The business plan is the summation of your thinking about the business you wish to start. Naturally, you are going into this because you have seen a need in the market for a solution to a problem, and you think you can fill that need. 

Your idea may be innovative, and if you put considerable thought to it, it may deliver such additional value as to be truly visionary.

But people need to understand the benefits of the product before spending money on using it, and hence products that are marginal improvements on existing offerings are easier to sell, and cause consumer drift towards you. These consumers can be offered ever-more complex offerings down the line as they begin to appreciate the benefits of your service. Customers are not really very clever, they mostly seek solutions to their pains, or direct entertainment and gratification. They are normally not excited about the products they buy.

Related to this fact, is a point made by many internet entrepreneurs, that their offering needs to be offered for free before people can be asked to pay for it. This is usually because nothing like what they offer is out there, and hence to encourage people to spend time evaluating a novel product, the "free value" incentive must be offered at the very least.

If you open a restaurant and all your friends come on the first night to support you, are they going to return, and in greater numbers? If you create something that is useful once, will people use it a second time?

Online communities need to be especially sticky, as their value comes from frequently updated and topically relevant content provided by the members. Once the contributors lose interest, the content is no longer valid, the website loses its value and the readers lose interest, and there is no further value to be delivered to the advertisers.

Notwithstanding comments on snake-oil, latent market needs may be unlocked, that is to say, a perceptive entrepreneur can distinguish that no explicit need for a particular packaged good or service exists, but that a certain "thinking out of the box" can fill this market need.

No one could have foreseen the success of websites like thefacebook.com or myspace.com, as the concept that millions of young people across entire continents with extremely homogenous tastes and lifestyles, are curious to know about everyone else in their lifestyle bracket, while also wishing to advertise their personal lives to everyone else, is not easily arrived at by asking people directly.

Latent "blue ocean" markets are ones that cannot be unlocked through directly asking people what they want exactly, as they have not seen examples of what they might like existing in the market, but through savvy understanding of human nature and how existing monolithic companies are not serving the consumer sufficiently.

Hence, the first Virgin megastore provided pleasant, relaxed, "cool" surroundings to purchase music in, rather than the impersonal ones offered by the competition, Starbucks turned a coffee break in a relaxation opportunity, and the Body Shop bridged the gap between cosmetics and personal wellness, with a strong environmental message.

Reaching a customer costs more than keeping one, we all know that.

Network products like urbanfootball.fr or skype which encourage users to bring more people into the circle of users and stay there, are excellent examples of sticky products which sell themselves. Neither service spent a penny on advertising, all marketing was done through word of mouth and satisfied clients bringing in friends.

"Me-too" products are not at all innovative, and seek to dress up essentially the same offering in different clothes. These can be dangerous areas to get into, as you are forever catching up with essentially identical products that may be better funded and already have established footholds in the market.

Suppose someone else attempted to copy you, and possibly offer the product for free, how would this make your plan unworkable? How have you built your product to make competition either irrelevant, or impossible? If this is not an option, how can you move fast enough on your limited funds and on the back of your first customers to garner a strong foothold in the market?

Competition, like markets and customers, is not static. You are jostling for customer attention from day one, and need to know where you stand in the product space, as well as how you are going to change to adapt to prevailing conditions.

If your plan is rigid, or your leadership mindset inflexible; if your assumptions are pillars of support for your success, and your product is ill-defined to serve even the consumers that you thought would first help bring home the bacon, then you may have just created a piece of junk.

Starting smaller, and asking customers for what they want and building it for them, is a better recipe for success than coming up with your dream product that no one but you would use (if even).

If your plan does not work in microcosm, then it is hard to see it working in macrocosm. Some investors may be willing to fund a pilot as part of the execution plan, essentially use seed capital for this alone. If your plan only works in theory if it scales massively, regardless of your faith in the concept, it will be hard to sell to an investor that it is all or nothing.

Making a strawman, running a pilot, to demonstrate the feasibility of the product may need to be done on your own dollar, and makes for a powerful investment tool. Bear in mind a funder needs to feel that their money is being used to elevate a project that has had all the kinks knocked out of the system, and now needs expansion capital to satisfy demonstrated demand in a well-defined market.

