Finding Funding for Your Venture – Part II
Now that you have the proper starting points and frame of mind to pursue funding for your venture (Part I), how do you complete your business plan with potential investors in mind? The following is a listing of Do’s and Don’ts when completing your business plan. It is a compilation of our experience and feedback provided through multiple forums on the subject.
DO: Talk about your management team, their expertise, their prior experience with start-ups. Have several members of the Board of Directors participating. Investors are looking at the company not just the product. They will want to know that he management team can deliver what they promise. Show that you can and are willing to hire people with greater expertise than yourself.
DO: Your market research and be able to articulate why your venture will meet a need. Demonstrate what the market need is and how your venture will alleviate the pain. Understand the multiples involved when consumers purchase. (Example: consumers do not switch products unless the value is “x” times what they already have).
DO: Demonstrate a tremendous amount of competitive intelligence, and CLEARLY demonstrate why your product/solution is better than the competitive offerings, both those currently on the market, and those anticipated to enter the market. Show how you will be able to maintain a competitive advantage over your competition.
DO: Sell your company not your product. The product is important but who and how you will deliver is more important.
DO: Show a tremendous amount of capital efficiency in how the funds will be used. Keep in mind that you financials will tell a lot about your fiscal maturity and goals. If the proposed capital is being used to pay you and your management team, this number will need to be very low if at all. In other words, do not pay yourself more than you need to put a roof over your head and food on the table.
DO: Demonstrate a cognizant and cogent product development and manufacturing strategy, with realistically estimated time frames and costs. Too many plans focus on the marketing, sales and distribution strategy, but gloss over how the products desired to be sold will ever come about. It takes a lot of time and money to accomplish this, and it needs to be accounted for with the same diligence as every other aspect of the plan.
DO: If possible show customers in your pipeline, and all real revenues for the next 36 months.
DO: Have factual and accurate cash flow projections, start-up costs, 3-5 year projections, income statement, balance sheet, IRR ROI, bottom up build, show industry comparisons. Make sure you have identified all critical risks and assumptions.
DO: Be able to demonstrate that you have adequately secured any IP that you have.
DO: Tell the truth. No one will forgive a lie.
DO: SEEK OUTSIDE REVIEW OF YOUR PLAN before you present. Regardless of whether the plan was constructed in house or outsourced to a professional plan writer a second set of eyes is necessary. Choose a person or company that understands the actual mechanics of starting a business venture. The Entrepreneur’s Advisor™ can review your plan for you and make suggestions, comments and corrections for a very reasonable price. We will look at the opportunity, the application, the flow of the plan and ask you questions that investors will also ask.
DON’T: Concentrate on the technology. Technology advantages have a tendency to be short lived.
DON’T: Hire or plan to hire people you cannot fire (friends, family…).
DON’T: Assume you will retain ownership control.
DON’T: Use technical Jargon. Have your idea be explainable in common terms. If an investor cannot understand what you are saying – why would they invest?
DON’T: Prepare your financial statements and forecasts based upon a % of market share or population etc… This is considered a “TOP DOWN” method. Use of this method will only tell potential investors that you have not developed a marketing and sales plan. It is almost guaranteed to have your proposal dismissed.
DON’T: Believe that you have no competition and therefore put forth a weak competitive analysis. Just because you are unable to find someone else doing exactly what you plan to do does not mean it isn’t being done or under development. You need to be very diligent here and explain how you will be better.
DON’T: Leave out your risk analysis and assumptions
DON’T: Engage the services of anyone “Guaranteeing” your venture investor dollars or a successful launch. No one can make that guarantee.
DON’T: Make your business plan too long. 20-30 pages are ideal. Use the Appendix for details such as BIO’s R & D, IP Documentation, White Papers, and Financials etc.
Business plan writing tips
Business plan templates can be found in books, small business resource centers and the internet. If you need help choosing the correct plan for your venture, contact us at http://www.theentrepreneursadvisor.com
Make sure to have us review your business plan before beginning the fund raising quest. Most plans can be reviewed quickly and timely. The cost /value of this service are exceptional.
The Entrepreneur’s Advisor is an advisory firm for new or existing ventures from conception through fruition. Our level of services ranges from Board of Director retainers to pay-as-you think (hourly).
Become a client today and let us guide you to success.
Next Blog: Targeting and Meeting Investors