Wit and Wisdom from Rules for RenegadesJanuary 20, 2009
Wisdom from Rules for RenegadesJanuary 22, 2009
Life is marketing. Marketing ourselves personally and professionally, marketing our products, marketing our ideas. Every day we are constantly marketing or being marketed to.
What constantly amazes me, is that knowing this, so few early stage entrepreneurs market their startup effectively. The business plan, executive summary, and financing pitch are the ultimate marketing tools. Marketing your startup successfully results in getting optimal investors, more favorable financing terms, outstanding executives, committed customers, basically a shot at success in today’s extremely competitive market.
Let’s start with the love-hate relationship we have with business plans. As a former entrepreneur, and a startup consultant today, I’ve certainly seen more business plans than I care to remember. Of the 30,000+ high tech business plans submitted to venture capitalists last year, less than 3% were funded. Why? The plans were either for products or services no one truly needed, or the plans were for great ideas that were not presented well. I see far too many of the latter. What a shame to have a brilliant idea, and the right process of executing it only to communicate the idea without being concise, compelling, and complete.
Be Concise – A concise plan provides a simple explanation for why the business is a great idea, as well as how it will be executed. The optimal length is 20 pages, but 30 is acceptable. This includes the 3-5 pages for the executive summary, but does not include the appendices (only include relevant info here to support claims made in the plan). Few of the investors will read the plan in its entirety. The goal of the business plan is for the entrepreneur to explain the company they want to build so they will a) be able to condense it and render an executive summary (that the investors will read) and b) have a basic execution plan for the company.
Be Compelling – A compelling opportunity is optimized by the right deal, with the right price, at the right time, with the right product/service and the right team. Compelling deals always get financed with favorable terms. The goal is to make your company appear to be deeply compelling. More on this below.
Be Complete – You must have a trusted third party review your plan to ensure it addresses all possible issues an investor may have. An incomplete plan, such as one that lacks three years worth of financials, or lacks a marketing or sales strategy, or a section describing the first few releases of a product and the high level technology strategy, makes it look like the entrepreneur hasn’t thoroughly thought out their business. This makes them look either unprofessional, fly-by-night, or both. Be complete – it will help you gain the trust of all who read your plan.
A Lesson – Here’s a sample paragraph from an executive summary I read a while ago. “Freight trucks in
Wow! Huge pain, customers empowered to remove it, the right team to make it happen, and the potential for a glorious exit. Concise? Yes! Compelling? Yes! What’s not to like? The entrepreneurs missed the “complete” part. . The plan that backed up this fantastic opportunity, lacked execution detail and thus has yet to be funded… after 2 years of seeking capital. I hate stories like this!
How To Do It – So, now you’re ready to create a killer business plan, which will yield a killer executive summary and a killer financing pitch. You’ll want to leverage your plan by using the content later for sales presentations, marketing collateral and white papers, recruiting pitches and web site content.
Here’s how to do it. Using the sample business plan outline, begin to fill in each section. Do not use a business plan package. These render “fill in the blanks” business plans that make the entrepreneur look inexperienced, unsavvy, and basically out to lunch. Don’t let yourself be branded this way. The key risks investors worry about are: people, technology, market, and financial. Financial risk is hard to remove. Focus on showing how solid your people are, how robust and extensible your technology is, and how huge the market you’re going after is. You must explain the barriers to entry too, in honest, realistic terms.
You’ll also need a financial model. Be sure to make it interactive, and not static. An interactive model is formula-based and takes longer to create than a basic static model. But trust me, you will definitely change your financial projections, so provide for flexibility from the get-go. An interactive model will also enable “what if” scenarios. Chances are good potential investors will slash your first year revenue projections in half. What repercussions will this have? Run it through the model and find out.
Life is marketing. Marketing your startup properly will result in a wild ride with life-enhancing results. Go for it and let me know how I can help!