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What's the Best Way to Write a Business Plan?

Posted by Cliff on from the show-me-the-opportunity-cost dept.

ohyeahohare asks: "I've got an idea that I want to start up in Australia. The business store front will be a .NET web application, however any business requires money to start up and I'm looking for some Venture Capitalists to help fund mine. As the saying goes, 'Businesses that fail to plan, plan to fail.' I need some advice on how to write up a killer business plan, everyone involved knows exactly where the business is heading. Does Slashdot have suggestions or recommendations from personal experience to offer?"

2 of 139 comments (clear)

  1. Mortgage your house... by Eightyford · · Score: 5, Insightful

    If you have any equity on your house, use that first.
    If you have rich relatives, use them first.
    If you can get a bank loan, use that first.
    If you can sell a kidney, do that first.

    Unless you need big bucks to start your company, you should avoid VC firms. They'll want too much control, and too much money. Hell, I bet VISA and Mastercard have better interest rates.

    --
    Religion for nerds. Stuff that really matters
    1. Re:Mortgage your house... by hardie · · Score: 5, Insightful

      Since you're asking about writing a business plan, I'll make the assumption that you are a geek like the rest of us, and probably are a little short in negotiating skills.

      Stay far away from VC's. They are professional negotiators. They will own your underwear before you get your second dollar out of them. It will all sound very reasonable--if they're going to give you $5,000, why wouldn't they get 50% of the company in return? You don't have any products after all. Wrong, wrong, wrong.

      On the other hand, I strongly disagree with the mortgage your house line of argument. There are three very important letters to focus on: OPM (Other Peoples' Money). You have a terrifically valuable item--a business plan and the smarts to execute. They have something *less* valuable, but still very important--MONEY. You will need a bunch, then you will need to go back and get more. You will probably need to hit them a third time. Each time you do so, you sell off part of the company. Be sure you sell it slowly enough that you have some left in the end. The first negotiation determines the rate of the following ones--don't sell yourself short.

      So where do you get money? Relatives are a possibility, but only if they have a lot of it. My folks were touchingly naive when we started a company--"Don't forget your mom and dad, let us invest..". A very high risk investment and they aren't dripping with it. A source that is a good compromise between pissing off your relatives and getting eaten alive by VC's is called an angel investor. These are people with a good sized bundle of money looking for somewhere to make use of it. The good ones have additional motives, like seeing others succeed, being part of starting something that lasts, etc. You could certainly find a bad one too (devil investor?). They might be successful people in your community, like dentists or doctors. They might be people that are on top of a successful startup (i.e. has been in business for 5-10 years) and want to help start another one. The really tricky part here is finding them. Unlike VC's, they don't run advertisements.

      The words exit strategy are ugly to a founder, but crucial to your investors. So is a business plan. The better your plan is, the more likely you are to attract money at favorable rates. The purpose of a plan is not to exactly predict the future--it is to make sure you think carefully about all the details.

      I've worked at small companies twice. The first time, I joined a small, year old company run by the technical folks. We did a lot of stuff, and made some fine products, but in the end we ran aground and were bought by a larger company at a fair but bargain price. This took 12 years all told (note that I do analog semiconductor chips, not software).

      The second time around, a group of us started from scratch. We had a wheeler-dealer (but trustworthy) business type at the top. The difference was like night and day. Our business was very similar to the first company, but succeeded. We sold our souls to a larger company after only two years, on pretty favorable terms. Almost entirely using OPM.

      Steve