Tim Draper is inviting entrepreneurs to post their ideas on his blog for a chance to pitch their idea to the famous VC face-to-face. Last year, one of the companies that won a chance to pitch actually got their idea funded.
Check it out: Pitch Tim Draper on Your Billion-Dollar Idea
StartupJournal.com has a story today that is a first hand account of an entrepreneur and how he created and uses his business plan. What this entrepreneur does and what many fail to do is revisit the plan on a monthly basis to keep his business on track. All businesses should do this.
The only thing that I have to disagree with in the article is the author’s opinion on business planning software. Granted, I’m biased. Unfortunately, I don’t believe he gave software a fair representation. He characterizes software as “fill in the blank” and “cookie-cutter.” While some software may be like this, not all software packages are. Several packages (including Business Plan Pro) include detailed instructions and examples that guide you through every step of the plan. I have yet to find a free template online that does that. In addition, the financials created by a software package are guaranteed to be error free. Creating your own spreadsheets on the other hand is open to extreme errors. I can’t tell you the number of times I have seen home-grown business plan financials that would never stand up to the critical eyes of a banker or investor.
Well, enough of my rant. It’s a good article and worth reading.
Read the article at StartupJournal.com
I spent today listening to presentations from contestants in the University of Oregon venture contest. It was amazing how the presentations gave life to some business plans that had been less than impressive when read in a vacuum.
During today’s presentations, a company that had nearly been discounted based on the quality of their business plan gave a stunning presentation. Not only was the opportunity excellent, but the team presented their material clearly and easily answered every question with immediate access to back-up PowerPoint slides.
Unfortunately, the reality is that for most companies seeking venture or angle funding, the business plan is the only presentation they ever get to make – it’s what filters out the wheat from the chaff and how VCs decide who they are actually going to invite to give an in person presentation.
The discrepancy between today’s presentations and some of the business plans that accompanied them underscores the need for entrepreneurs to review their business plans carefully before sending them off for review by VCs and other investors. Plans must be clear, easy-to-read, direct, and well organized. It can even be beneficial for entrepreneurs, particularly those trying to get funding for highly technical products, to work with a professional writer to help clean up the business plan text before submitting plans to investors.
A helpful exercise can be to work on an ‘elevator pitch.” Try to describe your business in 60 seconds or less. Try different versions with different audiences – friends, family, and business associates. Once you have a pitch that anyone can understand, convert it into the first paragraph of your executive summary.
The troubled SBA 7(a) loan program had been revived by legislation passed by congress last night. Previously, loans had been limited to $750,000 and it had been reported that the entire loan program was on an “indefinite holiday.”
The new changes include:
1) lifting the $750,000 loan cap and allows combination or “piggyback” loans
2) the 7(a) guaranteed limit is raised from $1 million to $1.5 million
3) the size of loans lenders can make voluntarily under the SBAExpress program has increased from $250,000 to $2 million.
This is good news for small business and business planners, allowing for the continued growth of entrepreneurship.
So it’s that time again, Spring generates lots of cliches and lots of venture contests as well. What started a couple of decades ago at the University of Texas — as far as I know — has become fashionable all over.
If you’re curious, try a Google search for MBA venture contest and you’ll get more than 8,500 hits.
I like these competitions. They promote the process of entrepreneurship. They give the contestants a chance to stand up to judges, make a pitch, answer questions, and, essentially, get some related experience. They give the judges a chance to get out of the office and listen to new people and new ideas. I’ve been a judge at contests held by University of Notre Dame, University of Oregon, Carrott Capital, and Palo Alto Software, several years i a row. I enjoy it. Everybody wins.
The most interesting problem I’ve seen with the venture competitions is that most of them evaluate ventures as potential investments, not as potential businesses. For example, judges choosing between two otherwise-equal plans will always choose the one needing $3 million venture money over the one needing no outside money. That’s bothered me several times, in several different contests.
The most valuable feature I’ve seen in any one contest is the University of Oregon’s system providing feedback to teams that don’t win. Typically, in this contest, the teams that don’t make the cut for the finals get a serious session with the judges who decided against them. These sessions take at least half an hour, and the judges involve normally give them a great deal of thought. The teams competing take several days with travel and the competition, so judges try to make the feedback worth it. This is something that all the other contests should imitate.
Tim
I’ve been spending a lot of time recently reading and judging business plans for a business plan competition at a well known MBA program. I have read some great plans and some not-so-great plans, but that is how it always turns out in any business plan competition.
