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What's the Best Way to Write a Business Plan?
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?"
1. Ask Slashdot 2. ??? 3. Profit!
What's the Best Way to Write a Business Plan?
...so you can erase your mistakes!
With a pencil...
The government which is strong enough to protect you from everything is strong enough to take everything from you.
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
I recently started a business and a partnership. I googled for business plans and you can get samples for the SBA (Small Business Administration - US) probably au as well.
7 56474-8088941?v=glance&n=283155
However after the rubber hit the road the document meant very little. That may not be the case for you since you will be looking for funding but until you have done it - it is difficult to know what you are doing.
I would suggest before you take on money and perhaps before you start your business that you read "The Partnership Charter".
http://www.amazon.com/gp/product/0738208981/102-9
It raises some good questions whether your partner is your brother (my case) or a vc company (your case).
Good Luck
You should be asking SCORE, not slashdot. See: http://www.score.org/
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There literally hundreds if not thousands of books on how to write a business plan.
Given my short attention span, I found "Business Plan in a Day" by Rhonda Abrams a great start. While I don't 100% agree with its format, I found it got my mind thinking in the right direction. It also allowed me to select other books based on their suggestions and formats.
issues like .NET vs PHP vs Servlets, etc should be way in the back. it's an implementation issue. Your plan should concentrate much more on marketing and finance, unless you're doing something very unique.
Here's a start. You don't need slashdot's help!
Religion for nerds. Stuff that really matters
Don't take business advice from amateurs, you have a lot to lose.
Unless you really need a lot of capital to start out with (and probably even then) avoid VCs like the plague. They will f*ck you and not even say thanks. Seriously, their job is to let someone else take all the risks, then jump in and make a metric buttload of money off of an idea that has already been proven. They are very seldom risk-takers, and they are generally ruthless. There are somne exceptions, but if you must find a VC, do your homework first. Talk to entrepreneurs who have worked with VCs. Get first-hand info from people who've been through a VC experience and survived to tell the tale.
When writing a business plan, cut through the crap. Read Guy Kawasaki's stuff. He knows what he's talking about. His piece on business plans is brief and to the point, which is how your business plan should be.
Good luck to you!
Read the EFF's Fair Use FAQ
1. Executive Summary (your elevator pitch, no more than 3 paragraphs)
2. Investor Relations (What you want from other people)
3. Description of Business (about 1 page)
4. Sustainable Competitve Advantage (The only thing anyone will read other than the executive summary)
5. Description of Competition (a full page is about right)
6. A list of competitors with a the strengths and weaknesses of each in about a paragraph per.
7. A timeline for what you want to do and when
8. SWOT chart (strengths, weaknesses, opportunities, threats)
9. Financials (make up some numbers and use them to make excel graphs)
The thing that gets most people is the financials. Obviously there is no way to know so you just have to make something up that seems reasonable. This isn't cheating or being unethical, it's the only way to do it and it is expected of you. Some people feel bad about this anyway. Don't.
Also, here is my Squidoo Lens on the subject if it helps. It is mostly just a recommended reading list. That being said, there really are fifteen or twenty Do Not Pass Go, Do Not Collect 200 dollar books. Everyone agrees on this, but of course they will all give you a slightly different list of what these books are.
That being said, you won't get any money from a VC until you have partners and a board of directors. The first step is to go around and talk to as many people as are willing to listen. Once you have told fifty or so people your idea and gotten all the feedback you can handle (mostly people telling you how stupid you are), then circle back and ask those people to advise you, be on your board, or invest. Most of them will offer without you having to ask if you are talking to the right people, i.e. people who have experience as serial entrepreneurs. Also before you can get VC funding you will probably need to show traction. The correct order of doing things is 1) Sell the product 2) Design the product 3) build the product. It's counterintuitive, but so is the idea of dropping out of college to make more money. :-)
Assuming that you have no experience in business at all, one possible place you could try is colleges in your area. In the US, many colleges offer help to people interested in starting businesses. The seniors (in college, not senior citizens) will help you develop a business plan and anything else you may need. They often do this as an internship. Most of the time it's free or if there is a fee, it's small. Anyway, if you don't have a great deal of money to start out with, this is a good place to start.
