278 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
Table14.1 Summary of Common Parts Needed in a Business Plan
I Cover sheet Company information
Name, title, and phone number of corporate ofcers
Copy number of the plan
II Executive
Summary
Critical because many investors only read the summary
Market opportunity
Capital requirements
Competitive advantage
III Company
Description
Business
Concept
Shows evidence that your product or service is viable
and capable of fullling an unmet market need
What you sell; benets, features, description
Captures and highlights the value proposition in your
product or service offerings
SWOT analysis
IV Marketing Plan
Market Analysis
Industry
Analysis and
Trends
Competition
Sales Strategy
Denes your target market
Segments your customers
Market growth and forecast
Projects your market share and trends
Positions your products and services
V Management
Team and
Organization
Investors bet on the jockey (management), not the horse
(technology)
Highlights the track record of the key members; you may
also offer details about key employees including
qualications, experiences, or outstanding skills, which
could add a competitive edge to the image of the
business
Management gaps and personnel plan
Writing a Winning Business Plan ◾ 279
Table14.1 Summary of Common Parts Needed in a Business Plan (Continued)
VI Technology and
Innovation
Risk Assessment
Operations and
Management
Plan
Intellectual property portfolio
Governmental regulations to be followed and their
impact
Organizational structure of the company
Provides a basis for projected operating expenses
Because these statements are heavily scrutinized by
investors, the organizational structure has to be well-
dened and realistic within the parameters of the
business
Expense and capital requirements to support the
organizational structure
Provides a basis for identifying personnel expenses,
overhead expenses, and costs of products/services sold;
these expenses/costs can then be matched with capital
requirements
VII Milestones and
Exit Plan
Funding strategy
Risk evaluation (economic, nancial, technological)
Timetable of expected business outcomes (start/end dates)
How investors will get their money back, with interest
VIII Financial Plan Clearly denes what successful outcomes entail; your
plan isn’t merely a prediction; it implies a commitment
to making the targeted results happen and establishes
milestones for gauging the organizational progress
Provides a vital feedback-and-control tool for investors
and staff
Variances from projections provide early warnings of
problems
When variances occur, the plan can provide a framework
for determining the nancial impact and the effects of
various corrective actions
Three-year income, balance sheet, and cash ow
projections
Break-even analysis
Sources and uses of funds
For the rst three years, all you have to worry about is
cash ow
(Continued)
280 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
Investors make their decisions based on emotion (convincing), and jus-
tify them with logic (persuasion). Turn your business plan into an irresistible
offer. Your irresistible offer
2
should consist of four elements:
◾ High return of investment (ROI)
◾ Recognizable market need
◾ Credible risk mitigation strategy
◾ Reasonable exit strategy
14.5 Management Team That Can Execute
“The best companies solve 100 problems at a time; the worst solve
one problem 100 times.” —Randy Pennington in Results Rule!
Perhaps more than any other factor, a competent management that can exe-
cute is the most important ingredient in business success. Persuade investors
Persuading
Example:
To put a man
on the mo
on, and return
him safely to ea
rth……
President Kenn
edy May 25, 1961
Joint
Session of Congress
Clear
ly state your argument.
Figure 14.4 Persuading—Persuade investors that you are mitigating all known risks.
Table14.1 Summary of Common Parts Needed in a Business Plan (Continued)
If your business is new, and pre-revenue, you may stop here
Monthly nancials are necessary for the rst three years
Annual projections will sufce for the fourth and fth
years
If your business is established, you will include actual
statements
IX Supporting
Documents
Leases, mortgages, business agreements, contracts, etc.
Writing a Winning Business Plan ◾ 281
that you have assembled a management team capable of executing the
mission, have dened accountability, and are focused on performance and
results. A superb management team will be capable of solving unforeseen
problems, managing the dynamics of change, and overcoming the inevitable
crises that are sure to come.
Before submitting your plan to investors, conduct your own assessment of
your management team. Critically evaluate each executive, and highlight the
following traits:
◾ Experience. Industry experience, solid management background,
trustworthy.
◾ Realism. The team fully understands the many needs and challenges
of the business.
◾ Flexibility. Aware of the team’s limitations, recognizing the need for
planning and accountability.
◾ Ability to get along. The team recognizes its ability to motivate,
reward, and punish.
14.5.1 Competent Team
“By working faithfully eight hours a day you may eventually get to
be boss and work twelve hours a day.” —Robert Frost
According to Patrick Lencioni,
3
teamwork is a unique, powerful advantage
unmatched by technology, strategy, or nance. He lists the ve dysfunctions
of a team as:
1. Inattention to results
2. Avoidance of accountability
3. Lack of commitment
4. Fear of conict
5. Absence of trust
To mitigate risks, you must persuade investors that you have assem-
bled a real team, bereft of the ve known dysfunctions. You have suc-
cessfully assembled a group of entrepreneurs that have common goals
and share both rewards and accountability for executing your stated busi-
ness goals.
282 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
14.6 How Innovative Is Your Invention?
“The harder I work, the luckier I get.” —Thomas Edison
Did you know that Thomas Edison did not invent the light bulb? Twenty-two
prior inventors worked on incandescent electric light bulbs before Edison.
However, Edison best understood the market need, and realized that a com-
mercially viable and longer lasting light bulb was required for the technology
to go “mainstream.” Therefore, he and his team created the product, and the
rest is history.
Edison also relied on investors. He persuaded skeptical investors that his
team was capable of executing. The moral of the story is that if the idea is
so good and the market need so intense, many other people have also seen
the opportunity, either before you or at the same time. You must persuade
investors that you and your team will be the winner that will open the mar-
ket, tweak the invention based on customer feedback, and scale the busi-
ness to commercial success. At this point, you should be prepared to answer
the three “why” questions of investors:
1. Why you?
2. Why me?
3. Why now?
14.7 Ignore Naysayers (and Prove Them Wrong)
“I stand on the shoulders of giants.” —Sir Isaac Newton
Do not be deterred by critics. Of course, your innovation is unproven in
the marketplace. If it were proven, it would not be an innovation, right?
Even Einstein relied on previous attempts to develop his innovative theory
of relativity.
And of course, others have tried it before, but failed. If they had not
failed, everyone would be using it already. Right again? You must persuade
your potential investors that you have found the answer to the problem.
Even the smartest people fail to envision the future. Following are famous
examples, or what we will call the Hall of Shame:
◾ “Airplanes are interesting toys but of no military value.” —Marechal
Ferdinand Foch, Professor of Strategy, Ecole Superieure de Guerre.
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