So far we’ve discussed the key elements of creating a business:
- It is up to you, and only you, to make a change in your life.
- Be an innovator, not an inventor.
- Develop a product that fixes a problem. The bigger the problem the more you will make.
- Do what you love to do.
The next step in the process is to form your business and marketing plan. This should not be a Masters Theseus, but it needs to be complete. You need to clearly identify your market, you need to accurately estimate what it will take to create the product and you need to realistically project sales.
A potential investor will walk if you overestimate sales. They do Rough Order of Magnitude (ROM) calculations every day. They will know if your numbers are BS. It is better to be conservative.
There are a few basic elements that need to be in your plan. It should have an Executive Summary, Problem, Solution, Business Model, Underlying Magic, Marketing and Sales, Competition, Team, Projections, Status and Timeline, and Conclusion. A tip on writing the plan is not to start with writing the plan! You should actually create your elevator pitch first. An elevator pitch is a business summary that you can recite in about 20 seconds. It should be clear, concise and peak the interest of anyone that hears it. Here’s an example of the one I used when raising capital for ITG:
“We specialize in improving the profitability of our clients by reducing their operating expenses and improving staff efficiency. Our target market is organizations that have 1500 or more employees that primarily rely on technology as a means to do their jobs. Our research shows that twelve-thousand businesses in our service area meet these specifications . We project a 10 percent market penetration by year three and we operate on a 42 percent fully-loaded margin. “
The reason you create the elevator speech first is because it is the easiest to write and change. You can try it out and see how it goes as often as you like. When you get the response you are looking for then break it out into a PowerPoint presentation and then into the written plan. In other words, create the outline first and make your English Teacher proud!
Another tip that is important is to keep the business plan short. It should be 20 pages or less. The longer it is the less likely it will ever be read. The Executive Summary needs to be the best thing you’ve ever written. It should only be one page long and blow the socks off of whoever reads it. You also need to know every inch of the plan so when questions are asked you can answer without hesitation. It is a good idea to get help gathering the data and running the numbers, but only one person should write the document. It needs to flow from front to back smoothly. A copy/paste job looks patchy, does not have a consistent voice and can introduce some embarrassing errors.
It is important to go through these steps even if you are going to fund your own business. You not only need to convince yourself that your idea is viable, you should run it by others as well. The more research you do the better. If you don’t you will likely be a statistic. Fail to plan and plan to fail…