I'm in the middle of doing this myself. I found a package from Jian Software which I found great and definitely recommend. It is a comprehensive set of word (open office works fine) and excel templates fronted with a bit of software. It comes with a video, an e-book, and lot's of explanations about the process. Check it out and see for yourself.
Software Developer - www.coolbalance.com
MISSION: At [name of company] it is our conviction that [to do the stuff we want to do] and to increase shareholder value are not merely complementary activities--they are inextricably linked.
PURPOSE: To increase shareholder value by [doing stuff]
EXTREMELY SERIOUS WARNING (printed on a separate page, in red letters on a yellow background): Unless you are as smart as Johann Karl Friedrich Gauss, savvy as a half-blind Calcutta bootblack, tough as General William Tecumseh Sherman, rich as the Queen of England, emotionally resilient as a Red Sox fan, and as generally able to take care of yourself as the average nuclear missile submarine commander, you should never have been allowed near this document. Please dispose of it as you would any piece of high-level radioactive waste and then arrange with a qualified surgeon to amputate your arms at the elbows and gouge your eyes from their sockets. This warning is necessary because once, a hundred years ago, a little old lady in Kentucky put a hundred dollars into a dry goods company which went belly-up and only returned her ninety-nine dollars. Ever since then the government has been on our asses. If you ignore this warning, read on at your peril-- you are dead certain to lose everything you've got and live out your final decades beating back waves of termites in a Mississippi Delta leper colony. Still reading? Great. Now that we've scared off the lightweights, let's get down to business.
EXECUTIVE SUMMARY: We will raise [some money], then [do some stuff] and increase shareholder value. Want details? Read on.
INTRODUCTION: [This trend], which everyone knows about, and [that trend], which is so incredibly arcane that you probably didn't know about it until just now, and [this other trend over here] which might seem, at first blush, to be completely unrelated, when all taken together, lead us to the (proprietary, secret, heavily patented, trademarked, and NDAed) insight that we could increase shareholder value by [doing stuff]. We will need $ [a large number] and after [not too long] we will be able to realize an increase in value to $ [an even larger number], unless [hell freezes over in midsummer].
DETAILS: Phase 1: After taking vows of celibacy and abstinence and forgoing all
of our material possessions for homespun robes, we (viz, appended resumes) will move into a modest complex of scavenged refrigerator boxes in the central Gobi Desert, where real estate is so cheap that we are actually being paid to occupy it, thereby enhancing shareholder value even before we have actually done anything. On a daily ration consisting of a handful of uncooked rice and a ladleful of water, we will [begin to do stuff]. Phase 2, 3, 4, . . . , n-1: We will [do more stuff, steadily enhancing shareholder value in the process] unless [the earth is struck by an asteroid a thousand miles in diameter, in which case certain assumptions will have to be readjusted; refer to Spreadsheets 397-413]. Phase n: before the ink on our Nobel Prize certificates is dry, we will confiscate the property of our competitors, including anyone foolish enough to have invested in their pathetic companies. We will sell all of these people into slavery. All proceeds will be redistributed among our shareholders, who will hardly notice, since Spreadsheet 265 demonstrates that, by this time, the company will be larger than the British Empire at its zenith.
SPREADSHEETS: [Pages and pages of numbers in tiny print, conveniently summarized by graphs that all seem to be exponential curves screaming heavenward, albeit with enough pseudo-random noise in them to lend plausibility].
RESUMES: Just recall the opening reel of The Magnificent Seven and you won't have to bother with this part; you should crawl to us on hands and knees and beg us for the privilege of paying our salaries.
