may encounter A handboo& for ne) employees describing )ho you are and )hat your company is all about A rKsumK you can use to introduce your business to suppliers vendors lenders and others

& at can go #rong #it out a business plan'he many benefits of having a business plan should be enough to convince you! But in case you$re still )avering consider )hat can go )rong if you don$t ta&e time to plan! "ou ris& >unning out of cash before you open your doors because you haven$t anticipated your start-up costs

7issing sales pro(ections because you don$t really &no) )ho your customers are and )hat they )ant @osing customers because your 5uality or service falls short Becoming over)helmed by too many options because you never too& the time to focus on a mission and vision for your company ;oing ban&rupt because you don$t have a rational business model or a plan for ho) to ma&e money ttp077###.dummies.com7 o#=to7content7# !=is=a=business=plan=important. tml

4op >? Business Plan 1ista*es

:very business should have a business plan! ?nfortunately despite the fact that many of the underlying businesses are viable the vast ma(ority of plans are hardly )orth the paper they<re printed on! 7ost =bad= business plans share one or more of the follo)ing problems# >. 4 e plan is poorl! #ritten! ,pelling punctuation grammar and style are all important )hen it comes to getting your business plan do)n on paper! Although investors don<t expect to be investing in a company run by :nglish ma(ors they are loo&ing for clues about the underlying business and its leaders )hen they<re perusing a plan! When they see one )ith spelling punctuation and grammar errors they immediately )onder )hat else is )rong )ith the business! But since there<s no shortage of people loo&ing for capital they don<t )onder for long--they (ust move on to the next plan! Before you sho) your plan to a single investor or ban&er go through every line of the plan )ith a fine-tooth comb! >un your spell chec&--)hich should catch spelling and punctuation errors and have someone you &no) )ith strong =:nglish teacher= s&ills revie) it for grammar problems! ,tyle is subtler but it<s e5ually important! 6ifferent entrepreneurs )rite in different styles! -f your style is =confident = =crisp = =clean = =authoritative= or =formal = you<ll rarely have problems! -f ho)ever your style is =arrogant = =sloppy = =fol&sy = =turgid= or =smarmy = you may turn off potential investors although it<s a fact that different styles appeal to different investors! /o matter )hat style you choose for your business plan be sure it<s consistent throughout the plan and that it fits your intended audience and your business! 0or instance once met a conservative 7id)est ban&er )ho funded an -ndian-Vapanese fusion restaurant partly because the plan )as--li&e the restaurant concept--upbeat trendy and unconventional! @. 4 e plan presentation is slopp!! 9nce your )riting<s perfect the presentation has to match! /othing peeves investors more than inconsistent margins missing page numbers charts )ithout labels or )ith incorrect units tables )ithout headings technical terminology )ithout definitions or a missing table of contents! 8ave someone else proofread your plan before you sho) it to an investor ban&er or venture capitalist! >emember that )hile you<ll undoubtedly spend months )or&ing on your plan most investors )on<t give it more than D0 minutes before they ma&e an initial decision about it! ,o if they start paging through your plan and can<t find the section on =7anagement = they may decide to move on to the next more organi%ed plan in the stac&! A. 4 e plan is incomplete! :very business has customers products and services operations mar&eting and sales a management team and competitors! At an absolute minimum your plan must cover all these areas! A complete plan should also include a discussion of the industry particularly industry trends such as if the mar&et is gro)ing or shrin&ing! 0inally your plan should include detailed financial pro(ections--monthly cash flo) and income statements as )ell as annual balance sheets--going out at least three years!

