As with most things there are a couple schools of thought on this topic. The first is that the Business Plan is absolutely necessary and is the core of your startup. The Second is that all it does is get in the way. Of the small businesses I polled on Twitter the only reason anyone had one was if they were looking for funding, other wise it was just too time consuming (which it should be)

Either way you look at it one thing is certain, if you’re looking for funding a business plan is absolutely necessary. That’s why I’m going to talk about it, we have created a small business plan and so we’ve been through the pain. It’s not investor worthy yet, but then we aren’t looking for investment right now anyways.

At the root of it all a business plan is a way to put on paper the goals, growth plan, business / management plans for your business. It’s there to help organize your thoughts and goals regarding your business and help keep you on track, it’s not there to drag you down and suck up your time. I’m going to get into the sections of a business plan, but first we need to create a ficticious business.

I posted the question to Twitter and Seth Simonds from the wickedly funny The Dating Papers was the first to respond with

“using GPS trackers to track endangered species and sponsoring a lottery of which # will be last of its kind.”

We now have a company dealing with extinction and gambling, now we need and imaginary owner… hmmm… how bout Adam? That sounds like a made up name. While it’s likely no one other than maybe Bodog is going to invest in Adam’s idea he still needs a business plan to humbly submit to Calvin Ayre and his legion of advisers.

Cover Page
This is the place where you will put your contact info and a statement of secrecy and confidentiality.

Adam is very careful in the wording to make sure his interests are taken care of and that Calvin knows it’s for his eyes only.

Table of Contents
Pretty self explanatory. Just make sure all the numbers are setup correctly.

Adam takes special care to ensure his page numbers are set correctly. He wouldn’t want Calvin skipping to the financial projects for the death of a panda bear when he’s looking for Adams management credentials.

Executive Summary
This is a MashUp of all your other chapters to give the investors a quick overview of you, your company, and your needs. Rule of thumb is use the summary of each section to create this, though some editing will be needed to keep a good readable flow and to flesh it out. Make sure to that it’s as compact yet informative as it can be, this is the spot investors will head to first. In every sense of the words this is your businesses first impression, so you need to make a good one.

What is going to be listed below is basically the summary sections of each for Adams business. They are not “up to snuff” and would be laughed right out of any board room, but they serve as a general idea

Company Description
You need to sell yourself and your company. Build a hsitory, tell a (true) tale, make it engaging and enjoyable.

Start where the company has been:
“I found that betting on Cock fights and dog fights weren’t profitable enough so I started running a stock buying site based on what animal you though was going to go extinct next due to natural causes like deforestation or global warming.”

Then move on to where you are now:
“We are getting ready to launch this into the big leagues by tagging all remaining endangered species with GPS locators and vital function monitors. We’re going to partner with the WWF to do the tagging and so they can do their studies while we setup the betting structure with exclusive rights to this game going to only 5 Vegas casino’s and 1 online portal.”

Finally where you are going:
“When the last animal finally dies we will start tagging humans in the same way and betting on who will be the last remaining one of us and they will inherit all of the worlds money at that point and become the worlds richest person ever! This is a plan that has the longevity of the human species and embodies the human spirit.”

Make it a good and compelling story, they have to like reading it at least as much as you liked writing it.

The Product or Service
Here is where you go into details about your business. What sets it apart, what make you competitive, and what problem it solves.

Adam’s synopsys might sound something like:
“We have created a unique GPS and vitals monitoring system that will allow us to be good stewards of the animal kingdom by prying into their personal lives in a very Big Brother conspiracy sort of way. This data will be used by the WWF to study the animals and that data will then be used 2 fold. By them for what ever it is they do and by us to create the odds and build the gambling structure that is Endangered! Race to extinction!”

This is also where you can (and definitely should) talk about other products your company offers and the growth strategy of your main product or service. Talking about product extensions and the way all of your various offerings tie in together show an investor that you are dedicated to your company and are planning for the growth needed to pay the investor back.

The Market
This is where you need to completely research your competition, your demographic, the growth of your market, pitfalls of your market, etc. This is like a research project on crack and the information you get for this section should make you wish that you were writing a thesis for a doctorate degree instead. The more info you have the more prepared and knowledgeable you will look to the investors.

In Adam’s case he is researching the current scene of life and death gambling:
“The only competitor we have right now is the Tsetse fly death watch, but ee don’t consider insects to be anything more than godless bags of goo. This leaves the field open for us to grab the larger segment of endangered mammals, birds, reptiles, and water inhabitants. We found that 85% of males aged 21-27 would be highly interested in our setup and would place at lets 2 bets a month. We also found that the consumption of grain alcohol helps increase their desire to bet on the demise of an elephant so we are looking at casinos that have the highest amount of alcoholics as their patrons. So far this appears to be Trump casino, The Nugget, Treasure Island, Club Vegas, and Mermaids Casino per the latest report by Las Vegas paramedics. We will also have a side bet going on which celebrity will be wearing the last of each kind of animal.”

Marketing
Here’s where you are going to explain how you’re going to get your product in front of customers eyes. This covers all the avenues you will explore, what their potential reach will be, how much it will cost, and your competitions methods. Make sure that you get detailed about where your money will be going.

