If you want to raise money for your new business you have to convince somebody to invest in you, your product and your company. This is usually presented in a Business Plan. Whether you want to raise money from Investors or invest your own hard earned cash, a Business Plan is a must.

I have to admit that I find writing a Business Plan is tedious work. But you should think of it as a way to scrutinize your own idea. No matter if it is a family recipe for a cake from your great grandmother or a communication device for submarines you have to check if it is really as good as you think. The enthusiastic part of the brain will scream YES. Mine does all the time. But is there a realistic potential to make some bucks? And does it already exist?

Number one should always be to google it! There are very few new ideas out there and it sucks, I know.

If you come to the conclusion that your idea is a viable service/product, answering the following topics will pretty much cover what you need to have in your Business Plan. The depth in which you have to cover all these topics depends mostly on who you intend to show it to, but if you go to a Venture Capitalist less than 15 pages I would say is too little. And the financial part will be absolutely crucial.

• What you are offering,
• The need on the market,
• Who is going to buy your product and how big is the market,
• What product/service you will compete with,
• How much will you be able to sell for the next 5 years and
• What costs will you have to realize the plan.

Let´s go through these one by one. I will use grandmas cookies as an example.

The offer

Let´s say you offer cookies with a secret recipe. Now you should ask yourself what makes you unique? Why should anyone buy your cookies instead of other ones on the market? Are they cheaper, larger, delivered in a certain way, ecological, better branded (I will cover branding in a later post), make you lose weight, anything that makes you stand out and gives you the “right” to be on the market.

Example:
We offer really tasty cookies based on an old secret family recipe with local ecological ingredients that makes you lose weight.
You wanna buy?

The need

To be able to sell anything there has to be a need for it. That is pretty obvious but easily forgotten or unconsciously avoided. A rather common mistake is not to go out there with your idea and ask potential customers what they think (it is ok to ask friends & family – to begin with). This is rather inconvenient for most people and since you can expect to get a lot of questioning you have to be mentally prepared with an open mind-set. Take all input as information to fine tune your offer. And don´t be disheartened.

So you can think of two ways of finding a need, usually referred to as “technology push” or “market pull”. The TV-set evolution with new better features, sharper images and 3D I would put in the technology push category. What we see now trending is cleaner products; less energy, less waste, less pollution etc. There you have a market pull. Where do you place Henry Ford who delivered cars when people asked for faster horses?

There is another situation I like to mention and that is a gap in the market. Perhaps you find the same kind of cookies in the huge stores, but the local ones do not get any due to contracts, costs or whatever reason there might be. Then you fill that gap.

The customer

The normal trap I see (and do myself) is to say that everyone needs this, or every household, or every large corporation, or every something. Not true. Period. There is no such product. Prove me wrong here! (Oxygen does not count.) And 100% of the identified market is not the potential market. Then we would have only one car brand etc. etc.

Define the customers and narrow down as much as you possibly can. It should be a small market. It should be so small that you will be the biggest fish in the pond within 1-2 years, meaning having a bigger market share than the biggest competitor. So be careful to choose the right pond! You can segment (narrow down) in many ways; by geography, size of customer, frequency in buying pattern, age, hairstyle, type of industry, whatever that makes sense. Then you add on the next closest segment as the second segment to take when you have reached the first goal.

Competitors

Don´t say (or think) you are alone out there. There are always competitors. It might be someone offering a similar product or another product that fills the same type of need. Make sure you know as much as possible about your competitors. By doing that you will learn a lot, you will know where to position your product and if you should make adjustments to the product, business model or even learn something you didn´t think of from the beginning. Be true to yourself and to your investors. The expression “killing your darlings” makes sense. Stop before you waste your time or money even though your heart says GOOO!

Sales

The moment of truth! How much sales will you have month by month the first 24 months and then quarterly the following 3 years. I know, this seems so theoretical, but yet so important. You have to be extremely tough to yourself here (if you are a kind person ask someone else to say No Way several times) and even mention the customers by name. Not Vera and Sam as individuals but Vera & Sam Bakery and the following 50 bakeries. When you have your plan, move everything 6 months forward. But don´t tell yourself you will do this because then you will have that in mind.

The investors love to see the hockey-stick sales plan: First year almost zip, second year it pics up and third year sales explodes. The funny thing is they hardly believe it themselves, but one investment out of ten makes it (at least that´s what they have to achieve with their portfolios).

Costs

This is where you have to look at your business from grain to loaf, from getting the ingredients to money in the bank. And of course depending on your set-up, the need for cash will vary. How much cost for each deal, sales meeting, marketing campaign, congress, homepage. Ad on wages, inventories, rent, tax, computers, internet, etc. It adds up quickly. When you are in control you can adapt.

Do a cash flow analysis. Investors might fancy some profit and loss statement where you can write off inventories on 5 years. Cash is king. If you have no money on the bank, there are no wages to be paid. I have been there two consecutive Christmases and it is not a pleasant situation to be in. And don´t forget the Pi-factor. Again, everything will take 3,14 times more in time and/or cost.

Presenting your great idea

Last but not least. When I have presented my ideas, the situations have differed from a 30 second pitch (the so called elevator pitch) to one hour meetings with investors. The ultimate test to see if you know what you are talking about is to present your idea in 60 seconds to anyone you meet and have them enthusiastic (or at least understand what you offer). My mother would not be so thrilled of my idea for a bottle holder I can use when I windsurf, but she has to understand the concept and why it is so brilliant. And since she is my mother she will of course be enthusiastic, at least until I ask for some funding for the first prototype.

So go out there and practice, practice and practice. You do not know when you might meet someone who is a potential customer, investor, partner or supplier. You might even sell something. And it might just take 60 seconds.

Stay creative out there and never give up on your dreams! “The ox is slow, but the earth is patient.”

//Andreas

I am a Swedish serial entreprenuer with 3 companies on the CV and a father of 3 beautiful and creative kids. I have a huge interest in start-ups, products and services that contribute to a sustainable world and freedome of thought.