How You Could Be The Next Apple Based on Your Business Plan
As someone who has worked with some of the most successful and high tech startups, as well as with Broadway shows trying to help them understand how they can create a brand out of themselves, make an effective message for marketing, as well as help them create pitches that can attract the attention of possible investors, along with their money. The one thing they all share is a few mistakes that they are all making.
If you are someone who has an idea in their mind, an idea that can one day turn into a successful business, you will soon find yourself on a road to success and stardom that is only traveled on by entrepreneurs. You will also find yourself visiting fund raising events, as well meeting venture capitalists, and you will do so with the business idea in your hand.
Making the perfect business plan is never a difficult thing, but it does take the right type of person. Below are four effective ways that you can use to create one of the most meticulous business plan that will guarantee success for your startup, and will certainly make the investors ponder upon.
Keep The Management in The Picture
The general partner of August Capital, Howard Hartenbaum claims that one of the most vital factors in any business plan is the strength, along with the experience that is brought by the management team, and not just the founder.
The one mistake that most entrepreneurs make is that they are always so focused on the person who brought the idea in the first place rather than focusing the whole group who will be helping the person create that idea into a successful business.
In a survey, a question was asked to 300 venture capitalists about why they decide to accept, or reject a specific project that comes to them. One of the biggest mistake that the venture capitalists mentioned was that the entrepreneur presenting the idea never bothered mentioning how and why the team that he or she put together was right for project.
Technology is Not Everything
Keeping Skype in view, Howard Hartenbaum says that in order for a business plan to become successful, the entrepreneurs need to show that they are not just entirely relying on the technology. Entrepreneurs also need to show that they have full understanding of the market they are in. Hartenbaum, who invested in Skype as a venture capitalist stated that as soon as he saw the backgrounds Skype’s original business plan, he was willing to sit with them.
The founders of Skype worked together before in a company named Tele2; it was a European telecom operator. One of the founders was responsible for running international business development for many years, but both of them were well aware of everything that was going on in the telecommunication industry.
The business plan that was presented to Hartenbaum also explained how both founders were previously responsible for founding a peer-to-peer music service called Kazaa.
According to Hartenbaum, when he first met them, Kazaa was one of the most downloaded consumer software in the history, and now they were looking to start a company called Skype that was based on the same peer-to-peer model.
Go For The Bottom-Up Financial Model
According to the managing partner of Clear Venture Partners, Michael Gurau, a good business plan comprises of two sections; one section is the narrative which talks about the opportunities, as well as the management team, and other similar factors. The second part is the financial part, and this is where most of the entrepreneurs fail to click with the potential investors. According to Michael Gurau, entrepreneurs should start writing the financial part of the business plan from bottom-up perspective; however, they do the opposite and write it down in the top-down perspective.
Most of the business plans that make it to the venture capitalist’s desk normally start with the entrepreneur talking about how big the market is, and what amount of market the new business plans to capture in a specific time period. However, the biggest issue with this type of analysis is that it does not have the right assumptions that will be enough to convince the venture capitalist into thinking that these entrepreneurs have what it takes to make the business successful.
For instance, an entrepreneur writes in their business plan that there are 20 million people in the said market, and we can capture 15 percent of the market share, we would be able to make a fortune.
Instead of going for this top-down approach, why not take a bottom-up approach when writing the financial part of your business plan, talk about the minute details.
For instance, talk about how it will take a salesperson to make this number of ales in a year to reach the goal in revenue. Or how many meetings will take place for each salesperson before closing a deal. Talk about how many sales would be at the full price, and how many at a discounted price. I know these things do not sound like a big deal, but if you are looking to convince a venture capitalist, you need to work on them.
By conducting proper research and making sure that you have all the assumptions covered to the last t in areas such as the sales, operations, as well as marketing and support, you will be able to convey your message to the venture capitalist that your business can actually be successful.
List Down a Specific Problem, And Give a Specific Solution
One of the biggest mistake that is commonly made by entrepreneurs is that they forget to add in the business plan about why the business they are trying to start makes sense.
The reason has to be big enough to create the business for. For instance, the way Google managed to gain investors was that they pitched the idea that there is so much information available on the internet, and it is really difficult to gain access to most of it. According to Hartenbaum, instead of spending time on clearing throats, just start talking about what you are planning to do right away.
Just like everything else, a properly created business plan is something that requires a lot of research, as well as hard work, effort, and a lot of energy. Just know that if you put in your proper time and dedication, the business plan that you have just created could lead you to secure a funding that you have been wanting.