Have a Plan

I know that just about every entrepreneur or small company thinks it has a plan. Sometimes it is a few pages written or somewhere in the partner’s mind. It may seem very clear to them but rarely is sufficient to allow an equity investment. Most people have created an executive summary, many think that this is their plan. An executive summary should be the last document that quickly summarizes and identifies the salient points of a business plan.

There have been situations over the years where a company has been created without a written plan. Most likely these businesses could have been much more successful should they have taken the time to describe what they intended to do. A plan described objectives and milestones. It describes what you think is your market and what you think your product is. It gives you a measuring stick to continually verify how you are doing. It lets others working with you know what is really important. Finally it keeps you on track and when updated makes you think about what you want to do, create new goals and objectives, and discuss with others in your group your desires so everyone is on the same page. Remember an organized group pulling together pulls harder and reaches their objectives faster. Even when the objectives are off course it is easier to straighten the path than to reign in numerous factions that will surely be created inside your organization.

From an equity point of view, having a business plan is imperative. The people making investment decisions are very smart and very good at what they do. They are not experts in every field. They may not even know anything about your field but they do need to know what you do well enough to help you obtain their objectives. Some of my clients will actually make a 30 minute presentation about the company they want to invest in. If they are unable to explain the primary concepts of the business and why the business is unique, they will not make the investment.

The plan needs to take a completely uninformed reader through the process of the business, the addressable market, the competitive environment, and the differentiating features. At the end of the business plan it should reassume the financial objectives and define some of the primary economic milestones. Finally the executive summary should cover each section of the business plan with a quick summary. This is where you can make statements that will be later supported in the actual plan. The executive summary also has a section defined as Use of Funds. This should identify how and when the requested funds will be used.

Be precise, it is better to say too much than to say too little in the business plan.

Tags: Small Business Private Equity Business Plans Financial Model Financing Marketing Sales