Late last year, a CEO who is currently looking to build out a new product line for his business approached me to get some help on a business plan. He has a great idea for a product that he believes will bring in the sales he wants but needed help in determining how to build a new business. The CEO’s mandate and requirement was for a business case he wanted to include in his business justification request to the board of directors.
While many successful companies are built on a simple idea, creating successful companies based on those ideas needs more than just an idea. After spending a couple of months interviewing the CEO and his leadership team, including the sales team, to better understand their strategic goals, their business, and doing the necessary research and analysis, I finally created the desired plan for him. But, during that entire experience, it continued to nag me why even CEO’s struggle to create ideal business plans. What is the ideal business plan and what should it include? How much information is necessary to provide enough context and content to get the investment you seek? Realistically, there is no ideal business investment plan because it all depends on 5 simple factors, 1 of which is not in your control:
- Are your investors experienced investors?
- Are there enough customers in the market that can buy your product?
- Why should the customers buy your solution ?
- Is your investment plan financially sound?
- What is your experience in creating business plans?
While it certainly can help to know more about your investment team or your leadership’s experience in funding the investment you seek, the reality is that it’s not a factor you can influence or control. Assuming that the investors are the most experienced you will ever find, you still need to do your best. In fact, the only thing you can do is to put your best foot forward and put together a business plan that you can defend. But if you don’t have enough experience putting together a business plan, how do you know what a business plan look like?
There are plenty of resources on the Internet that can assist you in creating a plan, but based on my experience of having launched 8 new products in the market and helped launch a startup, OneHive.com, I would highly recommend including the following, in some form, in your business plan.
- What is the current or future market trend and challenges that customers are facing
- What does the ideal solution do?
- Problems it solves
- Capabilities it will have
- Description for each capability
- Value derived by solving each problem
- Create a gap analysis to highlight the differences between what your company does today and what the ideal solution looks like.
- What is the addressable market opportunity? The addressable market opportunity normally includes:
- Total market size
- Potential market size
- Customer profiles
- Solution buying patterns
- Who are your competitors in the market and where does your company fit in, assuming you can deliver on the promise?
- What is the solution plan?
- What are the potential packaging and pricing strategies for your product?
- Note: If you cannot create a detailed pricing model, always create some benchmark pricing. It goes a long way to show that you know what you are talking about and also helps you create your financial summary.
- What does the sales model look like?
- Note: Most product managers or marketers overlook this aspect but it is important to understand the sales model as your product grows from it’s introductory phase, through it’s growth phase, and all the way up to market maturing and being recognized as a brand.
- Timelines for your solution and market growth, which should certainly include:
- Plan to build a product
- Staffing and growing a team
- Customer acquisition plan
- Sales model and enablement
- Financial Summary
- Free Cash Flow
- NPV (Optional)
Gone are the days where a business strategy or plan written on the back of the napkin would get you the investment you seek. While a back of the napkin business plan can certainly give you the framework you need, creating a business plan is essential to your business’s future. Without it, no investor is going to give you the money you seek.