In a recent article from Entrepreneur.com (January 23, 2015) Martin Zwilling tells potential business owners that, “To Investors, Start Ups Without Business Plans Are Expensive Hobbies.” He goes on to say that you can’t just “sketch your million-dollar idea on the back of a napkin” and expect investors to open their wallets. Finally, he counsels that: “Most good ones I see are in the range of 25 pages.” However, my perspective is different.
I believe what Zwilling telling us is this: Get a cogent plan together before you try to drum-up financing for your start-up. But there is no reason this plan has to be 25 pages or longer. It only has to prove that you know how to react to customer demand – both now and in the future.
One of the best ways to accomplish this is to use CBM’s one-page Business Planning Framework to help you quickly validate your customer demand. You should run some initial tests to prove or disprove your assumptions, then change your strategies and tactics so that you are fulfilling what customers actually need – and most importantly – what they will pay for. Showing investors this type of flexibility before they give you money—proving to them that you can test, fail, re-test and then scale – goes a long way to making them invest . Following are my top three ways that this plan – when it focuses on customer demand — will pique investor interest when others fail:
Numbers Tell the Story
Look at the CBM template and identify where you need to inject the power of numbers. What’s awesome about the iterative business plan model you are working with is that you will have sales numbers that show you have already reacted to suboptimal numbers and adjusted mid-flight – to make these numbers grow. Any smart investor will react positively to this type of professional business planning and execution.
If you will notice, the majority of the steps in the CBM model have to do with customer or marketplace. That doesn’t mean that the other elements aren’t important — it just means that you are forced to continually think about the single, most powerful engine that will drive your business’s success – customer demand. As you begin to adjust the other “tiles” in this plan — make sure you keep in mind the ramifications on the customer-centric tiles from the changes you’ve made.
Fear of Failure?
There is no such thing as failure when using this type of business planning process. If something goes wrong, you can stay flexible, learn, change — and try other options until you succeed. If you have a phone-book-sized business plan, it might be difficult to even identify where you went wrong. This one-pager focuses your activities much faster — and allows you to see where the customer – not some dusty old plan — is mandating that you change.
Think of it this way – the business plan built from the iterative and flexible process will be a working, living document that shows investors you’re already ”in the fray” and working to make your business work. You haven’t spent six-months researching what your customer needs — you’ve used this iterative plan to actually find out. You are also armed and dangerous to your competitors because you have experience with meeting (or not meeting) customer needs in the markets you serve and are acting based on facts, rather than assumptions. This approach is worth a lot — to investors and to your business.