HOWTOWRITE

ABUSINESS

PLAN

Mckinsey&company

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TableofContents

Preface 4

1.THEROUTEFROMCONCEPTTOCOMPANY 4

1.1Successfactors 4

1.2Stagesofdevelopment 5

2.THEBUSINESSIDEA 8

2.1Developmentofabusinessidea 8

2.2Elementsofapromisingbusinessidea 9

2.3Protectingyourbusinessidea 13

2.4Presentingtoinvestors 14

3.THEBUSINESSPLAN 16

3.1Advantagesofabusinessplan 16

3.2Characteristicsofasuccessfulbusinessplan 16

3.3Theinvestor'spointofview 18

3.4Tipsonpreparingaprofessionalbusinessplan 21

4.STRUCTUREANDKEYELEMENTSOFABUSINESSPLAN 23

4.1Executivesummary 23

4.2Productorservice 24

4.3Managementteam 26

4.4Marketandcompetition 28

4.5Marketingandsales 32

4.6Businesssystemandorganization 37

4.7Implementationschedule 41

4.8Opportunitiesandrisks 42

4.9Financialplanningandfinancing 42

5.CASESTUDY:"CITYSCAPE" 48

5.1"CityScape":Ideaandbusinessconcept 48

5.2"CityScape":Businessplan 49

5.2.1.-EXECUTIVESUMMARY 50

5.2.2.-SERVICEIDEA 52

5.2.3.-MANAGEMENTTEAM 53

5.2.4.-MARKETANDCOMPETITION 54

5.2.5.-COMPETITORANALYSIS 55

5.2.6.–CITYSCOPE'SCOMPETITIVEADVANTAGES 56

5.2.6.-MARKETINGANDSALES 57

5.2.7.-BUSINESSSYSTEMANDORGANIZATION 58

5.2.8.-IMPLEMENTATIONSCHEDULE 60

5.2.9.-OPPORTUNITIESANDRISKS 61

5.2.10.-FINANCIALPLANNINGANDFINANCING 62

5.3.-Critiqueofelementsof"CityScape"businessplan 68

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Preface

ThisGuidetowritingabusinessplanisdesignedtohelpyouindevelopingyourbusinessidea,"fromconcepttocompany".Itdetailsthecontents,scope,andstructureofabusinessplanandtheexpectationsventurecapitalistshavewhenreadingone,andprovidesvaluablepointersonstartingupacompany.

TheGuideisnotintendedasabusinessstudiesresourcenorisitatheoreticaltreatiseonthenatureofbusinessplansperse.Rather,itofferspracticaltipstohelpyougetstartedsettingupyourcompany.Naturally,thereisnoguaranteethatallaspectsofthisGuidewillberelevanttoyourparticularcompanyorthatalltopicsrelevanttoyourcompanywillbecovered.The"Keyquestions"aboutthemainelementsofabusinessplanmakenoclaimtocompleteness;thosequestionsnotrelevanttoyourspecificbusinessplanneednotbeanswered.

IfyouarereadingthisGuidebecauseyouhaveabusinessideayouwanttotransformintoasuccessfulcompany,weofferyouawordofencouragement:Makethemostofthisopportunity!

McKinsey&Company,Inc.

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1.TheRoutefromConcepttoCompany

New,innovativecompaniesgenerallytrytogrowfromastartupintoanestablishedcompanywithinfiveyears.Buttheycanseldomfinancetheiractivitiesalonealongtheway.Rather,theyaredependentonprofessionalinvestorswithconsiderablefinancialclout.Forentrepreneurs,financingisanexistentialquestion–thebusinessplanmustthusbeviewedfromthepointofviewofpotentialinvestorsrightfromtheoutset.

1.1Successfactors

Successfulcompaniesarisefromacombinationoffiveelements(exhibit1).

