This article by Palo Alto Software CEO, Sabrina Parsons, originally ran on the MyCorporation blog.
Your business concept is awesome and you know it. But you need startup funds and a way to convince investors that they’ll see a return on investing in your business. The thought of putting together a business plan that will effectively “sell” your business concept to seasoned investors is intimidating, but it’s also essential in getting the funding you desire. A well rounded business plan will provide you with valuable insight into your business, its potential for success, and the areas in which you may want to fine-tune your operating model.
Keep It Simple, Shorty
You always hear, “keep it simple, Stupid” or “KISS” and that goes for an effective business plan as well. But don’t be stupid, instead be smart, short, and sweet. Ten pages or less, absolutely. No one wants to read a really long plan.
In fact, ideally I don’t think you need much beyond great financials and an impressive executive summary. Potential investors are going to ask for whatever additional information they’re interested in whether you’ve written ten pages or 100. If you’ve done your homework and put together an impressive, tight little package, then you’re going to be in great shape. No one wants to read a 50 page business plan.
If your motivation is funding, they’re going to ask for the specific additional information they want. Your plan is more likely to be too long (I’ll call it a data dump) than too short. Too short would mean you’re missing critical information.
Do Your Homework, Then Practice Brevity
Just because you’re writing a succinct (and therefore effective) business plan that hits on the critical elements for potential investors doesn’t mean you shouldn’t do copious homework in preparing that nice, little plan. You absolutely should. Especially when it comes to knowing your financials. The easiest and most accurate way to do this is to build the financials from the bottom up. If it’s a new business, then start by determining your addressable market, then what percent of that market you are going to get, how much are they going to spend (lifetime value), and how much is it going to cost you to get them? If you can answer these questions accurately for the first twelve months, year two, and year three, then your financials are going to be in a good, realistic state for potential investors to pick them apart and (hopefully) like what they see.
The Critical Elements of an Effective Business Plan and Pitch
Your plan and pitch to investors should absolutely address each of these topics:
- What market problem you’re solving
- How you’re solving it
- Target market, size, and segmentation
- Your sales channels
- Marketing efforts
- Competitor analysis and your competitive advantage
- Real financial projections
- Key milestones in your business to date and a timeline of expected milestones to come
- Key team members and advisers championing your success
The Pitch: Turn it Into a Narrative
Once you’ve put your business plan together, ensured it’s not too long, and that it covers all of the important bases, then it’s time to start working on your pitch. I won’t go into too much detail here except to say that people (and don’t forget that investors are people too) love a compelling story. If you can find a way to weave the elements of your business plan into a tale that illustrates how your business is going to solve people’s problems, garner their loyalty, and generate revenue then it’s going to be a lot easier for you to pitch to investors. After all, stories engage our emotions and get us to root for the protagonist to win.
Make your business the hero of your story and back that story up with facts and figures to prove your potential for success and investors will appreciate the work you’ve put in and be much more likely to infuse your enterprise with the funds it needs to get up and running.
About Sabrina Parsons
Heir to a business planning kingdom and CEO of the world leader in business plan and management software (flagship products include LivePlan and Business Plan Pro) Sabrina knows more than a little something about planning, pitching, and managing a startup to success. Sabrina took over Palo Alto Software in 2007 (her father was founder and business planning icon, Tim Berry) and went on to not only beat the odds (approximately 70% of family-owned businesses don’t survive succession) but to successfully expand the company’s offering from a shrink-wrapped software company (Business Plan Pro) to a booming SaaS corporation, hosting business planning, pitching, and financial management in the cloud (for more than 60,000 small and mid-sized businesses and counting) via LivePlan (www.liveplan.com).
Sabrina is a graduate of Princeton University and president of the Princeton Entrepreneurs Network. She is also a mother of 3 young boys; involved in multiple business planning competitions; blogs for Forbes Women; and is a passionate advocate for evolving the workplace for today’s modern parents, including instituting and personally taking advantage of Palo Alto Software’s baby-friendly office policy.
Image via Shutterstock.