For Adam it might look something like this:

This part is crucial to show that you have an idea of what you’re doing, but don’t be surprised if the investors have their own ideas on this after they wave a check in your face. They will want to make sure that their investment is properly places and displayed so that they can get the return they are looking for.

Management/Ownership
Describe all of your management, qualifications, and what they will be doing. Here is where you paint a picture of your team.

Adam”s list of cohorts might go like this:
“George Dubli is a 10 year veteran of the Australian Outback. He will be heading up the tagging expeditions as he is in Australian. We are counting on his ability to wrestle gators three times his size, go 12 rounds with a ‘roo and calm down wild beats just by point the “rock” sign at them.

Adam Wellington Is the owner / creator of Race to Extinction and is a veteran of dirty casinos and games of chance. He has created other casino hits such as Hillbilly tooth hunt, NaturalDisasterBetting.com and Panda mating betting game (looses a bit in translation).”

It’s basically like a resume in paragraph form, but this is also where you want to point out any of the flaws in your leadership. Each section should be a very honest and critical review of your company, if you fudge it most investors will be able to tell and you’ll loose their trust immediately.

Competition
Research! Before we were describing the market as a whole (consumers, competition, demographics, etc) this one is specifically about your competitors. This is where investors will get a feel for just how well you will do based on how well you know your competition. This takes all the info you have already discussed and then placed in here highlighting their strengths, their weaknesses, their star players, where you have an advantage over them, etc. You need to sell that you know your competitor and how to compete with them.

Adam:
“Tsetse fly deathwatch has an active community of 13,000 people. They spend an average of $10 a month betting on flies in a jar bringing them $130,000 a month, which is $1,560,000 anually. We feel that their godless sacs of winged goo are no competition to our elephants, pandas, whales, and rhinos.”

Financial Statements and Projections
There are so many parts in here it may require a post or two on it’s own. Basically you want to show any track record you might have for the business already, if you don’t then you will have to base your predictions on your competition.

This is where Adam details the power of the TseTse fly:
“Tsetse fly deathwatch had 5,000 users by the end of year one and 11 months into year two they ae at 13,000. Based on these numbers and the fact that pandas are cuter than poop eating flies we feel we can achieve over 13,000 users by the end of the first year, with the low end bet being $15 we should be able to clear $2,000,000 easily”

This should be followed up with charts and graphs showing competitor growth and yours being a median growth among your most popular and least popular competition. You want to be optimistic, but don’t be saying that you will be taking bets from the Pope by the end of the first year. Saying outlandish things like that will not only offend some people but make you sound unprofessional by not knowing the realistic limits of your startup and growth potential.

Appendices
Resumes of personnel, organization charts, additional information and any data, research sources, etc to back up your claims should be listed here.

Adam:
“All stats were checked using Wikipedia. Here are links to the articles”

When creating your plan put as much information in it as is needed to convince your audience, but keep it trim and flowing. If you overwhelm them and make it a chore to read your document they never will. It’s a difficult task to balance what is informative and what is garbage so take your time, and choose your words and numbers carefully.

I can’t express enough that if you decide to make one you don’t want to just breeze right through it. Take your time and always try to look at it from the investors perspective. Constantly be asking yourself “If I were an investor would I give me money based on this document?” Heck, give it to someone else and have them see if they would give you money based on the document.

This is just a VERY compact overview and this topic itself requires a ton more insight and work all on it’s own. I know you’re just chomping at the bit wanting more so I’m going to make you a deal. I’m going to cover business plans in more detail with better, full fledged examples. Not only that, but I will give one lucky Twitterer a link to their blog from ours if they give me the business idea for my example. I want to include you the reader in this.

Now, Before I finish I want to leave you with a gift. It is a time honored tradition passed down from one advice giver to the next and this gift is…

A few Do’s and Don’ts of creating a business plan:

• Don’t make it overly complicated, it will just become a mess you won’t want to look at and neither will an investor.
• Don’t make stuff up, it will be more obvious than you think.
• Don’t overlook your competitors, research them and include the finding in your plan.
• Do start simple and then build it out as necessary.
• Do keep it handy to reference, review, and update every couple of months.
• Do keep it as short as you can without skimping, an investor doesn’t want to read an 80 page nightmare anymore than you want to write one.

What are your thoughts? Is a business plan useful for you? Does it help no matter what the circumstance? Is it worth the time? Leave your thought below, we’d love to hear from you.

Thank You for Reading,
Josh “Shua” Peters

5 Business Plan Resources
AllBusiness.com
BPlans.com
Inc.com
SBA Business Plan guide
Tim Berry’s Business Plan Blog

DISCLAIMER!!! We do not endorse the killing of or the extinctin of endangered species. The examples are meant to be a light hearted jest. We do not want to see the polar bears or panda bears or any kind of bears or animal go extinct. Business plans are BORING! Writing them is BORING (unless you love research like I do) and writing about them is even more BORING (unless you spice it up with some extinction gambling). So please save the angry emails for when I write about something I actually do believe in that pisses you off.

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Tags: business plan, entrepreneur, startup

This entry was posted on Tuesday, December 30th, 2008 at 1:34 am and is filed under Home, Starting Up a Startup. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.