Let me guess…You spent some time over the long Memorial Day weekend with family who encouraged you to “go for it” in launching your new business? No? Ok, then you spent some time over the long weekend at a backyard barbecue with your successful neighbor who recently cashed out on their venture? Wrong again? Ok, one more try. You spent most of the long weekend desperately working on your new business plan, but don’t know where to begin? If any of these are true, then this post’s for you.
There are thousands of blogs, books and articles with great advice on what your plan should say, how it should be structured. But you found this one! Take a look at the single slide prepared by Sequoia.
What follows is some additional clarification/opinion on what some of the items mean:
Sequoia says: Start-ups with these characteristics have the best chance of becoming enduring companies.
TechonomicMan says: The items in this column aren’t “nice to have’s” for raising venture capital from a VC of the caliber of Sequoia, they are “must have’s”. Large markets, team DNA, frugality and the rest can’t really be “faked”. The investor will see through false answers and rationalizations. Before you start pitching to investors, take a cold hard look at the facts of the business you’re starting and know your weaknesses. Seek out harsh criticism and do not simply defend your position. Think about it! There is nothing wrong with a business that fits into a $5 billion market or a $1 billion market…you could build one heckuva business there. Just know who you’re pitching to and understand what they like!
Sequoia says: Focus…Customers will only buy a simple product with a singular value proposition.
TechonomicMan says : Too often, I’m confronted with business plans that propose accomplishing too many things. Too many products, too complicated products, too many markets, etc. It is especially true these days that you develop a relatively simple configuration of your product to be your first product. If a customer says, “can you make it do this or that?”, great! Customize it for them, and make them pay for that customization. Do not immediately assume that every customer will want that configuration. General Electric, Johnson and Johnson, Amazon…on and on did not start life with a massive line of disparate products being sold all over the globe. Founders need to first make one thing for one customer!
In writing the business plan, Sequoia says define the problem…they say: Describe the pain of the customer (or the customer’s customer); Outline how the customer addresses the issue today.
TechonomicMan says: As when assessing your business opportunity, use a mirror in harsh light and look very closely at yourself. Every business I’ve ever been introduced to believes that their product/service configuration is the only one like it. And that is very likely true when you define your product in terms of features. But customers don’t really buy features, they buy solutions to their problems. Even more importantly, they buy solutions to their most pressing problems. Get your prospective customers talking about their problems in the area that your product sells in. If your product doesn’t solve their problem directly, work to find a partner that can. This is simple stuff…understand what your customer wants, don’t just try to sell him your product with 16 features that no one else ever combined before just because you can.
Sequoia says…Describe your Business Model. Namely, 1) Revenue model, 2) Pricing, 3) Average account size and/or lifetime value, 4) Sales & distribution model and, 5) Customer/pipeline list.
TechonomicMan says: This would be a great section for the plan. I see so many start-ups that do not understand the most significant achievements of their company. If you have a customer list, and an organized and professionally characterized and quantified pipeline, please be sure to share this information! What are the key decision points for each customer? How much revenue do you anticipate generating from each? Over their lifetime? I know these are still projections, but jeez…you’ve got real live customers who are buying or interested in buying what you have. Remember when you didn’t have that!
The Sequoia list, like many others is a great outline and I’m partial to it over many others I’ve seen (and written!). Feel free to contact me if you want some “harsh light” cast on your business plan. Click the VentureTips header and send me an email.