I'm in South Australia and have found the Business SA http://www.business-sa.com/ site quite useful. They also have a Young Entrepreneur Scheme http://www.business-sa.com/Content.aspx?p=32. I'm not sure what other states offer but it would be worth your while checking it out.
Good luck and hope you can make it work.
Unexpect the expected!
I run a fairly successful company.
.Net, find a partner with Microsoft who has a good solution and sell that. The profits you'll make from these sales and customizing these products will eventually fund your own niche product. Some products are more profitable than others - I have a 40% margin on some stuff I sell.
.Net through Microsoft Partner channel - there are quite a few.
It has a specific and complicated business plan, and some of it is written down. You can easily write a business plan once you actively start working on stuff and have some prospects or customers.
VCs are not faceless creatures. Sooner or later you'll actually get to know some as your personal network grows. I probably could get some financing right now if I really wanted to. I'd say VC hunting is like job hunting - tedious and time-consuming, unless you have the inside track where some lunches can turn up to be quite profitable.
If you want to run a company, you need to figure out what exactly your product will do and who needs it. I know that it seems like everyone needs it, but that's not the case.
With regards to storefronts, you may be better off selling someone else's established product as a channel partner. What do you bring that no other storefront product has done so far? Shopping carts were new in 1997. I worked for a company that developed one of these first successful shopping carts. That means that you are catching up on NINE YEARS of development.
Now, if you want to do
If you can't describe at least one relevant aspect what you are doing in less than 30 seconds, you need more focus.
I find formal business plans to be a nuisance, but it may help you clarify your vision. As long as my key assumptions are on the paper, that's good. My vision is very simple and seemingly unattainable, yet I am exactly at the point I wanted to achieve by this stage now.
I just ran a search for storefronts written in
Leonid S. Knyshov
Find me on Quora
I wrote my first business plan without ever looking for guidance on how to write a business plan. In hindsight, my plan turned out to be highly accurate. You basically need to think about your strategy, and write down whatever is relevant in complete sentences. Ask someone else to punch holes in it, and then go about collecting the missing information and performing the revisions. The only reason to read sample b-plans is to get the terminology for the headings. Samples and templates are not going to help you do the critical thinking that is required. On the other hand, doing as much reading as possible in your field helps a lot.
From the brief description about the business the idea doesn't sound too radical for a VC(who typically stay away from risky early stage investments), and neither does it sound as something that requires VC money(typically in millions, not thousands). So I wonder why you need VC money?
As other commenters have already pointed out, first get your own skin in the game by investing your own money. Remember the golden order of early stage funding, founder->family->friends->fools. Only after you've exhausted these should you start looking at venture capital. VC money typically helps you scale up/expand rather than bootstrap.
Of course exceptions will always be there...but those are typically when you've got either a great idea(eg. Riya) or a great startup team or both. Simple ideas with unknown management teams don't even register in the eyes of VCs.
You say "any business needs money" like it's a "people need air to breathe"-type fact.
.NET with FOSS); hosting services are nearly free. What isn't free is your own time, and that's the tradeoff you make.
I'm in the process of starting my 3rd Australian business now and none of them have required any significant money. Computers are close to free these days, or free if you can use a 3yo one that someone's throwing out; FOSS is free (and, yes, you can develop in
Some suggestions:
- live off your savings. If you don't have any, then get some. If you can't save any money, then you won't be in business long anyway so you may as well get a job
- spend as little money as you possibly can. Really. If you need particular expertise, scour your personal network to see who's got that expertise; once you find someone, offer your skills in exchange for theirs. Work from your own house, and live on coffee and sandwiches if you have to. If you eventually have to go to a VC for money, they'll want/expect to see that you're tight with your money before they give you some of theirs
- call in favours from friends and family. Visit your parents at mealtimes, if you have to. Track down that teenage cousin who wants to build Web sites for a living, and have him build yours; if you can't pay him, tell him he can put it in his portfolio and you'll refer people to him later. Pick the brains of people you know who've run their own businesses; in particular, find those who've *failed* because they'll probably have insights into how they went wrong, and you can learn from their mistakes
- when opportunity permits, seed the idea of what your business is with people who have money, but *don't ask for their money* and *don't* give them enough info so they could get someone else to build it for them. Go to networking seminars, if you don't know these sort of people and want to track them down. Show them your business plan, but don't go with your hand held out for cash. At some point, you may want to sell your business to these people, but you want them to be coming to you begging to buy, not you going to them begging for cash
I had a class with Bob Hisrich, one of the leading professors in the field of Entrepreneurship and New Venture Creation. Any of his textbooks are a good start.
