It takes either rare blind luck or enormous business savvy, determination and skill..not to mention the nerves of a cat burglar and the daring of a trapeze artist to bootstrap a company successfully. More than likely you will be looking for outside capital as your needs will outstrip your revenue fairly rapidly, early on.
The first cold, hard fact about business plans is that no one reads them. This is not to discourage but to wise up those who have not met venture capitalists face to face, or had to ask their banker for a working capital loan. These people are busy and every micro -second counts.
What to do? Should you have a plan? Absolutely. In fact, you should have a number of presentations of the same plan, in different stages of condensation, to draw on and use, depending on whom your audience is.
For Yourself – A Road map
You will first need a business plan for yourself and your team. This will become your road map; when completed it will tell you how to take this business where you want it to go.
Today there are many sites from which you can download a template and fill in the blanks. These will give you an acceptable form for a business plan, although the creation of one may be just as much of an art as it is a science.
The important, irreplaceable dynamic of creating a business plan is that it assures that you address and think through the issues confronting the industry you want to enter; how is it regulated; who are it’s customers; is the customer base growing or shrinking; who are your competitors and what competitive advantage do you perceive you will have to allow to compete successfully against them; all the details of your operation, whether it is capital or labor intensive, seasonal and , ultimately, how you are going to wrest a profit from it.
Many organizations, without any further interest in inspecting your business plan, will ask if you have one. Putting yourself through the discipline of creating one provides evidence you are not a “shoot from the hip” kind of gal, and that you have thoroughly thought every aspect of this venture through. You also can turn back to your plan time and again to test your assumptions. You can see if business is developing along as you believed it would, if external circumstances† the stock market, the Net, the health of the economy†.are as you envisioned them or if you need to tweak your plan or even completely overhaul it. If you’ve taken a detour, or even run off the road into a ditch and need to get up, dust yourself off and put the wheels back on, you can consult your map and find your direction or set a new course.
That’s what your business plan will do for you. Don’t confuse that with the pitch you plan to give banks or investors.
Bootstrap or Seek Outside Capital?
Can you create your business without outside investors? Possibly. People have done it and some do it today. The art of bootstrapping is the ability to plunge in with the money you have and, with the skill of a Swiss watchmaker, carefully balance whatever revenues you have, with whatever outflows are required to generate them, continuously guarding your downside, while cautiously inching upward. Sometimes, even after a company is fairly large and well on its way, a boot strapper is counting her greenbacks, one by one, on the desk at night, because there is precious little margin for error. It takes either rare blind luck or enormous business savvy, determination and skill..not to mention the nerves of a cat burglar and the daring of a trapeze artist…to bootstrap a company successfully. More than likely you will be looking for outside capital as your needs will outstrip your revenue fairly rapidly, early on. Growth costs money, and, even if you are very successful at selling your product or service, you will go through an expensive period of having to ramp up quickly to build the infrastructure to meet the demand.
The Elevator Pitch
The first people to invest in your company are, generally, family and friends. Or, as some say, the 3 F’s: fools, family and friends, although those fools sometimes turn out to be staggeringly well rewarded. But at some point, you can no longer moon light to support your business, a hard working spouse or trusting parents, even admiring friends, are no longer enough to feed your constantly hungry child† that is, your growing, cash consuming business.
To move on to the next step, you first have to meet an investor or a venture capitalist or someone who will provide you with an introduction to a venture capitalist or, as an intermediate step, someone who will groom you to be ready to meet one. This might be a lawyer or an attorney, who travel in these circles, and who like to keep feeding their investors, and help grow their mega-bucks clients of tomorrow.
To even make it to first base with the people who can provide introductions to help you bridge the chasm between friends and family and professional investors, you can forget the full blown business plan; you will need to develop what is known as “an elevator pitch.” This is a description of your concept or company which is short enough to be delivered to someone whom you or your attorney run into and have the opportunity to pitch on the elevator, somewhere between the 10th and the 3rd floor. Three to five sentences would make a good elevator pitch, so they’d better be good ones, whetting the appetite for more.
The VC Presentation
Again, forget your business plan. Venture capitalists receive thousands and review hundreds of business plans. They have been known to complain the plans are too long, filled with big, generic numbers, like “billion dollar market”, are not sufficiently specific about customers, and can not convey the quality of your team’s interaction. Who is your customer, precisely? How much is she willing to spend on your product and how do you reach her and convince her to try it. If you already have customers, revenues and referrals, so much the better. That is the kind of hard evidence a potential investor likes to see.
Get your team together and prepare a brief verbal presentation. Don’t go in alone. You want to show you can work as a team. And you will need someone tracking the time, scanning the crowd for body language and taking notes on reactions.
The importance of the team aspect can not be over stated. The most critical factor for any investor will be the team, as much as the quality of the concept and the size of the potential market. On the same theory that crises soon outstrip one person’s ability to solve them, so too, new companies in dynamic markets and today’s fast paced, 24/7, global environment, quickly outstrip one person’s ability to master all the details. Focus on being a leader; develop a team where each person has his specialty; you see the forest, but let each grow the trees in his or her own area.
Timing Is Everything
Remember, timing is everything. There will be a time for you to sit down and develop a complete, full blown, well thought out business plan. Its purpose is, as much as anything, to document the process of your thinking and allow you to make orderly changes. It will also keep you and your team singing from the same sheet of music. There will be a time to condense this into your “elevator pitch” and then to translate it into graphics and a well rehearsed group performance for investors. Developing a business is not a sprint, it is a marathon. Creating your plan is only the beginning. Then you must create the business, but that’s when it gets exciting.