1.Nobusinessconcept,nobusiness.Havinganideaisjustthebeginningofthecreativeprocess.Manyentrepreneursareinitiallyinfatuatedwiththeirinspiration,losingsightofthefactthattheirideaisthepointofdepartureforalongprocessofdevelopmentwhichmustface–andwithstand–toughchallengesbeforeitcanenjoyfinancingandmarketsuccessasamaturebusinessconcept.

2.Moneymatters.Withoutfindingsomebodywhoinvestsmoneyintogrowingtheideaintoaviablebusiness,thisbusinesswillneverbecomeareality.Therefore,fromearlyonalotofattentionhastobeputonconvincinginvestorstoprovidethenecessaryfunding.

3.Noentrepreneurs,noenterprise.Growingnewfirmsisnotaone-personjob.Itcanonlysucceedwithateamof,usually,threetofiveentrepreneurswhosetalents

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arecomplementary.Puttingtogetherwell-functioningteamsisknowntobeadifficultprocess,takingtime,energyandanunderstandingofhumannature.Donotloseanytimeinputtingyourteamtogether,andworkonperfectingitthroughouttheentirestartupprocess.Thecharacteristicsofahigh-performancemanagementteamarediscussedinmoredetailinsection5.3ofthisGuide.

4.Traditionalserviceproviderswillhelpyouclearthefirsthurdles.Youwilloftenneedtheadviceofprofessionalserviceproviderssuchaspatentlawyers,taxadvisors,andmarketresearchers,especiallyatthebeginning.Gettingtherightinformationearly,e.g.,forregisteringapatent,canhaveconsequencesforlatersuccessorfailure.

5.Strongnetworksarea"shotinthearm"foreverynewcompany.Professionalguidanceofpotentialentrepreneursbymeansofanetworkofnon-materialsponsors,entrepreneurs,venturecapitalists,andserviceprovidersisdecisiveinmakingviableideasintorealcompanies.PrimeexamplesforsuchregionalnetworkscanbefoundinSiliconValleyandtheBostonarea.

1.2Stagesofdevelopment

Thetypicalprogressionofthestartupanddevelopmentofgrowingcompaniesintoestablishedfirmscanbesubdividedintothreestages.Theendofeachstageservesasamilestoneforventurecapitalistsbywhichtogaugethestatusoftheirinvestment.Beingfamiliarwitheachstageandthechallengesitposesmayspareyouwastedenergyanddisappointment.Pleasenote,however,thatthethreestagesinthedevelopmentofafunctioningstartupdonotmatchthethreephasesinthedevelopmentofabusinessplanwithintheframeworkofthiscompetition(seeexhibit2).

Ifyouintendtobesuccessful,thisstartupprocessshouldinfluencebothyouractivitiesastheinitiatorofabusinessconceptandyourpathtowardformingyourowncompany.Toalargeextent,itisthedemandsofinvestorsthatwilldeterminehowyoumustapproachtheindividualstagesofthestartup.

Stage1:Businessideageneration.Inthebeginningistheinspiration–yoursolutiontoaproblem.Itmustbeevaluatedtodetermineifitdeliversanactualcustomervalue,whetherthemarketisbigenough,andjusthowbigitwillbe.Theideaitselfhasnointrinsiceconomicvalue.Itacquireseconomicvalueonlyafterithasbeensuccessfullytransformedintoaconceptwithaplanandimplemented.

Youwillneedtostartputtingtogetheryourteamassoonaspossible,andfindingpartnerswhocandevelopyourproductorserviceuntilitisreadyformarket(oratleastuntilshortlybefore).Inthecaseofproducts,thisusuallyinvolvesafunctioningprototype.Youwillmostlikelyhavetodowithoutventurecapitalduringthisstage.Youwillstillbefinancingyourplanwithyourownmoney,helpfromfriends,

perhapsstateresearchsubsidies,contributionsfromfoundationsorothergrants.Investorsrefertothisas"seedmoney,"asyourideaisstillaseedling,notyetexposedtotheharshclimateofcompetition.