He said once in a not-entirely-joking way that "every business plan must have at least ONE chart with a line going up and left". It sounds silly, but there's some merit to the psychological impact a nice graphic can have.
There are of course plenty of other more useful tips that others have already offered - I just found this amusing.
Shades of Grayden
1. Borrow a shitload of money
/. is not the best place for this question...
2. ???
3. Profit!
Well, maybe
But stay away from the orange shades as they may make you appear less professional.
Some advice from someone who's done this.. two or three times now.
Get your prototype or demo working (well). That's phase 1.
Write up a ~5-10 page document that explains;
- Who you are;
- What you've done before;
- What you want to do;
- How you plan to do what you want to do;
- How you plan to make money and..
- how much money you can make;
To see if the idea is even worth pursuing. Once you've convinced yourself of that, go talk to some local investors. You're not going to get the attention of a VC unless you have connections, and if you had those connections, you wouldn't be asking on slashdot.
If you can't convince the local investment community to risk a few bucks, then your idea is probably not as good as you think it is. Most communities of any size have some (usually wealthy) people who will risk some money on local firms. You need to network with those people and see what they think. Once you get that far, THEN you need to think about a business plan. Until you get to that point, that basic document I described above is all you need.
Good luck!
..don't panic
Having just this very day finally resigned from the startup some friends and I founded about 5 years ago (in Australia) when our previous employers fell victim to the burst dot.com bubble, some of my experiences may be relevant:
- There's some good advice in eariler posts on composing the business plan itself, but don't get too attached to it. Depending on your investors, partners, and clients, it will change. Once you get the VCs involved, they will write the business plans.
- Don't get the VCs in until you absolutely have to. They will screw you for everything they can get, eventually. That's just what they do, even the relatively benign ones.
- Don't give up your day job unless you can take a really hard, pessimistic look in the mirror and be confident that you can raise enough seed capital from family, friends, etc., to do at least a convincing proof of concept. It will put you in a much better position when you do have to talk to VCs.
- Australian VCs and seed-funders are almost absurdly conservative. Many talk big about supporting local innovation, but the reality is very different in my experience if you need more than about $100k to get your idea off the ground. Expect to fight over every last cent - you won't be fitting the office out with Aeron chairs.
- For this reason, when you do get VCs in, get them in big the first time. You do not want to be in the position of needing another 6 months funds to get your product ready when you've already given the VCs a big chunk of the company. Once you lose your majority share holding (and they have more directors on the board than you do), you're completely in their power.
As a postscript, the reason I'm leaving my startup is that it is, at last, in a position where it can almost afford to hire someone to replace me. I'm taking an entry level position at one of our clients that is almost exactly double my salary at the startup.
Finally, good luck!
You know they call 'em fingers but I've never seen 'em fing. Oh, there they go.
"every business plan must have at least ONE chart with a line going up and left".
;-)
You're right, it does sound silly. Probably because a line going up and left would essentially mean dropping sales/profits/market share.
Yeah, that kind of graphic would not have too great a psychological impact with VCs
Page 2 - Table of Contents
Page 3 - Executive Summary - Should be no more than 1 page - explaining you, you plan/idea/business model/revenue stream, succinctly and professionally
Page 4 - Purpose of the Business Plan - to organise your ideas, to demsontrate that you are capable of pulling this off, and making it profitable, and repaying your loans, to obtain start up capital, through traditional or private lenders
Page 5 - Products / Services
Page 6 - Operation - your hours of operation, your specific business model, your factories/employees/hiring/policies/procedures in short forms, your revenue stream, how are you going to make money at this, and pay me back, and is there really that much profit to be made?
