Every business plan, be it in the entertainment industry, technology or even farming, should follow the same model to yield any positive results. In this post, I cross over to business gurus in other fields for advice on how to create a compelling document.
Jason Nazar is the Co-founder and CEO of Docstoc.com, an
online resource for small businesses that hosts professional documents and
other productivity tools. He is also the creator of Startups Uncensored, a
technology conference in California that brings together investors, techies and
entrepreneurs. In this lecture, Nazar explains the importance of a business
plan and how to effectively use one. A business plan should help you:
- Raise money
- Find partners
- Get others interested in your idea
According to this Internet business guru, every business plan should address these ten questions to be successful in achieving one of the purposes above.
- In a very simple way, explain what is the product or service so that even a 5th grader can understand it. One should be able to get the concept in 30 seconds or less.
- Explain what is unique about the business and what makes it better than the others that provide the same service.
- Show that there is a market opportunity. For venture capitalists mostly, it is important to show whether there is a big market, how fast it is growing and how much money is spent in the market as well as who your competition is.
- Explain how you make money in simple terms. For example, is it a subscription service, one-off sales or supported by ads.
- Describe what the long-term vision or strategy for the business is as well as the milestones and key metrics for this time.
- You should be able to demonstrate how you will sell or market your product.
- The amount of capital you need to raise to reach profitability or to prove the metrics that will raise you more money for a liquidity business.
- Include your management team in your plan and show why your background and skills exclusively qualifies you to start the business.
- Projected financials for 3 years.
- Preliminary valuation of your company. The market valuation of your new business/idea is simply what people are willing to pay for it.
Del Foit is an entrepreneur and an award winning business school instructor at the Rady School of Management, UC San Diego. He has over 30 years of experience in medical diagnostics and biotechnology.
During this presentation, Foit explains what a good business plan should consist of. I found it especially interesting when he discussed the 4 anchors of superior business opportunities. Your business should be:
- Creating or adding value to the customer or end user.
- Solve a problem for which someone is willing to pay a premium.
- Robust market, margin and moneymaking features. He recommends a market that is large enough ($50 million+), high growth (20 percent+), high margin (40 percent +), early free cash flow, high profit potential and attractive realizable returns for investors.
- A good fit with the founders and management team at the time and marketplace and with the risk reward balance.
It is very interesting to see that experts emphasize on having a simple plan that is easy to understand. Gone are the days when the business plan had to be over 40 pages explaining every single complex detail of the business.
These gentlemen also urge one to consider the risk and come up with risk mitigation strategies, which assure the investors that you know your market and opportunity really well.