| Whether you are seeking capital for your
company or are optimizing your business strategy, the most important element -
particularly for outside investors - may be your written business plan. You can tune-up
and supercharge your plan using this 19-step checklist. When your written plan firmly
answers yes to each of these 19 questions, your market/product strategy is in terrific
shape plus you increase the odds of attracting investment capital.
If you don't already have a written business plan - write
one! Your business plan is a blueprint for your whole company. It describes in detail your
goals, the financial and technical viability of your goals, and the strategy you will use
(or are using) to reach those goals. And your business plan is a working tool - it is a
yardstick to measure your progress and a compass to keep you on course.
Must a business plan be written?
Yes! A plan which is not written usually has not been
thought through fully. And despite what you may have read, it is doubtful that any
business ever attracted capital on the back of a napkin.
Use this checklist as a way to identify where your
strategy, as spelled out in your business plan, needs work. Each of the questions below
highlights an area considered critical to technology investors.
1. Can the key ideas behind your product or service be
stated in one or two sentences? (y/n)
2. Does your company have at least one unique and
compelling competitive advantage, which cannot quickly or easily be duplicated? (y/n)
Examples are a special feature, a cost advantage, a
technical refinement, a new delivery system or a 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 you?
4. Is your industry segment growing by 25% or more? (y/n)
If not, can your new product dominate its segment? If the
answer is no, you probably won't be able to generate the kind of financial returns
investors look for.
5. Does your product or service create a new market? (y/n)
Although generally positive, this could be a trap - in a
brand new market, the potential can be slow to develop. Lotus Notes created a new category
but took years to create value for investors.
6. Is your market in "early momentum" - the
market growth phase where market revenues have recently taken off? (y/n)
Venture investors prefer markets in this stage because the
time-to-create-value is shorter and the growth potential still large.
7. Is your target market segment
1) tightly defined over a population sharing common characteristics,
2) large enough to support significant profits,
3) served by communications channels to reach that market - i.e., trade or special
interest publications, response mailing lists? (y/n)
8. Is your company filling a gap in the market, or do you
have a "gee-whiz" product which you think is so terrific that customers will
surely want to buy it? (y/n)
9. The benefit of your product or service to users is
1) significant,
2) quantifiable and
3) cost-justified? (y/n).
If you provide a benefit which is important, and you can
prove it - there is a much higher probability of generating sales.
10. Is there a demonstrated market for your product? (y/n)
If you have an existing product, is your customer base
expanding? Investors would rather fund sales and production than product development.
11. Is there wide appeal for your product or service? (y/n)
Are there enough potential customers in the target market
that you can earn 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 technical
backgrounds, a question to ask is "Who is going to sell your product or
service?" What about outside distributors?
13. Is there an experienced management team? (y/n)
Investors would rather fund a solid team instead of one
lone genius with a great idea. The team should be highly qualified in marketing, sales,
finance, and the product/service area itself. Of course, a demonstrable track record
helps.
14. Can you demonstrate a likely return of 5-15 times
investors' capital, over a period ranging from three to seven years? (y/n)
The actual parameters used by venture investors will vary
based on which stage you are in (idea, startup, development, expansion, turnaround).
15. Is there a clear exit strategy for investors? (y/n)
The most common strategies for returning investors' capital
are
1) going public;
2) acquisition of your company;
3) new investors;
4) founder's buyback or management buyout.
16. Have other investors already put money into the
company, particularly the senior management team? (y/n)
This reduces the apparent risk, reduces overall exposure,
and shows that management "has its money where its mouth is."
17. Have you clearly defined a structure for the investment
you seeking? (y/n)
The structure should include: who is involved, how much
capital is needed, what minimum investment you will accept, how much equity that will buy
- and, of course, the projected return on investment.
18. Are your financial projections realistic? (y/n)
Have you soundly justified your projected growth rates and
other financial assumptions?
19. Have you clearly examined the risks? (y/n)
Investors like to know that you have considered the risks.
This is key - can you turn your risks into opportunities?
Too many no's? Remember, each "no" opens up an
area for you to strengthen your business. Even if you aren't seeking capital, each
question highlights a critical success factor - which, when mastered, will increase your
profits, your performance, and your future success.
In order to help you discover hidden value and
opportunities in your existing business, and to make it easier to spot potential problems
while you are just starting out, I've created the Discover Hidden Value Business Building
Guide. A remarkable aid to accelerating the growth and profitability of your business,
this program of insight-provoking questions and checklists enables you to rapidly
diagnose, troubleshoot and optimize every part of your business, from marketing to sales,
customer service to product development and finance to production. |
