As an investor, I see a lot of business plans for start ups. Everything from an idea to an operating business with a five year track record is supported by a plan. Everyone from the first time angel through syndicates to large venture capital funds places a lot of store by these documents. Quite often, the business plan is the only part of the pitch that has been prepared by a professional advisor and therefore represents spending some scarce cash. I know from talking to founders that the business plan is always the result of blood, sweat and tears.
It would be generous, for all this effort, to describe the quality and coherence of startup business plans as variable. There can be huge gaps, numbers and measures are often unclear, markets and business models are poorly defined. It is one of the most frustrating experiences to talk to a startup team and find passion, knowledge and vision that are missing from the written plan.
So what do I look for? This is not intended to be a ‘how to” manual for drafting a business plan. It is also a very personal view. There are five key things which stand out for me:
If you get these things right, you will have me hooked. After this there is only one question I need answered, what will you spend the money on?
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.