Yourobjectiveatthisstageistopresentyourbusinessconceptandmarket–whichformsthefoundationofyournewcompany–soclearlyandconciselyastopiquetheinterestofpotentialinvestorsinhelpingyoucultivateyourideafurther.

Stage2:Businessplanpreparation.Atthisstage,itismostimportanttofocusonthebigpicture:don'tlosesightoftheforestforthetrees!Thebusinessplanitselfwillhelpyoudothisasyoumustconsiderandweightherisksinvolved,prepareforanycontingency,learntoanticipateavarietyofpossiblesituationsor"scenarios."Youwillneedtolaydownplansandcreateabudgetforthekeyactivitiesofthebusiness–fordevelopment,production,marketing,distributionandfinance.Naturally,youwillneedtomakemanydecisions,suchaswhichcustomersorsegmentswillyoutarget?Whatpricewillyouaskforyourproductorservice?Whatisthebestlocationforyourbusiness?Willyouhandleproductionyourselforoutsourceittothirdparties?Andsoon.

Inpreparingthebusinessplanyouwillcomeincontactwithmanypeopleoutsideyourstartupteam.Inadditiontoinvestors,youwilltalktomanyspecialists:attorneys,taxadvisors,experiencedentrepreneurs,adexperts.Thebusinessplancompetitionorganizerswillhelpyougetintouchwithjusttherightpeople.Youwillalsohavetobeginreachingouttoyourpotentialcustomers,i.e.,bymeansofconsumersurveys,tomakeinitialassessmentsofyourmarket.Alwayskeepinmindthatcustomeracceptanceisanessentialprerequisitetothesuccessofyourcompany!Seekoutaboutpossiblesuppliersandperhapscloseyourfirstagreements.Youwillalsowanttobecomeawareofwhoyourcompetitorsare.

Thiswholeprocesswillnotcomecheap.Theteammustearnaliving,youmustrunarudimentaryoperation,andperfectaprototype.Yetatthisstage,youshouldalsobeabletoestimateyourexpenses.Financingwillgenerallystillbeprovidedfromthesamesourcesyoureliedonduringstageone,althoughsomeinvestorsmaybe

willingtomaketheoccasionaladvance.

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Thisstageconcludessuccessfullyforyouasanewentrepreneurwhenaninvestorexpressesawillingnesstofinanceyourundertaking.

Stage3:Startupandgrowth.Nowthattheconceptualworkislargelycomplete,itistimetostartimplementingyourbusinessplan.

Yourrolenowchangesfromthatofarchitecttothatofbuilder.Businesssuccessmustnowbesoughtandachievedonthemarket.Thedayofreckoninghascomewhenyouwilllearnwhetheryourbusinessconceptwasagoodandultimatelyprofitableone.

Investorexitenroutetobecominganestablishedcompany.Thepull-outofyourinitialinvestorsisacompletelynormalstepinthedevelopmentofastartup,forifeverythinghasgonewell,yourriskyventurewillhavegraduallybecomeastableenterprise(seeexhibit3).Inthecourseofitsshortlife,youhavecreatedanumberofjobs,andwooedmanycustomerswithyourinnovativesolutiontotheirproblem.Yourcommitmentispayingoffasthevalueofyourbusinessincreases.

Aprofitableexithasbeentheobjectivefortheventurecapitalistfromtheoutset.Capitalrecoverycanhappeninverydifferentways.Normally,thebusinessissoldtoacompetitor,supplier,orcustomer,forinstance,oritislistedonthestockexchange(the"initialpublicoffering"orIPO).Itisalsopossibleforinvestorswhowantouttobepaidoffbytheotherpartners.

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2.TheBusinessIdea

"Thereisnothingintheworldaspowerfulasanideawhosetimehascome."

VictorHugo

Theabovestatementundoubtedlyappliestoideasforstartinganewbusiness.Buthowdoyoucomeupwithsuchanidea?Andhowcanyouknowiftheideaforthebusinesswillhaveapromisingfuture?