Having a pure concept to present may attract pretend investors purely interested in talking about it, who will waste your time, and you will waste your shot at making a good first impression on an investor who means business.

Your business plan may call for a certain amount of money, to fund a certain set of well-defined steps, in a certain timeframe. In reality, you may not get what you want when you want it, so you need to consider going ahead with something which gets you started on the process.

On the one hand, you may distract yourself from fundraising activity, however on the other hand activity in creating the business on your own dollar mitigates risk in the eyes of the investor, and helps you to start seeing the steps required to gain first foothold, and how to spend funds once received. You may even discover when spending your own money how much is really required, and what the demand really is.

Previous valid experience you can point to and replicate can perhaps obviate your need to run a pilot, and allow you to plausibly aim for greater goals. It will also convince investors that you face less "unknown unknowns", and can deal with setbacks that could faze a novice in the area.

If you can modify your business plan to start on known territory before moving to something completely new your business stands a far better chance of surviving in the early days, and gives you a platform to seek new directions.

Though you may have partially relevant experience, there will be some holes in your previous experience which need patching up. Equally, your previous experience may not apply under new environments, especially true for western mindset vs Eastern mindset.

The well-enforced laws and governance of the City of London will not help you in the Jakarta financial markets. The watertight American contracts backed up by legal precedent will not survive against wholly interpretative Chinese agreements. Your consumer base may have a radically different purchasing pattern for the same product due to cultural reasons.

 

Though you may have a flawlessly designed strategy for moving forward, with planning to the last detail, you should really be concerned with achieving milestones that demonstrate real progress for your plan.

Some of these milestones are flags that you are fulfilling your business plan. If these milestones appear not achievable, it is time to reassess your next moves under the prevailing circumstances.

The novice entrepreneur may feel that the sequence of execution alone guarantees success, though in reality the best laid plans of mice and men rarely execute as expected, due to the "unknown unknowns".

Focus your energies on achieving the major milestones. Bite-sized progress allows you to review and change execution steps where necessary in order to continue towards your goal.

Converse to the progress-measuring "what must go right", certain missed targets can spell the end for your business plan as you know it.

Be sure that you are tracking the most vulnerable assumptions of your business plan, such as not losing staff at exactly the wrong time, maintaining customer interest and cashflow in unsteady times, being paid by your debtors when you are already heavily exposed, losing strategic partners to competition, being attacked by supposedly friendly partners, receiving negative publicity, releasing an incompletely tested product which ruins your fledgling reputation etc etc.

Though the plan may call for an injection of cash, be prepared not to receive all that you want and when you want it, especially when nothing is off the ground. You must learn to think like an investor and act like an entrepreneur. The investor probably understands the value of money better than you do, as they stand to lose it immediately, and must wait an indeterminate time to return to status quo, let alone profit.

Acting like an entrepreneur means taking those all-important leaps of faith (otherwise known as risks) to spend those funds in creating new markets. As long as you can justify your cash needs, you are likely to get them. But justifying them can prove difficult if you are acting purely on "gut instinct" or worse, conjecture. It is easier to justify on the basis of track record, and ideally, awaiting clients.

The figures presented in your business plan are general indications that you have tried to think through the process of what the costs are and where the revenues are going to come from. The underlying assumptions that generate these figures are more important than the numbers themselves.

A real number such as a booked order from a first client is infinitely more interesting than pages of imaginary figures based on statistical analysis and conjecture. Remember, the investor is giving away REAL money, so the less imaginary your projections the more reasonable it will seem to the investor, and hence the more attractive an opportunity.difficult.

The entrepreneur seeks funds to start activities, the investor seeks projects which will use finds wisely to grow their value. An entrepreneur may not be "in it for the money", and a common perception is that this is an admirable trait of entrepreneurs. However, the investor is in it for the money. Money is the investor's business, and it must grow. 

Be sensible when asking for money.

 

Every investor has loads of ideas battering down his door. Investors are not overly concerned with the novelty of the idea, but far more with the workability of the business. A wise investor seeks a partner to grow a business with, and look for more opportunities down the line when the entrepreneur's track record is proven.

Investors take a long view, and so should the entrepreneur. Simultaneously, the investor seeks short-term assurances that the business can at least get off the ground. If you can balance your pitch to demonstrate feasibility to get off the ground, along with potential for long-term growth you are in a very strong position, not only to achieve funds, but also to actually succeed if your plan is tuned this way.

