19 questions to boost your business plan
Whether you’re seeking capital for your company or optimizing your business strategy, the most important element, especially for outside investors, may be your written business plan. You can adjust and enhance your plan with this 19-step checklist. When your written plan answers yes to each of these 19 questions, your product/market strategy is in great shape, and you also increase your chances of attracting investment capital.
If you don’t already have a written business plan, write one! Your business plan is a blueprint for your entire company. It describes in detail your goals, the financial and technical feasibility of your goals, and the strategy you will use (or are using) to achieve those goals. And your business plan is a business tool: it’s a yardstick to measure your progress and a compass to keep you on track.
Should a business plan be written?
Yeah! A plan that isn’t written down usually hasn’t been fully thought out. And despite what you’ve read, it’s doubtful that any business has ever attracted capital on the back of a napkin.
Use this checklist as a way to identify where your strategy, as outlined in your business plan, needs work. Each of the following questions highlights an area considered critical for technology investors.
1. Can the key ideas behind your product or service be expressed in one or two sentences? (y/n)
2. Does your company have at least one unique and compelling competitive advantage that cannot be quickly or easily duplicated? (yes/no) Examples are a special feature, cost advantage, technical refinement, new delivery system, or 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 yourself?
4. Is your industry segment growing by 25% or more? (yes/no) If no, can your new product dominate your segment? If the answer is no, you probably won’t be able to generate the kind of financial returns investors are looking for.
5. Does your product or service create a new market? (y/n) While positive overall, this could be a trap: in a completely new market, potential can take time to unfold. Lotus Notes created a new category, but it took years to create value for investors.
6. Is your market in a “booster”: the growth phase of the market where market revenue has recently taken off? (yes/no) Venture investors prefer markets at this stage because the time to value creation is shorter and the potential for growth is still great.
7. Is your target market segment 1) narrowly defined over a population that shares common characteristics, 2) large enough to support significant profits, 3) served by communication channels to reach that market, i.e. trade publications or special interest, responsive mailing lists? (y/n)
8. Is your business filling a gap in the market, or do you have a “cool” product that you think is so great that customers are bound to want to buy it? (y/n)
9. Is the benefit of your product or service to users 1) significant, 2) quantifiable, and 3) cost justified? (y/n). If you provide a benefit that is important and you can prove it, there is a much higher chance of generating sales.
10. Is there a proven market for your product? (yes/no) If you have an existing product, is your customer base expanding? Investors prefer to finance sales and production rather than product development.
11. Is there a broad appeal for your product or service? (yes/no) Are there enough potential customers in the target market that you can make 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 a technical background, a question to ask is “Who is going to sell your product or service?” What about third-party distributors?
13. Is there an experienced management team? (y/n) Investors prefer to fund a strong team rather than a lone genius with a great idea. The team must be highly qualified in marketing, sales, finance and in the product/service area itself. Of course, a demonstrable track record helps.
14. Can you demonstrate a probable return of 5 to 15 times the investors’ capital, over a period of three to seven years? (yes/no) The actual parameters used by VCs will vary depending on what stage you are in (idea, start-up, development, expansion, recovery).
15. Is there a clear exit strategy for investors? (yes/no) The most common strategies to return capital to investors are 1) going public; 2) acquisition of your company; 3) new investors; 4) buyout from the founder or buyout by management.
16. Have other investors already invested in the company, particularly the senior management team? (yes/no) This reduces apparent risk, reduces overall exposure, and shows that management “keeps its money where its mouth is.”
17. Have you clearly defined a structure for the investment you are seeking? (yes/no) The structure should include: who is involved, how much capital is needed, what minimum investment you will accept, how much capital you will buy, and of course, the projected return on investment.
18. Are your financial projections realistic? (yes/no) Have you solidly justified your projected growth rates and other financial assumptions?
19. Have you clearly examined the risks? (yes/no) Investors like to know that you have considered the risks. Here’s the key: can you turn your risks into opportunities?
Too many right? Remember, each “no” opens a space for you to strengthen your business. Even if you’re not looking for capital, each question highlights a critical success factor that, when mastered, will increase your earnings, performance, and future success.
To help you discover the hidden value and opportunities in your current business, and to make it easier to spot potential problems while you’re just getting started, I’ve created the Business Building Guide. A remarkable help in accelerating the growth and profitability of your business, this insightful program of questions and checklists enables you to quickly diagnose, troubleshoot, and optimize every part of your business, from marketing to sales to customer service. to product development and finance for production.
©Paul Lemberg. All rights reserved
