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Management, Management, and More Management
The crux of the matter in writing a Business Plan is to prove to
the reader that the people involved in the business have the skill
and experience to create a successful enterprise.
Investors put money behind people, not simply behind cool products
and interesting technologies. There are many wonderful, patented
inventions that never see the fluorescent light of day at Wal-Mart
because no one could figure out how to profitably manufacture and
sell the product. You must tell the reader about what you have
accomplished in your business career, not just tell about the
positions you have held or what mighty corporations you have worked
for. What have you done that can inspire confidence in your
ability to execute the business strategy in the plan? Write in
active terms: I increased revenues 100% in two years. I cut
divisional costs by 45%. I supervised 100 people in 8 states.
One of the most striking, and succinct statements I have ever read
in the Management Section was: "In our last venture, I earned the
investors a 2,500% return." Most of us would take a chance on
backing that guy.
Be Enthusiastic, But Don't Sound Like A Carnival Barker
Sell but don't over hype
The Business Plan is a selling document: it is supposed to attract
people to the financial opportunity presented by your company. But
a sophisticated investor can quickly spot exaggerated claims about
management capability, or projections that are completely out of
line with reality. You have to strike a delicate balance between
not sounding like a dry technical manual and not sounding like a
high-pressure salesman from some telemarketing boiler room. The
more excited you sound about the prospects for your business, the
more likely the reader will be too. The other extreme, however, is
like someone who told us he uses the plan to get the investor's
"greed glands" pumping. Making promises you cannot deliver on can
later arouse the investor's "anger glands" and even his
Know Your Audience
(If you are a venture capitalist you can skip this tip)
When a client asks us to review their business plan and tell them
if it is "ready to go," one of the things I often tell them is: The
Venture Capitalist Is Not As Smart As You Think He Is.
How can this be, you say? The VC has three college degrees from great colleges, universities, and not one of them from community college. The VC often has Roman numerals behind his last name. And he is very difficult to get on the phone, a sure sign of an Important Smart Person.
Maybe. Maybe not.
Don't assume he will immediately understand why your product is
clearly superior. Don't assume he will be able to grasp the way
your technology works. He may or may not know how large your market
or industry is.
Think about who will be reading the plan before you begin to write
it, and tailor your message to the reader's level of understanding
or experience. Many investors decline to pursue discussions with
companies not because the business does not have merits, but
because they simply "didn't get it" when they read the plan.
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