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SearchWhether you are seeking capital for your company or are optimizing your
business strategy, the most important element - particularly for outside
investors - may be your written business plan. You can tune-up and supercharge
your plan using this 19-step checklist. When your written plan firmly answers
yes to each of these 19 questions, your market/product strategy is in terrific
shape plus you increase the odds of attracting investment capital.
If you don't already have a written business plan - write one! Your business
plan is a blueprint for your whole company. It describes in detail your goals,
the financial and technical viability of your goals, and the strategy you will
use (or are using) to reach those goals. And your business plan is a working
tool - it is a yardstick to measure your progress and a compass to keep you on
course.
Must a business plan be written?
Yes! A plan which is not written usually has not been thought through fully.
And despite what you may have read, it is doubtful that any business ever
attracted capital on the back of a napkin.
Use this checklist as a way to identify where your strategy, as spelled out
in your business plan, needs work. Each of the questions below highlights an
area considered critical to technology investors.
1. Can the key ideas behind your product or service be stated in one or two
sentences? (y/n)
2. Does your company have at least one unique and compelling competitive
advantage, which cannot quickly or easily be duplicated? (y/n) Examples are a
special feature, a cost advantage, a technical refinement, a new delivery system
or a special supplier.
3. Is your competitive advantage proprietary? (y/n) That is, can it be
copyrighted, patented, trademarked or otherwise protected? Can you keep it
exclusive to you?
4. Is your industry segment growing by 25% or more? (y/n) If not, can your
new product dominate its segment? If the answer is no, you probably won't be
able to generate the kind of financial returns investors look for.
5. Does your product or service create a new market? (y/n) Although generally
positive, this could be a trap - in a brand new market, the potential can be
slow to develop. Lotus Notes created a new category but took years to create
value for investors.
6. Is your market in "early momentum" - the market growth phase where market
revenues have recently taken off? (y/n) Venture investors prefer markets in this
stage because the time-to-create-value is shorter and the growth potential still
large.
7. Is your target market segment 1) tightly defined over a population sharing
common characteristics, 2) large enough to support significant profits, 3)
served by communications channels to reach that market - i.e., trade or special
interest publications, response mailing lists? (y/n)
8. Is your company filling a gap in the market, or do you have a "gee-whiz"
product which you think is so terrific that customers will surely want to buy
it? (y/n)
9. The benefit of your product or service to users is 1) significant, 2)
quantifiable and 3) cost-justified? (y/n). If you provide a benefit which is
important, and you can prove it - there is a much higher probability of
generating sales.
10. Is there a demonstrated market for your product? (y/n) If you have an
existing product, is your customer base expanding? Investors would rather fund
sales and production than product development.
11. Is there wide appeal for your product or service? (y/n) Are there enough
potential customers in the target market that you can earn significant profits,
for a long time? Are there follow-on products to sustain revenue and profit
growth?
12. Does your company have the ability to sell your product? (y/n)
Particularly in companies where the founders have technical backgrounds, a
question to ask is "Who is going to sell your product or service?" What about
outside distributors?
13. Is there an experienced management team? (y/n) Investors would rather
fund a solid team instead of one lone genius with a great idea. The team should
be highly qualified in marketing, sales, finance, and the product/service area
itself. Of course, a demonstrable track record helps.
14. Can you demonstrate a likely return of 5-15 times investors' capital,
over a period ranging from three to seven years? (y/n) The actual parameters
used by venture investors will vary based on which stage you are in (idea,
startup, development, expansion, turnaround).
15. Is there a clear exit strategy for investors? (y/n) The most common
strategies for returning investors' capital are 1) going public; 2) acquisition
of your company; 3) new investors; 4) founder's buyback or management buyout.
16. Have other investors already put money into the company, particularly the
senior management team? (y/n) This reduces the apparent risk, reduces overall
exposure, and shows that management "has its money where its mouth is."
17. Have you clearly defined a structure for the investment you seeking?
(y/n) The structure should include: who is involved, how much capital is needed,
what minimum investment you will accept, how much equity that will buy - and, of
course, the projected return on investment.
18. Are your financial projections realistic? (y/n) Have you soundly
justified your projected growth rates and other financial assumptions?
19. Have you clearly examined the risks? (y/n) Investors like to know that
you have considered the risks. This is key - can you turn your risks into
opportunities?
Too many no's? Remember, each "no" opens up an area for you to strengthen
your business. Even if you aren't seeking capital, each question highlights a
critical success factor - which, when mastered, will increase your profits, your
performance, and your future success.
In order to help you discover hidden value and opportunities in your
existing business, and to make it easier to spot potential problems while you
are just starting out, I've created the Discover Hidden Value Business Building Guide. A remarkable aid
to accelerating the growth and profitability of your business, this program of
insight-provoking questions and checklists enables you to rapidly diagnose,
troubleshoot and optimize every part of your business, from marketing to sales,
customer service to product development and finance to production.
About the Author
© Paul Lemberg. All rights reserved
Paul Lemberg's clients call him "the unreasonable business coach" because he
insists they pursue goals and take actions far outside their comfort zone to
make more money than they previously thought possible. To get business
coaching tips, tools and strategies like these, visit http://www.paullemberg.com/Business_Coaching.html.
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