Page 7 - Ownership - your one page bio, your experience/training qualifications to run this, your partners(same again) convince me to part with my money
Page 8 - Organization - Personnel / Leadership / Management, industry bodies (Ontario Truckers Association or similar)governing bodies /legislations (regulatory bodies)
Page 9 - Marketing / Sales Activities - your planned strategies / costs / advertising / networking / partnerships / affiliates
Page 10 - Exit Strategy - how is the lender getting his Return On Investment, how is this entity going to separate itself from you with it's money back, and interest, and let you carry on your merry way? loss of ownership after fully repaid or 5 years while you've hit various milestones? buy out when you decide? right of first purchase and right of first refusal if they were to sell their interest? would you sell out?
Page 11 - Market Analysis - what / who is your market, how many widgets should you seel to break even, how many can you sell in a week / month / year, expanded markets / franchising, will these be repeat customers / one time only / recurring revenue streams?
Page 12 - Funds Required and Their Use - how much you want and what will you spend it on, why? how little could you get going with? maximum possible expenditure? detailed / itemised, please. don't forget taxes / accounting / legal / logos / artwork / letterhead / cards / flyers / mailers / warranties / equipments / rents / deposits / communications / website
Page 13 - Financial data - what you've put in, are poutting in plus your effort, they need to see your " Hurt Money "
Page 14 - Forecasting figures for year one, projections through Fiscal Year 3 repayment schemes for the startup loan, project into year 5 with your expansions etc. include professional chart here
Page 15 - Appendices / Exhibits - self-explanatory
Page 16 - Privacy and Confidentiality Policy
Page 17 - Disclaimer
Page 18 - Confidentiality and Non Disclosure Agreement
Page 19 - Circulation Control Sheet
Page 20 - FAQ / notice of copyright / trademarks
Do NOT neglect to include somewhere, your weaknesses, and how to overcome them, or at least mitigate them, include any specific strengths and advantages in this plan as well This should at least get you started, email me if you'd like - particularly those persons in and around Toronto, Ontario Canada. email is yourwizard AT NO SPAM financier DOT com
Question Authority before IT questions You
This sounds extremely simplistic, but countless people, especially those writing business plans for the first time, tend to completely overlook the basics.
Forget about formatting and templates and what section headings to include. These will come together later. Instead, put yourself in a VCs shoes. Pretend you are considering risking a considerable amount of money on an idea and a team that will implement these ideas (assuming your company has no existing product or revenue stream, that it is still in the idea phase). The guise is that if you provide x amount of capital, this group of people will employ it to generate x*n amount of capital in a given amount of time.
Ask yourself, what is it about my ideas or plans will ensure an investor that this is not only going to happen, but happen to such an extent that it will generate many times the amount of capital invested. Investors are not looking to break even, they're looking to make a large increase on the amount of money they invest.
You need to be completely honest with yourself and your idea. If, (as would be natural given the forum,) your idea is based on a technology, remember that an investor has absolutely no interest in how cool or exciting it is or whether it's written in Java or Turbo Pascal. What problem does it solve? How are you going to sell it? Who is going to buy it? How are you going to advertise it? How is it going to generate the many fold return on investment I'm looking for? 10 pages on the design and features of your wild new technology does nothing to address these concerns.
Ask yourself, would you put up however many millions you are asking for with complete confidence? People gripe and moan about greedy VCs, but remember, you're probably asking somebody to take of 100% of the financial risk. If it fails, you could just walk away into another job. The VC may be out millions. What's so special about your idea that this financial risk is worth it?