Studiesshowthatthelion'sshareoforiginalandsuccessfulbusinessideasweregeneratedbypeoplewhohadalreadyhadseveralyearsofrelevantexperience.GordonMooreandRobertNoyce,forexample,hadanumberofyearsbehindthematFairchildSemiconductorsbeforeteamingupwithAndyGrovetoformIntel.Buttherearealsoexamplesofrevolutionaryideasbroughttolifebymerenovices,asSteveJobsandSteveWozniakdemonstratedwhentheydroppedoutofuniversitytostartApple.

2.1Developmentofabusinessidea

Ineconomicterms,asparkofgeniusisworthless,nomatterhowbrilliantitmaybe.Foranideatogrowintoamaturebusinessconcept,itmustbedevelopedandrefined,usuallybymanydifferentpeople.

Theinitialideamustfirstpassaquickplausibilitycheck.Beforeyoufollowuponanidea,youshouldevaluateitinlightofits(1)customervalueand(2)marketchancesandits(3)degreeofinnovation,aswellasconsideringwhetheritwillbeboth(4)feasibleandprofitable.

?Talkyourideaoverwithfriends,professors,experts,andpotentialcustomers.Thebroaderthesupportyoufindforyouridea,thebetteryouwillbeabletodescribeitsbenefitsandmarketopportunities.Youwillthenbewellpreparedwhenitcomestimetodiscussyourprojectwithprofessionalinvestors.

?Isyourideareallynovel?Hassomeoneelsealreadydevelopeditorevenappliedtopatentit?

?Willitbepossibletodevelopyourideainareasonableperiodoftimeandwithajustifiablelevelresources?

Ittakesatleastfourweekstodevelopabusinessidea.Inlightofthemultiplestagesofdevelopment,itisimprobable–andfairlyunrealistic–thatyouwillspendfewerthanfourweeksdevelopingyourconcept.Generally,abusinessideaisnotworthyofbeingfinanceduntilitissoconcretethatitcanbelaunchedonthemarket

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intheforeseeablefutureatreasonablerisk.Investorstalkofthe"seedphase"ofabusinessconcept,whichusuallyhastobefinancedwith"soft"money,i.e.,fromsourcesthatasyetplacenohardandfastdemandsonthesuccessoftheidea.

Theseedphasecantakelonger,inparticulariftheideaisaheadofitstime.Althoughtheperfectproducthasbeenfound,itcannotyetbemarketedbecausethedevelopmentofcomplementarytechnologiesorsystemsisstillintheworks.OneexampleistheInternet.Theideasformarketingproductsandservicescameearly,butalackofsecurityintheavailablepaymentsystemshamperedanddelayeditscommercialexploitationforsometime.

2.2Elementsofapromisingbusinessidea

Abusinessideacanbeconsideredpromisingifithasthefollowingfourelements(exhibit4):

1.Clearcustomervalue

Thekeytosuccessinthemarketplaceissatisfiedcustomers,notgreatproducts.Customersspendtheirhard-earnedmoneytomeetaneedorsolveaproblem.Thefirstprinciplefordevelopingasuccessfulbusinessideaisthusthatitclearlyshowswhichneeditwillfulfillandhowitwilldoso.

Initially,manyentrepreneurshavetheproductandthetechnicaldetailsofdesignandmanufactureinmindwhentheyspeakoftheirsolution.Notsotheinvestor– theinvestorfirstlooksattheideafromtheperspectiveofthemarket.Forinvestors,customervaluetakestoppriority,andeverythingelseissecondary.What'sthedifference?Ifinnovatorssay,"Ournewdevicecanperform200operationsperminute,"or"Ournewdevicehas25%fewerparts,"theyarefocusingontheproduct.

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Bycontrast,saying,"Ournewdevicewillsavethecustomeraquarterofthetimeandtherefore20%ofthecosts,"or"Ournewsolutioncanboostproductivitybyupto25%,"adoptsthecustomer'spointofview.Theproductismerelyameansofdeliveringvaluetocustomers.

