Part 2 of the Guide will cover the Product, The Business Model and The Management.
These are big sections and require you to think long and hard. It requires getting inside the mind of an investor. This is tricky and the investors mind you get into might not be the investor that is reading your business plan. This is where a bit of luck comes into play. The seedcorn competition will try and match your business sector with an investor in a similar sector – it won’t be a perfect match.
Time to get inside the venture capitalist who is now looking at your business that offers:
- a clearly specify the product or service
- a large potential number of paying customers
- at a price well above what it would cost to produce i.e making a profit (while delivering customer satisfaction)
What else do you need to let the investor know? You need a good business model. One that offers genuine choices of:
- Who is the target customer? Why was that target sector chosen?
- What is the product?
- How is the company planning to deliver the product and maximise margins?
I can’t stress enough that this needs to be in plain and simple English – no jargon! Each of these points has to be obvious to the investor.
4 Product or Service Proposition
4.1 Unique Selling Points
Expand on your products USP. Sit down and using a clean sheet of paper work on your USP. Remember this is a Marketing concept so thing like a marketing guru. Why would someone buy your product over the next? If you buy this product what are you getting? Leave the sheet of paper in a drawer and come back to it in a couple of days. Does it make sense now? Show & tell the USPs to random people – do they look at you with one raised confused eyebrow or nod? If they nod you on the right track.
Have a think about other Products say an iPhone. Why would you buy an iPhone over any other smartphone?
4.2 Protecting the Product
If you have protection on the product – trade marking, patent etc. declare it in full. Show the logos, box, packaging etc. of the product.
4.3 Endorsement of the Product
The biggest endorsement is having customers. Get the CEO/MD of one of your customers to say something nice about your product.
If anyone has endorsed your product – blog write-ups, if it’s been promoted (say at the Las Vegas Consumer Electronic Show by Nokia).
Been nominated for any awards? Win any prizes?
4.3.4 Poll/Survey of X000 users
What do your users think of it?
4.4 Additional R & D
What next are you going to do with the product to improve it?
4.5 Time to market and route to commercialization
Is it ready now? Does it need further work? If it’s ready how are you going to bring it to the market?
4.5.1 Selling directly to business
4.5.2 Selling directly to the end consumer
4.6 Technical risk
There is always technical risk! What sort of secret sauce do you have – is it reversible? Can you prevent it from been cloned?
5 Marketing Plan
How are you going to inform people of your product? Tradeshows? Cold calling? Magazines, Radio, TV, viral marketing ? Have you contacts in the market that you can leverage?
5.1 Business model
Check out “Business Model Generation” by Alexander Osterwalder book for more on this section . I’ve included the Canvas page but make sure you read the freely available section of the book that explains it. [grab it here]
Some fundamentals that need to be clear: B2B or B2C? and how you make money!
E.g. you can buy an apple for 10cent. You sell the apple for 20cent. It will cost you 2 cent to deliver an apple. 8 cent profit. You must avoid the South Park Underpants Gnomes business model at all times! [Google it!]
5.2 Distribution strategy
How are you going to distribute the product? Direct Sales or via a distributor?
5.3 Revenue model
Revenue share? Direct Sell? Via a reseller? Transaction based? Percentage of membership?
5.3.1 Business to Business
Clearly show how much your product is selling for. The cost of sales etc.
Is there a way your product could carry advertisement? Extra revenue scheme?
5.4 Key Customers
Who are your key customers in the next 12 months? How are you going to get them? How do you promote to them? How much can you make if you secure the key customers?
5.5 First Addressable Market
So you have a few markets you are going to go after – but which one first? Spell out your logic.
5.6 Funding Avenues
It’s going to take a bit of time to get customers on board (it always takes longer than you think!) so how are you going to keep the show on the road?
- Business Expansion Scheme?
- Angel Investor?
- Joint funding from EI & Venture Capital investment ?
6 Management Team
Big section here – you can have a super-duper product but without good people to execute a plan then the product will not gain traction. Who are the super-heroes in your team and what are they responsible for? What are the backgrounds of the founders? Experienced?
Outside the core team who are the advisors? The accountants, the solicitors? We are fortunate to have a good set of mentors in the Valley and this helped us stand out.
Section 7 ( Operation, Risks, Financials) coming in Part 3.