I thought it might be useful to talk about the most common deficiencies that have come up in the reading of these plans.
Executive Summary - Frequently, business plan authors are so immersed in their business and their business concept that they forget that all potential readers of the plan aren’t experts in their industry. Many executive summaries that I read assumed some degree of knowledge about the industry and in some cases even the business and business concept. Executive summaries need to be short, direct, and provide an overview of the business opportunity. The idea of an “elevator pitch” is critical here. A good plan will communicate what the business does, who the target market is, and what the potential upside is in no more than 5 sentences.
Expenses - A common failing in business plan financials is to either under-estimate expenses or to leave out some expenses altogether. Several plans I read recently neglected to include any personnel costs. This is fine if you are bootstrapping the business, but this needs to be explained clearly in the supporting text. On the flip side, don’t discuss plans for a sales team and then neglect to include the costs of that team in your personnel plan.
On the expenses side, make sure that your P&L includes all of your fixed costs for running your business. You’d be surprised how many people forget things like rent, insurance, hosting costs for a web site, etc.
Optimism - Optimism is great and a required attribute of any entrepreneur but it can be a minor detriment in planning. While it is tempting to create a sales forecast that shows exponential growth, make sure your forecast is realistic. Most business plan readers are going to question what appears to be overly optimistic growth scenarios and it is important to back up these claims with text if these projections are realistic.
Market Size - Similar to my point on optimism above, it is very common for businesses to define their market too broadly in their plans. It is not uncommon to see plans that define their markets in the billions of dollars and millions of potential customers. While this is not a bad thing on it’s own, it’s very important to sub-divide this huge market into manageable target markets or market segments. Divide your market into manageable segments such as location, customer needs, age, income, etc. Without a realistic market segmentation strategy and a marketing plan that addresses that segmentation, you will have a difficult time implementing the plan.
There are plenty of other topics worth focusing on to build a successful business plan, but these four I mention today are common enough that they merit being singled out for discussion.
Anne over at MarketingSherpa.com has a great feature summarizing the results from a focus group study examining how people use search engines and paid inclusion results to research and purchase products.
Read the complete summary, and find out where to download the full focus group results.
I highly recommend subscribing to MarketingSherpa’s email newsletters. For any small business either just starting out or looking to grow to the next level, the free case studies and articles are invaluable.
Is there such a thing as an eBay Business Plan? Is it different than a standard business plan?
The answer is no. At the end of the day, the issues faced by an eBay business are much the same as a traditional brick-and-mortar business or a typical online store. eBay businesses still have the same considerations to think about: product selection, inventory management, purchasing, accounts receivable, product pricing, order processing and fulfillment, customer service, and everything else that comes with running a business. Because of these similarities, the eBay business plan should look not much different than a business plan for any other product business and in fact sample business plans for traditional retailers will be quite helpful in developing this type of plan.
This question comes up because there is a bit of mystique about creating a successful eBay business. With Amazon listing 1966 books on starting an eBay business, it’s no wonder that an entrepreneur might be a bit intimidated by the thought of expanding their business through eBay. Thankfully, there is a lot of help and advice available. To start learning how your business might benefit from eBay check out Entrepreneur.com’s feature on eBay success stories which includes pointers to get you started.
From the financial planning perspective, though, eBay should be treated as just another sales channel. While the marketing costs and strategies might be different from your traditional business, the financial forecasting and business planning aspects are fairly similar to a traditional business. And, with the rising number of small business eBay success stories, eBay can not be ignored as a viable sales channel. In 2002, About 7% of the $14.8 billion worth of merchandise sold on eBay as a whole was accounted for by business-to-business sales. I’m sure that number has grown in 2003 and will continue to grow through 2004.
For more on eBay’s growth in the business-to-business arena, check out the analysis over at Forbes.com.
Tim Berry, contributor to this blog and author and publisher of Business Plan Pro, has been invited to participate in a free hour-long conference call to help demystify financial projections. This is essential information for all small businesses or any one who wants to learn more about business financial planning.
More information is available at the Company of Friends Calendar
ClickZ is working on a series of articles focused on finding free market research information.
The latest in the series focuses on resources from the US Census and the US Department of Labor’s Bureau of Labor Statistics. I am consistently amazed at the amount of free information that is made available on these two sites. Having used these sites extensively for some consulting projects as well as at my current job, I can testify that these two resources are excellent starting points and can provide data than can do a fantastic job at fleshing out any business plan.
It is great to see our tax dollars at work on these projects.
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