Thecustomervalueofaproductorserviceexpresseswhatisnovelorbetterabouttheitemwhencomparedtocompetitiveoffersoralternativesolutions.Assuch,itplaysakeyroleinsettingyourproductapartfromothers–acoreissueinmarketing,aswewilllearn–andisessentialtothemarketsuccessofyourbusinessconcept.Try,wheneverpossible,toalsoexpressthecustomervalueinfiguresifyoucan.

MarketingtheorystatesthatthecustomervaluemustbeformulatedintoauniquesellingpropositionorUSP.Thismeanstwothings:first,yourbusinessconceptmustbepresentedinawaythatmakessense(sellingproposition)tothecustomer.Manystartupsfailbecausethecustomerdoesnotunderstandtheadvantageofusingtheproductorserviceandthusdoesnotbuyit.Second,yourproductmustbeunique. Consumersshouldn'tchoosejustanysolutionthathitsthemarket–theyshouldchooseyours.Youmustthereforepersuadethemthatyourproductoffersagreaterbenefitoraddedvalue.Onlythenwillyourcustomersgiveyouanedge.

Indescribingyourbusinessconcept,youneednotpresentafullyformulatedUSP,butitshouldbemoreorlessobvioustopotentialinvestors.

2.Marketofadequatesize

Abusinessideawillhaveeconomicvalueonlywhenitsucceedsinthemarket.Thissecondprincipleofasuccessfulideaisthatitdemonstrateshowbigthemarketisfortheproductoffered,whichtargetgroup(s)itisdesignedforandtowhatdegreeitwilldifferfromthecompetition.

Adetailedanalysisofthemarketisnotyetnecessaryatthispoint.Estimates,derivingfromverifiablebasicdata,willsuffice.Sourcescouldincludeofficialstatistics,informationfromassociations,articlesintradejournals,thetradepressandtheInternet.Itshouldbepossibletodrawareasonableconclusionaboutthesizeofthetargetmarketfromthisbasedata.Itissufficientforyoutosummarizetheresultsofthisinvestigationinyourpresentationofthebusinessidea.

Thesameistrueforyourtargetcustomers;youwillneedonlyaloosedefinitionofwhotheywillbe.Describewhyyourbusinessideawillofferaspecialvaluetothisgroupinparticular,andwhythisgroupisfinanciallythemostinterestingtoyou.

Youwillalwaysfacecompetition-bothdirect,fromcompaniesthatofferasimilarproductandindirect,fromsubstituteproductsthatcanalsofulfillthecustomer'sneed.Anoodlemanufacturercompetesnotonlywithothernoodlemanufacturers,butalsowithriceandpotatoproducersandbakeriesinparticularand,moregenerally,withallotherfoodstuffsaswell.Yourbusinessideawillneedto

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demonstratethatyouhaveunderstoodwhoyourcompetitorsare.Namethem–anddescribewhyandhowyoucantaketheleadwithyourbusinessidea.

3.Sufficientdegreeofinnovation

Businessideascanbeclassifiedalongthetwodimensionproducts/servicesandbusinesssystem.Ineachofthesecategories,youcandevelopsomethingneworcapitalizeonsomethingthatalreadyexists.Simplified,abusinesssystemisawayofunderstandinghowaproductorserviceisdeveloped,manufactured,andmarketed(seeexhibit5).

Theterminnovationisgenerallyusedinthecontextofnewproductswhicharemadewithconventionalproductionmethodsanddeliveredtothecustomerthroughexistingdistributionchannels.Microsoft,forinstance,developedDOS,makinguseoftheIBMsalesorganizationtobringittothemarket.

Innovationsinthebusinesssystemarelessobviousbutjustasimportant.ThesuccessofDellisattributedtosignificantcostsavingsthankstoanewformofdirectdistributionandanovelproductionprocessinwhichacomputerisproducedonlyafteritisordered,andintheshortestpossibletimeframe.

