Before You Buy That Business Plan Template
// November 9th, 2009 // View Comments // business startup
Writing a business plan can be a daunting task. Unless you earned an MBA and learned how to build a business plan from the ground up, you may be tempted to take a shortcut.
Buying business plan software or a business plan template is seldom the right choice.
Don’t get me wrong, if you are just looking to put your business strategy on paper to use as a “play book” for your management team, then consider buying a business plan template or purchasing business plan software.
However, if you have any intention of using your business plan to raise startup capital from an investor, I’d strongly recommend not using a business plan template or software system.
Why?
Because I get to see a lot of business plans every month. Some are from friends who actively invest in startups and small business. Others come directly from entrepreneurs looking for advice, input and even funding. Guess where the templated business plans go? In my electronic (or physical) trash bin. And I’m not the only one.
“An entrepreneur who wants to short cut the business planning process by buying a $300 template or software is going to try and shortcut other mission-critical strategic processes. That entrepreneur is a risk factor to our portfolio”.
That’s a quote from an Angel investor friend of mine.
So if you’re looking to write a business plan to raise capital, consider the following tips.
1. Get the facts right: So many entrepreneurs go about the business plan writing phase as follows. “I’ll write my business plan and submit it to VCs. If that doesn’t work, I’ll send it out to some Angel networks. If that fails, I’ll show it to some bankers. If that doesn’t work, then I’ll…” That’s not how it works! The investor world is not a pyramid structure with VC’s at the top and the loan shark at the bottom. Each investor group is a separate silo. VC’s are their own silo. The rules of engagement with them are unique to them. From the qualifications to deal structure to exit strategy, VC deals look, act and smell like VC deals. The same is true of the other silos. So get your facts right and don’t assume that one-size (of business plan) fits all.
2. Ask yourself who your target audience is: Is your ideal investor a VC, a sophisticated Angel investor, a wealthy friend/family member, a grant committee or banker? Each of these audiences require a very different business plan and funding offering. Think about it. Does a banker care about the same things a VC does? Absolutely not! So how can the same document be given to both parties? Do some homework on each group’s M.O, needs and requirements. If you do your homework correctly, you’ll find yourself leaning toward a single target audience.
3. Build your business plan around your target audience: If you qualify for VC funding, then develop your entire business plan and presentation around their needs. Instead, if your audience is a grant committee, then cater to their needs. Keep in mind that only a fraction of 1% of all business plans get VC funding. About the same percentage earn Angel funding. NEWS FLASH – The number of VC’s who provide seed funding to companies can be counted on one hand. A majority of them focus on $20 million to $200 million dollar companies looking for significant market expansion.
4. Get expert guidance: Find someone in your target audience to mentor you and review your business plan as it takes shape. If you are going after banks, find a banker to mentor you. If you are going after friends and family, find a trusted high-net-worth family member to do the same. Let your target audience tell you how well your business plan is resonating with them. It will keep you from going too far down the path only to find that your business plan isn’t working to achieve it’s objective.
5. “Get real” on valuation: One of the big reasons a lot of good business plans go unfunded is because the entrepreneur has over-valued their company. You have big dreams and goals for your company. We get that. However, when it’s at the idea/seed stage, your company is probably not worth ten million or even a million bucks. Don’t go to the market asking for $100,000 of investor capital in exchange for 5% of your company at the seed stage. I don’t care if your company is the next facebook or Coca Cola. It isn’t yet. Your investor is going to need a significant position in your company to provide you with seed funds of $100,000. Don’t worry, as you perform, you can buy back or earn back your equity. A good legal and capital sourcing advisor can help you structure a win-win relationship, but get real on valuation. You’ll ensure a better funding event.
6. Have a Plan B: The reality is that we live in “interesting” economic times. Even some of the best business ideas and management teams are sitting on the sidelines unfunded right now. A good strategic plan should include a play book for “when we get funded” as well as a play book for “if we don’t get funded”. Be wise and figure out how you can get your company up, running and generating revenues without investor capital. That will dramatically improve your chances of success (and long-term funding).
Questions, comments or objections? That’s what the comment box below is for 