Finally, consider that the process of putting together a business plan is likely to be far more informative to yourself than any investor, as you are forced to consider all of these questions, and consider your idea in the cold harsh light of reality. If you cannot answer, and answer honestly, any of these questions, then it is more than likely your business idea simply needs rethinking.
I've learned all of this the hard way. Perhaps the simple answer to the question 'What's the best way to write a business plan' is 'many, many times.'
I'm not really familiar with Austrailia, but in the United States most public Universities have Small Business Centers that provide free help.
For example, near where I live in Florida, the University of West Florida offers services.
Or the United States Small Business Association provides resources.
My wife made use of these when she started up her business. Its been about 18 months, not making a profit yet but sales have been increasing.
"You cannot find out which view is the right one by science in the ordinary sense." - C.S. Lewis on Intelligent Design
The title may sound like some sort of LARP show but its not. They get entrepreneurs in front of four VCs each of which has a HUGE PILE OF CASH in front of them. The entrepreneur then explains their product or idea, and says something like "I want 50,000 UKP and you get 10% of my company".
Each VC, or 'Dragon', then says "You sweat too much, I'm out", or "I cant work with you, you're clearly a moron, I'm out", or if you are lucky one will say "I'll give you 25,000 for 15% of your company". Well, that's no good, unless you get all the money you ask for you get nothing. So maybe Dragon 4 will say "I'll give you the other 25k for another 15%". So now you've got your money but you've lost 30% of your company. If you want it.
Anyway, see if you can check out the show (on BBC2 in the UK). Anyone who dithers about figures or sales projections or plans is out on their arse immediately. Anyone who seems to have a clue tends to reject the VCs even if they do get an offer, thinking they can get better elsewhere....
Barry
Comment removed based on user account deletion
Back at the peaceful Simpsons house. Homer is reading "Internet for Dummies".
HOMER: Oh, they have the Internet on computers now!
MARGE: Homer, Bill Gates is here.
HOMER: Bill Gates?! Millionaire computer nerd Bill Gates! Oh my god. Oh my god. Get out of sight, Marge. I don't want this to look like a two-bit operation.
GATES: Mr. Simpson?
HOMER: You don't look so rich.
GATES: Don't let the haircut fool you, I am exceedingly wealthy.
HOMER: Get a load of the bowl-job, Marge!
GATES: Your Internet ad was brought to my attention, but I can't figure out what, if anything, CompuGlobalHyperMegaNet does, so rather than risk competing with you, I've decided simply to buy you out.
HOMER: This is it Marge. I've poured my heart and soul into this business and now it's
finally paying off. (covering his mouth) We're rich! Richer than astronauts.
MARGE: Homer quiet. Acquire the deal.
HOMER: (to Gates) I reluctantly accept your proposal!
GATES: Well everyone always does. Buy 'em out, boys!
Bill Gates companions begin to trash the "office".
HOMER: Hey, what the hell's going on!
GATES: Oh, I didn't get rich by writing a lot of checks!
Bill Gates lets out a maniacal laugh. Homer and Marge cower in the corner as the room continues to be trashed.
Linux can be a differentiator between your company and your competitors. If mgmt is not interested in leveraging IT (buzzword), then stick with Windows and run with the pack. On the other hand, Linux could be the difference, especially if your industry runs tight margins and/or is highly standardized (retail, for example). At the very least, your company should be doing Linux R&D, just in case one of their competitors runs with Linux.
On a slightly more emotional tack, pitch Linux as the lone carnivore and the status quo as the herd of herbivores. Are your managers predators or prey? Are they risk takers or are they content to split the pot with their competitors.
I'm not big on business books, but one book that impacted me is Thriving on Chaos by Tom Peters. It's an old book, from the late eighties, but the concepts apply today. One of the key concepts is to use innovation to differentiate your company from your competitors.
Step Number 1
>> Don't ask a bunch of geeks on slashdot about business plans, or anything business related.
Step Number 2
>> Ask this question again once you've located the correct forum for decent feedback... I'd start by searching "small business help" in google.