Indevelopingnewproducts,improvementofthemulti-layereddimension"customervalue"isattheforefrontwhileinnovationsinthebusinesssystemaretargetedatlowercostsandfasterprocesses,savingswhichcanthenbepassedontothecustomerintheformoflowerprices.

Itisrarethatbothtypesofinnovation-inproductandbusinesssystem-canbecombinedtocreateacompletelynewindustry.NetscapecontributedsignificantlytothesuccessoftheWorldWideWebbydistributingitsnewbrowserovertheInternetfreeofcharge.Indoingso,Netscapepassedupinitialsalesrevenuesbut,through

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theincreasednumberofvisitorstoitswebsite,succeededinraisingadvertisingrevenues.

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4.Feasibilityandprofitability

Finally,toarriveatanactualstartup,thefeasibilityofthebusinessideamustbeassessed.Inadditiontospecificfactorsthatcouldmaketheprojectunfeasible(e.g.legalconsiderations,standards),theassessmentmayincludethetimeandresourcesneededtocarryouttheproject.Theconstructionofhotelsonthemoonmaybetechnicallyfeasible,forexample,buttheircost-benefitratioisunreasonable.

Interwovenwiththefeasibilitycriterionisprofitability.Acompanymustbeabletogenerateprofitoverthelongterm.Thisfourthelementofasuccessfulbusinessideashouldthusindicatehowmuchmoneycanbemadeandhow.

Traditionally,profitcalculationsforabusinessaremadeasfollows:acompanybuysmaterialorservices,therebyincurringcosts.Italsosellsproductsorservicestocustomers,therebyearningrevenues.Ifyourbusinessfollowsthispattern,itisnotnecessarytoprovideanygreaterdetailinthedescriptionofyouridea.Do,however,makeroughestimatesofanticipatedexpensesandprofits.Oneruleofthumbforgrowingcompaniesisthatthestartupphaseshouldgenerategrossprofits(revenuesminusdirectproductcosts)of40%to50%.

Butmanybusinessesdonotfunctionaccordingtothistraditionalmodel.McDonald's,forexample,earnsitsmoneyfromthelicensingfeesitchargesfranchisers.TherestaurantownerpaysMcDonald'sforthenameandthewaytherestaurantisrun.Ifyourbusinessideaisbasedonthiskindofinnovationinprofitgeneration,youshoulddetailitinyourbusinessidea.

KeyQuestions:BusinessIdea

?Whowillbuyyourproduct?

?Whyshouldcustomersbuytheproduct?Whatneeddoesitfulfill?

?Howwilltheproductbedistributedtothecustomer?

?What,exactly,isinnovativeaboutyourbusinessconcept?

?Howisthebusinessconceptunique?Isitprotectedbypatent?

?Howistheproductbetterthancomparablealternatives?

?Whatcompetitiveadvantageswillthenewcompanyhave,andwhycan'tacompetitorsimplycopythem?

?Canmoneybemadewiththeproduct?Whatcostswillbeincurred,whatprice

willbeasked?

2.3Protectingyourbusinessidea

Onlyafewideasaregenuinelyingenious.Truebreakthroughsaretheresultofhardworkandthereforecannotbeeasilyreplicated.Acompromisemustbefoundto

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protecttheideasufficientlywhiledisclosingsufficientinformationtotestits

viability.

Patenting.Earlypatentingisrecommended,especiallyinthecaseofnewproductsorprocesses.Gettheadviceofexperiencedpatentlawyers:Thefuturesuccessofyourbusinesscandependonapatent,andineveryindustry,therearepowerfulcompetitorswiththemeanstokeepanunfavorablepatentfrombeinggranted.Butsomedegreeofcautionisadvised:apatentcanalsomissthemarkwhenitcomestoprotectingyourideabymakingtheideapublic.Besuretokeepthisinmindifthepatentcanbeimproveduponeasily–andthusthwarted.TherecipeforCoca-Cola,forexample,isstill"secret"andhasneverbeenpatentedbecausethepatentcanbecircumventedwithaveryfew,neutral-tastingchanges.