A solid business with a dependable leader can be allotted any number of great ideas once track record in execution is demonstrated. A professional investor likely has several businesses in progress, and is unlikely to be swayed by the argument that this is "the next big thing", they've heard it all before, and will do so three times more before lunch.

 

Angel investors have been forced to think and act like professional investors, and the gap between angel investing and venture capital is blurring, and blurring towards an analytical, venture capital based approach. Angel investors may have a greater appetite for risk than VC firms, but this is less and less every time they invest in project. The old adage still holds, "once bitten, twice shy".

 

Think of an investor as your parent whom you are asking for your first car. The approaches of either party are not dissimilar to an entrepreneur asking an investor for money. Both you and the investor wish you well, and to become an expert driver, and go far. Your appetites for risk, and need to demonstrate prior ability before moving forward are probably completely opposite.

You would likely prefer a Ferrari, that would blow away the competition for attention, grab high profile immediately and appear to replicate the success of other Ferrari drivers whom you have seen, and feel you can do at least as good as, if only you can get behind the wheel. The investor would just as soon give you a Volvo with stabilizers.

And perhaps invest a little in tracking your every movement via satellite, keep you off the motorway, and definitely force you to wear a safety belt. They are highly unlikely to ask if you would like a bottle of vodka thrown in, with a few supermodels and perhaps some coke.

Volvo ideas are ideas that are attainable and dependable. Though a not insubstantial capital outlay is required, they require little maintenance, and can go a long ways before needing to be serviced or upgraded. You don't need a vast array of skills and experience to drive them, and are not vanity projects. Before long, a novice driver will have mastered the basics of handling them, and will be qualified to consider more volatile, expensive, potentially dangerous projects. Potentially great drivers can learn the basics on a Volvo before being handed the keys to the Ferrari.

Ferrari projects are ones that look for lots of money up front and seek to make lots of impact. Novices are unlikely to be qualified let alone capable of handling them. While it is possible that prodigies exist that can drive them well first time, they are the exceptions that prove the rule. And unless a competent driver with a track record like Michael Schumacher is asking for the car, the investor is unlikely to consider the risk worth the potential reward.

The upshot is, you have to prove yourself in demonstrable steps of progress before funds will be released to you to move further. And the investors may cut their losses and take away the car keys (and your petrol money) if they think you are a danger to their funds and yourself.

 

Consider the investor's point of view again, they let you out more rope as and when it is necessary to allow you to progress, not so much as to hang yourself with. Money can be a vehicle to drive to oblivion until you finally realize you are lost, so seek sparingly and check progress at each stage. If you think you need 1 million euros, then you are not going to spend it all at once, simply ask yourself "what do I need within a reasonable time frame to get off the ground and get business flowing".

You should in fact look for as little money as possible to free yourself from obligations to investors, and keep as much equity for yourself.

If, like Amazon, you expect to build the profitability slowly as you build an unbeatable inventory and service, you should make this very explicit. Post-dotcom days, finding this kind of investor confidence without a track record will be difficult.

Customers need to be educated about the product, whether through advertising, word of mouth, free trials, one-on-one hard sell etc. As mentioned earlier, your first product may be quite new, and people may not understand it very well.

If you can prepare them for it by informing them about its development, the reasons behind it, and get people thinking about it, you are in better position to sell rather than make the product and start the education process.

Products that require continually updated versions, like software platforms, can get old fast and you may waste development money in creating a first version that takes so long to sell it is obsolete by the time the market knows about it.

There is a lot of free advertising out there, it is called the mass media. People's appetite for news is extremely strong, and getting stronger in the information age. Events that you stage to increase awareness of your product or service can even be profitable in their own right, as well as getting the word out.

Ask yourself if you can shape the product or your marketing campaign so that it suits free advertising somehow. In the case of a website, bringing in many visitors to try it out for free and see the services on offer, in the case of a consulting firm, perhaps industry-education events on topics of interest for which you have the answers.

Association of your product / service with events is very powerful advertising, as people's recollection of the product has more than one stimulus, namely the associated event not just the product itself. This suits FnB industries that hold entertainment or sporting events, software products associated with gaming conventions, clothing companies associated with fashion events or design schools.

