What is the most critical need for a startup? Funding? Customers? Market opportunity? Marketing strategy? Proven management? You need ALL of these elements, and the surest method to outline your strengths is through a solid business plan.
A good business plan presents a compelling story of the opportunity, the product or service, the market, competitive advantages, barriers to entry and competition, and management’s ability to implement what they say in the plan.
Business plans serve two functions: investment and a focusing tool. A business plan is essential to raise equity funding, be it angel or VC, and debt financing. A business plan is also a document that forces management to put its thoughts into words, articulating the opportunity, expertise and passion of the entrepreneur and his/her team.
The medium and delivery of a plan may change (is changing now) over time because of electronic media and the Internet, but the essence remains the same:
I guarantee you that investors want those questions answered succinctly and concisely in your plan. Make the plan 10 pages or less. They don’t care as much about your financial projections as many entrepreneurs think. It’s the logic behind the projections that are key – what are the revenue streams, how is the product or service priced, and what does it cost to achieve significant sales and market share?
You need to show in your plan that you are smart, that you know the technology, but also that you understand the market, the industry, your competition, and your skills. Equally important is understanding what you don’t know, where the holes are, and how to seek team members and advice that can launch you ahead.
Investors read your executive summary, and, if you have presented this well, they will flip to the management and then the market section. Technology or the actual product is usually the last section of the plan to capture the investors’ attention.
So, go ahead and write your business plan, but get some advice along the way from people who know. If you don’t want to use an outside consultant to help you craft your plan, then submit drafts for review to select individuals who are experienced with entrepreneurship, funding, and marketing.
And, when it comes to investor presentations, make the slides few and meaningful – 12 to 15 slides should do it. They don’t need to be fancy, but they need to be attractive and readable. And, when you present to investors, show some enthusiasm, salesmanship and passion for your business. Investors back the jockey (management), not the horse (the product), or even the racetrack (market). Rehearse your presentation and get a coach – someone knowledgeable and experienced in the art.