The Business Plan

Selling the Entrepreneurial Idea

With an estimated $50 billion in funding available for the
entrepreneur annually, you may think that venture capital and R&D
partnership firms are falling over each other to fund the latest way of the new
technological integration and reseller proposals.

Wrong.

Venture capital companies such as Trinity Capital, R&D
Funding Corp., Early Stages Co., Mayfield Fund, Asset Management and others
receive an average of 100 technology and service/support proposals each month.

Researchers at these firms must dig into each proposal at
great length to examine the market, competition, technology and people to
determine its merits, or lack of them.

Unfortunately, instead of paving the way for funding, the
VAR and OEM proposals themselves often are more detrimental than helpful. In
fact, the sad truth is that the majority of the integration and reseller
business plans presented are not just badly written, but very badly written,
making the evaluation all the more difficult.

Some experts believe that the reason so many of these
business plans are poorly presented is because most of the new ventures are
started either by engineers or salespeople with great ideas, rather than
business people who know how to present ideas and make them happen. But that
doesn't have to be the case.

Pyramid Your Plan

The business plan should be presented to your potential
investor in the same manner that products and services are presented to
potential customers—quickly and effectively. A simple way to accomplish
this is with a pyramid-style presentation. This type of proposal includes a
summary at the top and expanded sections toward the base.

After you get through the legalities and disclaimers, the
most important part of your plan should be given to the executive summary. This
one- to two-page summary clearly states what the company is going to do, what
the market potential is, how the company plans to achieve market penetration,
the time period involved, the product/service plans, the amount of money needed
and how that money will be used.

Anyone reading those first pages should be able to quickly
determine whether or not it is a concept, program or product or service that
the firm wants to support.

The second most important section of the business plan is
the business summary. This part of the proposal includes corporate objectives
and strategy; a market summary with product/service objectives; unique
technology involved; a plan of operation/action; a financial summary and
investment requirements.

The executive and business summaries are the most important
part of your proposal because few senior funding officials will read beyond
these areas. If the proposal is rejected at this point, it will be returned to
you. If it is accepted for consideration, the project will be turned over to a
junior member of the firm for further evaluation and diligent research.

The Product

The next section of a complete business plan is the product
or service description. This includes the product's system or service features and
capabilities as well as initial and future plans. Since many people feel that
marketing is as important as technology (if not more so), include an aggressive
marketing and promotional program. The product/service section should clearly
show the firm's intentions to be bold and dramatic in its efforts to achieve
marketshare.

Few people would say that IBM's products are technologically
superior. However, everyone acknowledges that IBM still has a strong, seasoned,
well-oiled marketing organization and plan, which keep the company very
competitive. The same could be said for many other well-established companies
and products. In short, marketing is where it's at.

Market Analysis

The fourth section is the market analysis which should
discuss the market or markets, the trends and the need your products/services
will fill.

Depending upon the potential market, there are numerous
information sources for this section. Start with the publications that target
your specific market area. Editors and publication research staffs spend
considerable time monitoring the market, products, trends and needs. By knowing
who and what to ask, you usually can find a significant amount of valuable
information at no cost.

Over the last decade, an entire market research industry
that covers every aspect of the computer and electronics market has emerged.
Research reports can be purchased from companies such as IDC, CAP
International, Gardner Group, Santa Clara Group, Creative Strategies, Yankee
Group, Data Quest and many others.

The Competition

The fifth section of the business plan is the competitive
analysis. This includes a discussion of the participants in the market as well
as potential market players, the number of years they've been in business,
their size, sales volume, product niche markets and product plans.

Don't try to bluff your way through this section. If your
company and products or services are of interest to the investors, you can be
certain that they will have more than a passing knowledge of the industry and
its participants. In addition, the funding industry is closely knit, and it
only takes a few phone calls to check out all of the details. This means you
will have to do a lot of digging to make certain that your facts are flawless.

Background

After evaluating the competition, include a section
presenting yourself. The background section is a historical discussion of the
company and its founders.

It includes a discussion of the current management team, as
well as any additional people you will need and when you expect to add them.

Keep in mind that funding people look at the total picture
and evaluate every portion in detail. At times, part of their contingency plan
will include replacing certain members of your team with individuals of greater
strength.

These strings are not attached out of malice. The people
putting out the hard cash just want to do everything possible to ensure that
the company will succeed so that they can get the return on investment they
need.

After all, some people have great ideas but can't execute
them. Others are outstanding when the firm grows from $5 million to $10
million, but can't take the company to the next plateau of $15 million. Realize
that the recommendations are being made for the good of all concerned including
you.

The Whole Plan

Finally, a complete business plan includes a section on
financial projections where all of the pieces come together on a cold, hard
ledger sheet. For the fist two years of operation, lay out the program's cash
flow in monthly detail. The third year should be outlined by quarters and the
fourth and fifth years in six-month increments.

No one is foolish enough to believe that your crystal ball
is so clear that you can see what is going to happen month by month in the
third, fourth and fifth years. But you should at least show that you have
planned that far ahead.

By following this outline, you can develop a clear, logical
business plan that attracts investment interest. Great ideas need help to make
them happen. A well-written business plan will help you prepare for success. style='mso-tab-count:1'>

G.A. "Andy" Marken is president of Marken Communications, Inc., in Santa Clara, Calif. He may be reached at andy@markencom.com.

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