Questions to ask before writing a business plan
Posted Wednesday, August 14 2013 at 17:50
- Kindly note: the multi-page documents that entrepreneurs pushed at meetings are gone.
The stodgy business plan—that multipage printed document that entrepreneurs used to hand out at meetings with venture capitalists—has gone the way of the typewriter and Rolodex.
These days, entrepreneurs are expected to lay out their strategies in slick Power Point presentations, complete with colourful pictures and informative charts.
But while it’s true that the format of the business plan has changed, the substance most certainly hasn’t. If you’re headed out to raise capital for your company, you’ll still need to address key issues about the size of your market, the experience of your team, and your long-term financial goals.
In the wake of the financial crisis, persuading potential financiers that your plan has legs will be especially challenging.
Here are the key questions you should ask yourself before you fire up Power Point and start preparing your slides.
1. Have I proven that I’m filling an unmet need in the market?
As the economy still struggles to turn around, entrepreneurs are under pressure to gauge the strength of their market—in detail—before they go out and raise capital.
Try test marketing your product on a small scale so you can realistically forecast how much you can sell in the future, suggests Edward Hess, professor and Batten Executive-in-Residence at the University of Virginia Darden School of Business.
“Entrepreneurial funding is moving away from formal business plans to having to prove that customers are actually going to buy what you’re trying to sell,” Hess says.
2. How will I acquire and retain customers?
You’ll also need to prove that your idea isn’t a fad.
“Understanding how customers are going to be found, acquired and retained is critical,” says Alison Berkley Wagonfeld, operating partner for Emergence Capital Markets in San Mateo, Calif.
“Some companies might say, ‘We’re going to buy search words,’ but once they get somebody to their website, how are they going to sell them a product?”
3. Why am I better than the competition, both current and future?
If you have direct competitors, you’ll need to devote several slides to depicting exactly how you plan to differentiate yourself. If you have no competitors, you need to explain that, too, Wagonfeld says.