Since we are on the topic of business plans today, I'm inspired to share another tip on how to improve them as a funding tool.
Long ago, back in the fall of 1986, I had just completed my business degree and was looking for a startup gig. Then one fateful morning the telephone rang. It was a couple of electrical engineers I had done some work for that spring as part of my university's student-run small business consulting group. This time they wanted me to help them write a business plan. Since they were working on some innovative stuff with inverter technology, I jumped at the opportunity. In lieu of a real salary at the beginning I was given a small stipend and block of equity in their company. This motivated me even more than a pay check.
Within a few weeks of starting with them, it was decided that the five key officers would travel to San Francisco to exhibit at the Macintosh Show at the Marconi Center. Our initial product was a UPS (uninterruptible power supply) for the Macintosh computer which back then had strong market share. We called it the MacUPS. At the show we met all the prospective distributors for our product as well as the people publishing the various Macintosh magazines. All of them loved the MacUPS prototype we had brought for demonstration purposes.
Then the light bulb went on!
Since there was such a high concentration of Mac distributors at the show why not ask them all for written evidence of their interest in carrying our product? So over the next two or three days, it became my responsibility to solicit letters of interest. In most cases, they supplied them. In a few cases, because they were understaffed and overworked, I volunteered to write their letter for them. Once the draft was approved it was printed out on their letterhead and finally signed by a senior officer of their company.
After returning home, I decided to put the 10 best letters at the very front of the business--before even the executive summary. The plan ended up winning us $545,000 in venture capital funding which back in 1987 was some serious coin.
Don't miss opportunities like this at the next trade show or industry conference you attend to provide proof of genuine market interest to investors.
I have been following a long thread on a popular forum about the importance of business plans in raising capital. Many frustrated capital seekers blame their business plans. Then of course, the business plan writers, who always outnumber them two to one, tell them that they are correct and launch into pitches for their services.
If you have been trying to raise money for over 6 months without success, here are a few things to consider.
1. Maybe it's not the business plan's fault?
Instead, maybe it's you. Maybe you and your team are the problem in the investors' minds. Sadly, if this is the case, they will almost never tell you because they want to avoid hurt feelings and possibly an unpleasant scene.
People are like that. Most are wimps about being frank if it may result in wounded feelings.
2. Maybe your idea is really not all that compelling? (This is the case 9 out of 10 times.)
Unfortunately, everyone wants to be supportive to aspiring entrepreneurs. So they shower you with fake encouragement. "What? You invented a new way to butter toast? That's fantastic. You'll make millions! Go get em, Tiger! Best of luck to you."
A few people see through this nonsense. Most don't want to face that they are being lied to and delude themselves into thinking it's the business plan's fault. It almost never is.
Bottom line: if both you and your idea were as good as you thought, you might have the money already. So you need to take a long hard look at yourself and your idea. Ask tough questions that demand brutally honest answers.
1. Is there anything in my past to inspire confidence in potential investors? Have I already succeeded in a business and made money for previous investors? Or am I a complete unknown to investors?
2. Do I have any real proof of market demand for my product (i.e., actual paying customers versus supportive pats on the back from mom and Uncle Ignatz)? Or is all just wishful thinking on my part?
If you're not attracting the money you need, dollars to donuts it has nothing to do with the business plan.
Here's the most important thing you need to know if you are contemplating writing a business plan for the purpose of raising venture capital or angel investor financing:
When I first got out of college long ago, I loved writing business plans. Heck, I was even paid to write them while working for a management onsulting firm. Then over time I began to notice that no one actually read them.
This was in the 1980s!
I think the world is finally catching on to this fact.
If on the other hand, you are a rookie entrepreneur considering writing a business plan to organize your thoughts and action plans, then go ahead. It can be a helpful exercise. But to save precious time do each section in bullet point form. That's all you need.
I'm referring to the arrival of two new websites which attempt to sell visitors sample business plans and executive summaries. This is not a winning business model considering that any surfer can find dozens of free examples of both the business plan and executive summary in seconds with Yahoo or Clusty.
I'm frequently asked what business plan writing software is the best for creating that venture capital winning document. My answer is always Word and Excel. I've looked at the various business plan writing packages over the years and must confess to being far from impressed by them. Business plans produced with this software all share a certain sameness. They are the business world equivalent of paint-by-numbers "art".
So stick with Word and Excel to demonstrate that you are capable of some degree of original thought. By all means do look at samples of other people's business plans especially if they helped to attract an investment. But always bear in mind that it's the team that attracts investors and not the business plan.
So what's that Top Business Plan Tool I promised you?