B. 4 e plan is too vague! A business plan is not a novel a poem or a cryptogram! -f a reasonably intelligent person )ith a high school education can<t understand your plan then you need to re)rite it! -f you<re trying to &eep the information vague because your business involves highly confidential material processes or technologies then sho) people your executive summary first 2)hich should never contain any proprietary information3! 'hen if they<re interested in learning more about the business have those sign incompete and nondisclosure agreements before sho)ing them the entire plan! WBe fore)arned ho)ever# 7any venture capitalists and investors )ill not sign these agreements since they )ant to minimi%e their legal fees and have no interest in competing )ith you in any case!X C. 4 e plan is too detailed! 6o not get bogged do)n in technical details4 'his is especially common )ith technology-based startups! Geep the technical details to a minimum in the main plan--if you )ant to include them do so else)here say in an appendix! 9ne )ay to do this is to brea& your plan into three parts# a t)o- to three-page executive summary a D0- to 20-page business plan and an appendix that includes as many pages as needed to ma&e it clear that you &no) )hat you<re doing! 'his )ay anyone reading the plan can get the amount of detail he or she )ants! D. 4 e plan ma*es unfounded or unrealistic assumptions! By their very nature business plans are full of assumptions! 'he most important assumption of course is that your business )ill succeed4 'he best business plans highlight critical assumptions and provide some sort of rationali%ation for them! 'he )orst business plans bury assumptions throughout the plan so no one can tell )here the assumptions end and the facts begin! 7ar&et si%e acceptable pricing customer purchasing behavior time to commerciali%ation--these all involve assumptions! Wherever possible ma&e sure you chec& your assumptions against benchmar&s from the same industry a similar industry or some other acceptable standard! 'ie your assumptions to facts! A simple example of this )ould be the real estate section of your plan! :very company eventually needs some sort of real estate )hether it<s office space industrial space or retail space! "ou should research the locations and costs for real estate in your area and ma&e a careful estimate of ho) much space you<ll actually need before presenting your plan to any investors or lenders! E. 4 e plan includes inade9uate researc ! Vust as it<s important to tie your assumptions to facts it<s e5ually important to ma&e sure your facts are )ell facts! @earn everything you can about your business and your industry--customer purchasing habits motivations and fears* competitor positioning si%e and mar&et share* and overall mar&et trends! "ou don<t )ant to get bogged do)n by the facts but you should have some numbers charts and statistics to bac& up any assumptions or pro(ections you ma&e! Well-prepared investors )ill chec& your numbers against industry data or third party studies--if your numbers don<t (ibe )ith their numbers your plan probably )on<t get funded! F. .ou claim t ere+s no ris* involved in !our ne# venture! Any sensible investor understands there<s really no such thing as a =no ris&= business! 'here are al)ays ris&s! "ou must understand

them before presenting your plan to investors or lenders! ,ince a business plan is more of a mar&eting tool than anything else -<d recommend minimi%ing the discussion of ris&s in your plan! -f you do mention any ris&s be sure to emphasi%e ho) you<ll minimi%e or mitigate them! And be )ell prepared for 5uestions about ris&s in later discussions )ith investors! G. .ou claim !ou ave no competition! -t<s absolutely ama%ing ho) many potential business o)ners include this statement in their business plans# =We have no competition!= -f that<s )hat you thin& you couldn<t be further from the truth! :very successful business has competitors both direct and indirect! "ou should plan for stiff competition from the beginning! -f you can<t find any direct competitors today try to imagine ho) the mar&etplace might loo& once you<re successful! -dentify )ays you can compete and accentuate your competitive advantages in the business plan! >?. 4 e business plan is reall! no plan at all! A good business plan presents an overvie) of the business--no) in the short term and in the long term! 8o)ever it doesn<t (ust describe )hat the business loo&s li&e at each of those stages* it also describes ho) you<ll get from one stage to the next! -n other )ords the plan provides a =roadmap= for the business a roadmap that should be as specific as possible! -t should contain definite milestones--ma(or targets that have real meaning for your business! 0or instance reasonable milestones might be =signing the D00th client= or =producing D0 000 units of product!= 'he business plan should also outline all the ma(or steps you need to complete to reach each milestone!

4op >? Business Planners < 4 eir /atings

Pricing

)onclusion
Writing a business plan is hard )or&--many people spend a year or more )riting their plan! -n the early drafting stages business plan soft)are can be very helpful! But the hard part is developing a coherent picture of the business that ma&es sense is appealing to others and provides a reasonable road map for the future! "our products services business model customers mar&eting and sales plan internal operations management team and financial pro(ections must all tie together seamlessly! -f they don<t you may not ever get your business off the ground!