A lone entrepreneur is unlikely to be all things to all people, least of all because of how that hamstrings getting anything fully done. Slow, steady progress gets a business off the ground, rather than aiming high at several targets. Hence, at the very least, your business will need to have more than one person, each one with a particular strength.

Leadership will make its presence known when crisis demands, not by assigning a title. Calling yourself the CEO, or COO only has meaning when there is a functioning organization with staff that requires strategic direction. Taking your first steps means everyone chips in, and does what they know they do best in execution. Investors above all, are not fooled by, or interested in, titles.

Your role in the founding team is not determined by your title, which is more for external PR purposes, but by what you can contribute on the ground, rolling up your sleeves, getting your hands dirty.

Thus ask yourself, "what are my strengths?"

There's a big problem if you discover that you, or your colleagues cannot doggedly convince people to give your offering a shot. Creating a beautiful new product is awesome fun, but you have to be shameless and thick-skinned in telling the world about it. If you cannot sell it, and the product does not "sell itself", then don't plan on getting places any time soon.

Do I know when to make a deal, and when to continue negotiating? A startup firm operating on tight resources and little room for manoeuvre, will sink or swim on the ability of its management to know when to strike a deal, when to give up the chase if the deal size is too big or moving too fast, when to focus on the right targets, when to make a burst of resources to attempt to capture their business, and also when to change tack or back off in the face of superior competition.

The point was made by a growing Singapore entrepreneur in the hi-tech area that one should not doggedly chase a single prospect from the get go, and it makes sense to scope out several options before committing, and remember where they are in case of fall back, as the first option may prove more elusive than initially expected.

In their case, they followed a client prospect for six months, and ignored several other prospects believing this one to be just in reach. They had to back off having spent considerable time and money on servicing what became a dead end. Similarly, the same firm chased a single funding prospect for several months while letting others grow cold, only to have to return to the start and chase the old prospects, one of which they did strike a deal with, though a year and a half later.

If you choose a difficult or impossible target, you will waste time and resources, both of which burn away relentlessly leaving you weaker before facing the next target. As an entrepreneur, consider the analogy of the savannah lion approaching a herd of buffalo. Regardless of the supposed superiority in speed and ferocity of the hunter, the conclusion to the hunting expedition is never a certainty. The target chosen may prove elusive, and other opportunities while not as juicy as the originally chosen one, would have been far more attainable, and would have done well to feed on attainable targets until the next opportunity came along.

You chase opportunities that you are capable of landing, you give up when it is clear that you are getting nowhere, and conserve resources for the next burst. And you go bald-headed for the big prize when you know you are ready for it.

The knowing what you are capable of, when to strike, when to back off, how to manage and discard different opportunities, and when to be brave against the odds is the killer instinct that you will likely learn through practice and starting small, making visible steps of progress.

You may be at risk if the answer is you. You should endeavour to attract people who are smarter than you, along the dimensions of the company's activities. Basically, you should seek people who know vastly more about their areas of expertise than you do as they will be carrying out the activities of the company on your and the shareholders' behalf.

Being the smartest person in the room means the onus is on you to come up with the creative strategies, and possibly do much of the work you should otherwise delegate. If you are smarter than all your employees, then in order to carry out your plans you will have to spend precious time leading them rather than worrying about the issues at hand.

In the words of uber-entrepreneur Richard Branson, "herd cats, don't lead sheep".

Be prepared to lead from behind as soon as possible in a startup. Really, your role as entrepreneur is not to implement, but to steer your team's efforts, and ensure that the job gets done.

Your plan should ideally have no assumptions whatsoever. Nothing should be conjecture. Of course, some will be present in a new venture, but it is important to know what is a fact, and what is hope. This is related to the question, "What must go right", "and what must not go wrong".

You are setting off to sea in your new venture, and you know that you don't know everything. You face considerable risk if you have decided to ignore your personal weaknesses. Clearly, no one is perfect, and your strategy will be shaped on the go by actual demand, but you should know what your weak points are.

If you are not a salesman, then find someone who is, and don't accept responsibility for it. If you are poor at organization, find someone, or a good tool, to aid you in organization. You are not helping your venture by going forth purely with best wishes for the future, you also have to back it up with personal skills either possessed by you or a team member.