Making it past the "No" pile

Let's be honest, a great business plan alone is not sufficient for you to land a deal but it sure helps! For a start-up that is going through the fund raising process the first impression of the company is often conveyed by the business plan. So how do you as an entrepreneur make sure that your business plan makes it past the first screen?

1. Importance of the Executive Summary
If there is one section of your business plan that will be read in its entirety that is the executive summary. A good executive summary should be the hook that draws the attention of the potential investor. Make sure the executive summary hits all the key points and keep it under 2 pages.

2. Its ok to be concise
The very mention of the term business plan conjures up images of a 60 - 70 page document very much like a graduate thesis work, but that does not have to be the case. A 10 - 20 page document that is clear and concise is perfectly acceptable and may even be preferred.

3. Focus on the pain point
The business plan should address the reason why the business exists in the first place. What pain are you trying to solve and why is it important? Is there an awareness about this in your target audience or do you have to educate them? Your go to market strategy becomes even more important if you need to educate your audience.

4. The importance of TAM
Once you have addressed the pain point identify the size of the Total Addressable Market (TAM). The key word here is "addressable" - I have seen several business plans which will give the overall market size but fail to mention the size of the market their business is targeting. For instance, the automotive sensor market may be USD 8 Billion but if your product is applicable only to hybrid cars, then your TAM is definitely not USD 8 Billion.

5. Product and underlying Technology
Focus on what makes your product or offering unique. Do you have any IP that is critical and could also potentially be a barrier to entry? How scalable is your technology?

6. There is always a competition
There may be some key differentiators or technology leaps between your product and what's being used but it is almost impossible to not have some form of competition - think slides vs. Power Point or Key Note or postal mail vs. e-mail. So please avoid the statement "we have no competition".

7. Show me the money
The product or service offered is the best and market is huge but what is your monetization plan? The business model is a very critical element in a business plan. This section is relevant especially in current economic times. A high level financial projection with key metrics is important and sufficient. There is no need to provide a detailed itemized projection for the first screen. The key idea is to clearly show the assumptions that drive your model.

8. The Team
Clearly identify why the team you have assembled has the right qualifications to drive this business forward.

9. Provide comparables for your business
Make it easier for your investor and provide comparables. If the choice of your comparable is not obvious explain the logic behind the choice. At the end of the day, investors need to have an exit of some form and providing them with VALID comparables helps anchor the potential that your company has to offer.

Now that you have your business plan together always try to see if you can make a personal connection before you send in your business plan. An average VC may receive anywhere between 800 - 1000 plans a year while only 2 - 4 deals get funded in a year! The time spent on perusing a business plan may be any where between 5 - 15 minutes. If your business plan has made it to a VC's table the chances of them spending 15 minutes on your plan vs 5 minutes goes up if it has come in through the proper channels.

Disclaimer: This post assumes that you have all the right ingredients for your business itself and the area that is lacking is the business plan :-)