So you've got a promising concept. Great. But many former entrepreneurs have tried to go straight from concept to launch without taking the time to put together a workable plan. Don't make the same mistake.
The current state of the Internet industry is leading many people to explore different career paths this year. Some people will leave one dot-com to join another, while others will look for opportunities in another industry. And then some will explore becoming entrepreneurs.
Despite the problems with a number of the highly visible dot-coms recently, many opportunities for growth are still available for the right entrepreneur. Some of these opportunities will be in wholly online companies, but many others will be traditional businesses with a key Internet component.
A Great Concept Isn't Enough
The first step to becoming an entrepreneur is to develop a concept for a new product or a new way to do business. A few weeks ago I wrote about the need to identify a solid concept for a business. But it takes much more than a great concept to make a great business.
Many former entrepreneurs have tried to go straight from concept to launch without taking the time for the crucial middle step of putting together a workable plan -- which is probably one reason they are former entrepreneurs.
Business plans have become a staple in the Internet industry, just as they are in every high-growth industry.
Whether you are interested in raising investment capital or looking for an office lease, every stakeholder is interested in reviewing the business plan. Potential investors want to see a clear, comprehensive plan that indicates that the entrepreneurial team has thought through all aspects of the business -- from marketing and sales to production and customer service.
Other stakeholders want assurance that the new business has a significant chance of succeeding. These stakeholders range from bankers who make loans to real estate companies looking to lease office space to new ventures.
Everybody wants to know if a company will succeed, and they think that reviewing the business plan will help them predict future success. Business plans frequently highlight problems that have not been addressed by the entrepreneur -- problems that will prevent achieving success.
What Turned Investors Off?
If you ever have a chance to read a business plan after a venture capitalist has reviewed it and written questions and comments in the margins, take the opportunity. It's almost like scrolling through a web server log showing which pages were glanced at and which pages received careful attention.
Partway through some business plans, the notes just stop. No conclusion. No verdict. No shopping-cart checkout turning millions of dollars over to an entrepreneur.
But like a server log of pages visited, the pages in a business plan visited by a potential investor can leave clues about what turned the investor off. Frequently, the last page read will be only a few pages in because that's where the investor found the fatal flaw in the entrepreneur's plan.
The accepted format for a business plan aimed at finding investment capital has become standardized. There are a number of web sites that have products and online tools that show how to format a business plan, such as Bplans.com, Palo Alto Software, JIAN, and BizPlanIt.Com. Using the standard format for a business plan makes it easy for investors to quickly find the key pieces of data used to make a quick yes-or-no decision to pursue the venture.
However, there is more to writing a great business plan than filling in forms in a program and clicking the print button. The plan should tell a compelling story about how the company will achieve greatness while minimizing risk and stretching capital until the company reaches profitability.
The Key Components in a Business Plan
Though every section in a business plan is important, potential investors review a few key elements first:
Reviewing these three sections allows a potential investor to make a quick assessment of how likely the venture is to succeed.
If you're planning to become an entrepreneur this year, focus your attention first on creating a solid concept for a new product or way of doing business. Then make sure the potential market for your business is large enough to support it. Finally, team up with people who have the experience necessary for success in a high-growth environment.
If you take these steps, you'll find it much easier to create a solid business plan that will attract the people and funding your business needs to succeed.
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Cliff Allen is President of Coravue, a company that provides content management software and application service provider (ASP) hosting for Web and email. Allen is coauthor of three books about Internet marketing, including the "One-to-One Web Marketing, Second Edition" (John Wiley & Sons, 2001).
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