Growth5 Blog

Monday, January 25, 2010

Five Things I Wish Were In Your Business Plan

We read a lot of business plans, executive summaries and listen to pitches on a regular basis. Putting a business plan together is not easy, kudos for getting that far. But since you asked, here are the five items I wish your business plan contained.

1. Specific Market Data
"There are, you know, billions of people on earth, so if we get a good chunk of them to buy, we should be all set." Showing how many people are on the planet and an actual % in place of "good chunk" would've helped.

I like data, preferably reliable data. Footnoted facts and figures. Get specific. What is the real market for your product or service? What are the stats on the various segments? What % of the market do you hope to capture? Yes, you are guessing, we all know that, but the more educated your guess is, the more educated our guess about your business will be. Show your work, sometimes the process of how you got there is more telling than the numbers that resulted.
2. Sales / Marketing Strategy
"Well, we created the revenue growth you see by taking the year before and multiplying it by 1.25 all the way across." Congrats on your excel superskills, but how do you plan to hit those numbers?

Be specific about how you intend to grow your business. What marketing initiatives do you plan to implement? Will you have a sales team? How much will it cost to acquire each user/sale?
3. Milestones
"We're too young to have any milestones yet." But you plan to have some eventually, right? What led you to seek an investment now? What has been accomplished, and more importantly, what are the key events that will show your progress, proof of concept, business model, etc...? At which of those points will you need further financing, why and how much?
4. Financing Plan
"We're going to use the funds to grow the company." That's a decent 800,000 foot plan, we probably should drill down a bit. What milestones will the current round of financing support? Why did you choose this amount? Will these funds get you to X users? Your next release? Cash flow positive? $X Revenue? We like to see the use of funds match the milestone strategy so we can assess...
5. Value: Now and When
"We want all our investors to make a lot of money." We do too. It's not easy valuing businesses, especially startups. What we need to see here is a plan for value creation. How do the milestones connect with the increasing value of the business? How long will it take to get to value worth investing in? When you hit the $X revenue milestone what will the business be worth according to industry metrics? We can compare that to how much financing is needed to make risk/reward assessments. You can too, and you should.

It doesn't have to be advanced mathematics, ballpark guessing can be really helpful. You might realize the market won't yield a long-term value that's worth the money needed to get there. And thus the mystery of the distant stares at your last three pitches, solved.
Don't forget to ask for feedback on your business plan or your pitch. It's the best way to know how to improve it. It's also a great way to filter the kind of VCs you want to work with.

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At January 25, 2010 at 4:14 PM , Blogger Caitlin said...

That is very true, so often a company's business plan is missing key elements. Every company should review their business plan frequently to ensure it is not missing any important points.


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