19 questions to spice up your business plan

Whether you are seeking capital for your business or optimizing your business strategy, the most important element – especially for outside investors – can be your written business plan. This 19-step checklist will help you fine-tune and fine-tune your plan. If your written plan answers a resounding yes to each of these 19 questions, your market/product strategy is in excellent shape and you increase the chances of attracting investment capital.

If you don’t have a written business plan yet – write one! Your business plan is a blueprint for your entire company. It details your goals, the financial and technical feasibility of your goals, and the strategy you are using (or using) to achieve those goals. And your business plan is a working tool — it’s a benchmark to measure your progress and a compass to keep you on track.

Does a business plan need to be written?

Yes! A plan that is not written is usually not thought through to the end. And despite what you may have read, it’s doubtful any company has ever attracted capital on the back of a napkin.

Use this checklist to identify where your strategy, as outlined in your business plan, needs revision. Each of the following questions highlights an area considered critical for technology investors.

1. Can the key ideas behind your product or service be summed up in a sentence or two? (y/n)

2. Does your company have at least one unique and compelling competitive advantage that cannot be duplicated quickly or easily? (y/n) Examples are a special feature, a cost advantage, a technical advancement, 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 exclusively for yourself?

4. Is your industry segment growing by 25% or more? (y/n) If no, can your new product dominate its segment? If the answer is no, chances are you won’t be able to make the kind of financial returns that investors are looking for.

5. Does your product or service create a new market? (y/n) While generally positive, this could be a trap – potential can be slow to develop in a brand new market. 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 increased sharply? (y/n) Venture investors prefer markets in this phase because the time to value is shorter and the growth potential is still great.

7. Is your target market segment 1) narrowly defined by a population with common characteristics, 2) large enough to make significant profits, 3) served by communication channels to reach that market – ie trade or specialty publications, response mailing lists? (y/n)

8. Does your company fill a niche in the market, or do you have a brilliant product that you think is great enough that customers will surely want to buy it? (y/n)

9. The benefits of your product or service to users are 1) significant, 2) quantifiable, and 3) cost-effective? (y/n). If you deliver an important benefit and can prove it, you’re much more likely to generate revenue.

10. Is there a proven market for your product? (y/n) If you have an existing product, is your customer base expanding? Investors prefer to finance sales and production rather than product development.

11. Is there broad appeal for your product or service? (y/n) Are there enough potential customers in the target market that you can generate significant profits with for a long time? Are there follow-on products to sustain sales and profit growth?

12. Can your company sell your product? (y/n) Especially in companies where the founders have a technical background, one should ask the question: “Who will sell your product or service?” What about external distributors?

13. Is there an experienced management team? (y/n) Investors would rather finance a solid team than a single genius with a great idea. The team should be highly skilled in marketing, sales, finance and the product/service area itself. Of course, a proven track record helps.

14. Can you demonstrate a probable return of 5x to 15x the investor capital over a period of 3 to 7 years? (y/n) The actual parameters used by venture investors vary depending on what stage you are in (idea, launch, development, expansion, turnaround).

15. Is there a clear exit strategy for investors? (y/n) The most common strategies for returning investors’ capital are 1) IPO; 2) acquisition of your company; 3) new investors; 4) Founder buyback or management buyout.

16. Have other investors already invested money in the company, especially the senior management team? (y/n) This reduces the apparent risk, reduces the overall risk and shows that management “has its money where it talks”.

17. Have you clearly defined a structure for the intended investment? (y/n) The structure should include: who is involved, how much capital is needed, what minimum investment you will accept, how much equity you will buy – and of course the projected return on investment.

18. Are your financial projections realistic? (y/n) Have you substantiated your projected growth rates and other financial assumptions?

19. Have you carefully analyzed the risks? (y/n) Investors want to know that you have considered the risks. That’s the key – can you turn your risks into opportunities?

Too many nos? Remember that every “no” opens up an area for you to strengthen your business. Even if you’re not seeking capital, each question highlights a critical success factor – which, if mastered, will increase your bottom line, performance, and future success.

To help you uncover hidden value and opportunity in your existing business, and to make it easier to spot potential problems while you’re just starting out, I created the Business Building Guide. This program of stimulating questions and checklists is a remarkable tool for accelerating your business growth and profitability, and allows you to rapidly improve every part of your business, from marketing, sales, customer service, product development and finance diagnose, troubleshoot and optimize production.

©Paul Lemberg. All rights reserved