More on Business Model and Business Plan!

With the new year, let’s talk about refreshing your Business Model and Business Plan. It’s a crime to work so hard on writing a business plan, only to sabotage your chances of getting funded by omitting or shortchanging the key components. When a financier, board member, or key executive assesses your plan, they need to see the 10 topics I’ll be covering this week. The problem is, many businesses plans I’ve read make the same mistakes. Getting it right conveys that you know where your business is going, and you know how to get there. Here’s the first three areas you’ll need to nail to prove you’re building a success story. 1) Company Overview: A few concise and compelling sentences describing your company’s purpose/goal. The Mistake: More often than not, the company’s purpose/objective is vague, common, not compelling. 2) Pain. Identify the specific market pain you will reduce or remove. At the same time, explain why your product or service is crucial. The Mistake: Some entrepreneurs don’t properly address pain. For example, a social media company recently said it didn’t address pain. I disagree. One of the draws to social media is to feel you are expressing yourself and part of something larger than yourself. Feeling invisible or isolated is one of the key human pains. Voila. 3) Solution. Explain in detail what your solution is to the market pain and exactly how it works. The Mistake: Missing the mark on this is a fast ZERO on results. 4) Company Info: List your location, when you founded your company, the number of employees, and provide short bios of key team members (both on staff and board of directors/advisory board if applicable). No one expects you to have a fully fleshed-out team in the early days, but a skeletal team supplemented with advisors is vital. The Mistake: One and two person teams simply don’t demonstrate your ability to enroll others in your vision. As a general rule of thumb, try to have at least five people in this section 5) Financial Info: Describe your funding history, the total amount of money sought, the source of dollars sought (venture capital, angel investors, loans, grants, etc.), the anticipated use of funds, last year’s revenue, a five-year revenue forecast, monthly burn rate, projected cash flow positive date. Entrepreneurs always ask me why five years of fictitious revenue estimates matter. The answer is because financiers want to know how ambitious you are. The Mistake: Pie-in-the-sky financials. Be sure to back up your projections with how you expect to achieve them. 6) Product. A short paragraph explaining the status of your product: complete and in production, in early trials, etc. It’s okay if you’re in early trials, or even if you only have a killer demo. The Mistake: Not helping the reader understand how you’re going to get to a full-fledged product and when. 7) Defensibility. Explain how your intellectual property or market position will be protected from competitors and how you’ll mitigate risk for financiers. You also need to address patents in process, the key risks with your company, and how you’ll help to mitigate them. The Mistake: Not demonstrating that you’ve considered these topics, and not having thoughtful answers.