Confidentialityagreement.Lawyers,trustees,bankemployees,areallrequiredbylawtomaintainconfidentialityvis-à-vistheirclients'businesses.Venturecapitalistsalsohaveaninterestinkeepingthingsunderwrapsassomeonewhogetsareputationfor"poaching"ideaswillnotbemadeprivytonewideasanytimeagainsoon.Thesameistrueforprofessionalconsultants.Yetaconfidentialityagreementcanbeeffectiveinsomecases.Thecoaches,serviceprovidersandjurorsinvolvedintheNorthBavarianBusinessPlanCompetitionarerequiredtosignaconfidentialityagreement.

But,likeeverylegaldocument,ithasitslimitswheretherearegrayareasthatcouldmakeitdifficulttoproveaviolationoftheagreementincourt.

Quickimplementation.Yourbestprotectionagainstintellectualpropertytheftisprobablytoimplementyourplanasquicklyaspossible.Agreatdealofworkmustbedonebetweendreamingupanideaandopeningforbusiness.Thiseffort,calledtheentrybarrier,cankeeppotentialcopycatsatbay,becauseintheend,it'scrossingthefinishlinefirstthatmakesyouthewinner,nothavingthefastestshoes!

2.4Presentingtoinvestors

Howyoupresentyourbusinessideatoaninvestorwillputallyourpreviouseffortstothetest.Itiscriticaltoattractattentionandpiqueinterestthroughcontentandprofessionalappearance.Goodventurecapitalistsarepresentedwithupto40businessideasperweek,andtheirtimeislimited.

Inpresentingthebusinessidea,neitherfanfarenorawealthofdetailsisasimportantasaclearandthoughtfulpresentation.

Example1:Thehardsell."Ihaveagreatideaforanew,customer-friendlymethodofpaymentwithabigfuture.Thisissomethingeverybodyhasalwayswanted.Youcouldearnalotofmoneyfromthis..."Theinvestorthinks,"Thatsoundslikealotofhotair.I'veheardofahundredsuchmiraclesolutionsbeforeNext!"

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Example2:Thetechnicalapproach."Ihaveanideaforacomputerizedmachinerycontrolsystem.Thekeyisthefully-integratedSSPchipwith12GByteRAMandtheasymmetricalXXP-baseddirectcontrolunit.Ittookmefiveyearstodevelop."Theinvestorthinks,"Techie.Inlovewithtechnology.She'sherownmarketNext!"

Example3:Theentrepreneur."Ihaveanideawhichwillenablecompanieswithupto100employeestosave3-5%oftheircosts.Initialcost-priceanalyseshaveconvincedmethataspreadof40-60%shouldbepossible.IhavefoundafocusedadvertisingchannelthroughtheAssociationofSmallandMediumSizedBusinessesandtheABCMagazine.Theproductwillbedistributedbydirectsale."Theinvestorthinks,"Aha!Shehasidentifiedthecustomervalue,andevenworkedoutthefigures!She'sthoughtaboutthemarketandtheprofitpotentialandknowshowshewillgettheproducttohercustomers.NowI'dliketogetalookattheproduct..."

Theseexamplesdemonstratewhyclarityshouldbeyourforemostgoal.Itisbesttoassumethatinvestorsarenotfamiliarwiththetechnologyofyourproductortheindustryjargon.Theyarealsonotlikelytotakethetimetolookupanunknowntermoridea.Describingyourconceptclearlyandincisivelyisyournextgoal.Youmustbeabletoconveythebasicmechanicsofyourbusinessideatoaninvestorwithcredibility.Therewillbeplentyoftimeatalaterpointfordetaileddescriptionsandexhaustivefinancialcalculations.

Normalrequirementsofabusinessconceptpresentation

Titlepage

Nameoftheproductorservice

Nameofthepersonsubmitting

Confidentialitynotice

Illustration,whereappropriate,oftheproductorserviceinaction

Body

4-