Gear the Plan to the Purpose
Some business plans seek investors, others support applications for a loan. Business plans used internally to manage a company won’t need the polish to present the company to outsiders. On the other hand, if the plan seeks the blessing of a VC or angel investor, it must sell an idea, a team, and a market to financial backers. The goal of a good business plan is to make sure it fits the needs and objectives of a new and growing startup.
Research and be Realistic
It’s crucial in developing a business plan to research the market for the product or service. It should be ahead of the curve technologically and conceptually. If the plan calls for millions of dollars of investment, it should be backed by a management team with a successful track record in the field.
Include a Specific Road Map
Every good business plan should include tasks, deadlines, dates, forecasts, and budgets. It should have tracking mechanisms to show pass/fail milestones.
Separate Facts from Assumptions
Business plans represent best guess estimates by smart people. But even the smartest people can be wrong. Investors like to know what the key assumptions are in the plan. This lets them accurately assess risk, which is key to evaluating the plan and how much to invest.
Review and Refine
A good business plan evolves over time. Experienced people need to read it. Marketing people, bankers, engineers, researchers and potential consumers—all should be allowed to make suggestions. Frequent reviews are necessary for refinement. The business plan must be allowed to breathe in an atmosphere of change.
Investors Hunger for True Innovation
Today’s investors are not as eager to take risks as they were during the dot.com bubble. Good deals are scarce and investors want a team with a really innovative idea. Improvements on “me too” products/ideas are far less attractive than those that push the envelope.
Proven Business Metrics Are Favored Over Simple Projections
Given the increasing challenges in moving a product from development to market, investors are looking for gauges and yardsticks that show measurable results. Market trajectories must be clearly defined and be able to dovetail into existing systems. Investors want to score quickly in today’s fickle and fast-changing market. That means showing how to build revenue streams and building customer loyalty. Investors expect to see a projected timeline of success in a vertical market–possibly with a prototype–before going broadly horizontal.
Entrepreneurs value ownership, Investors value success
In today’s hyper competitive markets, entrepreneurs must show investors how they will assess their risk and how their plans to reduce it differ from other companies’ risk aversion strategies. It’s important to show that the entrepreneur is not only aware of minefields, but an approach that adroitly sidesteps them.