Essentials towards planning for business
06 July 2000
by Stever Robbins
Q: I want to know what questions I need to answer in my business plan. Do you have a format I can follow to write it?
A: Address your audience's questions. Professional investors want to know how big the opportunity is, why your team will make it happen and how much money you need. Help them know if they're not the right match as soon as possible so you don't waste their time and yours. Here are ten elements you should remember to include in your business plan:
Begin your plan with an executive summary, which you should write last. The summary condenses your main points into two or three pages so investors can quickly decide if the opportunity suits them enough to keep reading.
What are you selling? Describe your product, giving enough information to imagine the product. Eliminate the technical details -- if you can't get the idea across quickly, you haven't thought it through enough.
Who buys, why and how? Who are your customers? What need are you filling? Give numbers and sources to give a feel for the opportunity size. For example, "Tractors Quarterly, May 2000, says 20,000 tractor manufacturers need 15 hours to change production lines. Our patent-protected TractorGizmo™ reduces that to 12 seconds, saving an estimated $55 billion yearly."
Forget markets such as "suburban teenagers" -- that's way too broad. Address the market you can reach, and give your plan for reaching it. It isn't feasible to reach all suburban teenagers, but teenage boys who play multiplayer Internet-enabled games might be easy to reach through targeted publications and Web sites. Say so and put the cost of advertising in those magazines and Web sites into your financials.
Mention the "value proposition" -- how valuable your product is to your customers. Cuticle clippers fill a real need, but $1,000 clippers won't sell. Amazingly, $15 cuticle clippers sell easily. Cuticles are evidently a $15 problem for many people.
Show where the money comes from. Gillette loses money on razors, but makes money -- lots of money -- selling blades. Discuss who pays you, how much they pay and how often. Check out these real-world scenarios for examples of different business models.
Introduce your team and advisory board. Good ideas are common; talented managers aren't. Show you have the right team for the idea by highlighting the relevant background of your team members. If you make ball bearings, emphasize your experience in manufacturing, not your time as a college newspaper editor. (Yes, this really happened.)
What's your competition and why will you win? Competition may not be a company. Personal checkbook program Quicken considered pencil and paper, not other computer programs, the biggest competition.
How much money do you have? Where did it come from? How much do you want? How will you use it? What return are you promising investors? Include two to five years of financial projections (called pro formas). Even if you can't predict the future exactly, creating the projections forces you to identify and double-check your assumptions.
Eventually you'll need to get things done. Describe how you'll deliver your product, the problems you expect and how you'll master them. If your business allows 100,000 people a year to order custom-made suits by telephone, here's where you say how you'll actually make and deliver 100,000 suits.
How will you grow? A diner isn't run the same way as a 250-table restaurant. Explain your growth plans and how your idea scales.
How are you doing so far? If you're already under way, talk about your progress. In any event, lay out the next few months' milestones so you and your investors can track your progress.
As an entrepreneur, technologist, advisor and coach, Stever Robbins seeks out and identifies high-potential start-ups to help them develop the skills, attitudes and capabilities they need to succeed. He has been involved with start-up companies since 1978 and is currently an investor or advisor to several technology and Internet companies including ZEFER Corp., University Access Inc., RenalTech, Crimson Soutions and PrimeSource. He has been using the Internet since 1977, was a co-founder of FTP Software in 1986, and worked on the design team of Harvard Business School's "Foundations" program. Stever holds an MBA from Harvard Business School and a computer science degree from MIT. His Web site is at http://www.venturecoach.com.