Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

Entrepreneurs, When Developing Your Business Plan – Sweat the Details

Most business plans, developed by first time entrepreneurs, are light on substance.  That is, they generally lack the details required to make this document an investor focused business plan, or provide any real value to themselves or their investors.  On the other hand, it is the details of a business plan that will help these same entrepreneurs through the funding process and at the same time provide their start-up company with the proper background information to make sure that they are ultimately successful in the market.  So, when developing your start-up company’s business plan, make sure that you sweat the details. This will serve you well in the short term during your fund raising activities and in the long term to insure your start-up company and its technology, product or service offering remain competitive in the market. This article addresses some of the reasons you need to sweat the details in developing your start-up company’s business plan.

Developing a Investor Focused Business Plan Takes Time

Most entrepreneurs want to start out day one writing their business plan.  While this may seem like the most appropriate logical first step, in reality, you need to begin developing your business plan by doing business planning.  Doing the appropriate business planning upfront, will ultimately save you time in the long run.  Much like an architect that develops an appropriate plan to build a quality house, you need to do the appropriate amount of due diligence and planning to develop an investor quality business plan.  

Developing a business plan ultimately takes time, a lot of time.  This is the reason many entrepreneurs want to skip this activity.  On average, it takes about 300 hours to develop an investor quality business plan, but by doing so you will ultimately learn more about your business proposition and your start-up company than you ever could by not developing an investor focused business plan. The business planning and the business plan development process will allow you to identify road blocks, target the appropriate markets, and ultimately uniquely position your company in the market.  The value that you receive by going through the due diligence process, doing business planning, and finally writing your business plan will pay you back, ten times over when you begin to present your start-up company to potential investors. So take the time to develop an investor focused business plan. It is definitely worth your effort.

Developing a Quality Business Plan Requires the Details

A quality business plan requires details. From the market size (in units), to the cost of goods sold, to competitor positioning, ultimately, a quality business plan will have the appropriate amount of details to address all of the issues facing your start-up company.  On the other hand, the lack of details can hurt you both in the short term and long term.  In the short term, a business plan, being thin on details, will not serve you will when securing funding from your potential investors.  Not knowing your markets, your competitors, or financial pro forma projections, will raise a definite red flag with your investors.  They will question whether you really know your target markets and if ultimately you are the one that can lead a start-up company to success in the market. In the long term, by not having developed the appropriate amount of details in your business plan, you will not have a strong base in which to move forward in the market.  This can cause serious problems in the future for your start-up company and its technology, product or service offering, as unforeseen road blocks can result in serious issues in the market. Also, not having developed a quality business plan with the appropriate amount of details, will not allow you address new competitors in the market and uniquely position your company with a long-term competitive advantage in the market.  Finally, by not knowing the details and not having memorialized them in your business plan you will ultimately not have a jumping off point in which to move forward, as the market and competitive landscape changes and you need to address new unforeseen issues.  Therefore, if you are going to spend the time to develop a business plan, and you should, sweat the details.  This will benefit you in the short and the long terms.

 Details will Provide Your Start-up Company with Direction

More often than not, when a first time entrepreneur develops a business idea or concept they do not really know all of the required details involved in both developing their technology, product or services offering and bringing the start-up company successfully to the market.  By going through the business planning process and ultimately developing the details of your business plan, you learn what direction to take your start-up company and how to roll out your start-up company’s technology, product or service offering to the market.  This can include:

  • What markets to address?
  • Which product features and functions to introduce first?
  • How to position your start-up company against your competitors?
  • What the “value” of your technology, product or service offering is to your customers?
  • What market channels will be best for your start-up company?
  • What is unique about your start-up company’s business model?

 All of these items will provide your company with direction and will be uniquely addressed when developing the details of your start-up company’s business plan. Ultimately, the final direction in which to move your start-up company and its technology, product or service offering will be a combination of the details of all of the above and more.  Also, in many cases, by developing the details of your business plan, you will often take a new direction, not originally contemplated when you developed your business idea or concept. This will usually serve you and your start-up company well, as by developing the details, you now know with certainty and conviction which direction to take your start-up company.  This will provide you with the highest probability of success in the market.

 Details will Provide You with Confidence in Front of Potential Investors

When presenting in front of sophisticated investor, you will be barraged by many questions.  Having developed a detailed business plan will provide you with the necessary confidence in which to address these same questions.  On the other hand, if you have not developed a detailed business plan, many of the questions you will receive from potential investors will result in your stumbling and stammering searching for an appropriate response. With the details of your business plan in tow, you will, more often than not, be able to answer all of the questions of these same sophisticated investors.  This will not only provide you with confidence, but it will give these same investors the confidence that you know what you are talking about and that you are an expert in the field you are addressing with your technology, product or service offering.  This perceived expertise and confidence goes a long way with potential investors. They need to know that they can count on you to know what you are doing and why you are doing it.  Having developed a detail business plan facilitates you and your start-up company with your potential investors.

Sophisticated Investors will Expect you to Know the Details

From the details of the market growth projections, to the gross margins of the financial projections of your start-up company, sophisticated investors will expect you to know all of the details of your business plan.  This is a daunting responsibility, but having already developed a detailed business plan, you have a firm basis in which to move forward.  The trick here is to be able to recall all of this detailed information while you are on your feet presenting to these same investors.

Today, more often than not, potential investors will not have read your business plan.  Therefore, they do not know the details of your business plan nor do they have any impression of you or your start-up company.  This is where knowing the details of your business plan, and being able to recall this information, in a sometime hostile environment, will provide you with instant credibility with your potential investor base.  The more you know about the details of your business, the more you will impress these same investors with your knowledge, and expertise in your field.   Also, from an investor’s point of view, they will expect you to know all of these details. After all, they are counting on you to develop and run a successful company, and therefore, you need to know all of the details when presenting your business plan in front of potential investors.   

As discussed, when developing your business plan, you need to sweat the details. By doing so, you will not only learn a lot about your start-up company and the business you will be addressing, you will also develop a level of confidence, not available without sweating the details of an investor focused business plan.  In addition, often by developing a detailed, investor focused business plan, you will create a new direction in which to take your start-up company which can facilitate your ultimate success in the market.  Finally, by having put in the time and effort required to develop a detailed business plan, you will substantially increase your knowledge base and at the same time become an expert in the market. This will not only provide you with confidence in front of your potential investors, it will provide you a solid basis in which to recall detailed business plan information while presenting to these same investors.  So, when developing your business plan, sweat the details, it will serve you well in the long run.

This information was taken from Robert’s new book: “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies”.  Available at www.amazon.com.  For more information on the book go to http://www.carlsbadpublishing.com

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July 13, 2009 - Posted by | Business Development, Business Planning, Business Plans, Venture Capital, venture finance, Venture Funding

2 Comments »

  1. Very informative blog Robert!

    As someone who is about to write a business plan for a new venture, it’s great to be reminded of the importance of “attention to detail”. Until a business owner has a complete, detailed plan for their potential business and it’s place in the market, they have no business launching it in the first place.

    It is yet another reason why 80% of new businesses fail in the first five years.

    Comment by Marcus Thompson | July 13, 2009 | Reply

  2. Detailed planning will help you to better predict the likely situation of your business. Thank you.

    Comment by jonathan | July 20, 2009 | Reply


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