Keep it simple. Tell a story. Make every word count. A strong management team is important, and so is a realistic financial picture.
Those are some of the makings of a good short business plan. With the Business Plan Challenge deadline coming up April 5, five Challenge judges shared their no-nonsense advice, answered questions about business plans and what investors like to see and even heard a few pitches at the Miami Herald’s two-hour Business Plan Bootcamp attended by more than 250 people last week at Miami Dade College.
Let’s get right to it. What do these experts — who look at hundreds of business plans and investor pitch decks a year — want to see in a short plan?
“If I read the first three sentences and I don’t understand what it means, thanks, but no thanks. You have to make a point of ensuring that it is easy to understand and that we get it,” said Mike Tomas, CEO of Bioheart and an investor. “No. 2, I will look at management. I love to invest in overqualified entrepreneurs. No. 3, financials; 90 percent of all the business plans have fractured financials. If it doesn’t make sense to you and your friends, it probably won’t make sense to an investor.”
“Put yourself in the investor’s shoes and make it easy for us. Use simple words for what you do, use action verbs. What problem are you solving? Are you solving a real problem for real people that will make real money? And how are you going to make money? Who are your customers and how will you attract them? Why are you the one to lead this business?” added Melissa Krinzman, managing director of Venture Architects and co-founder of a new early-stage venture fund, Krillion Ventures.
OK, sounds like a lot to pack into a three-page plan, the length of the Business Plan Challenge submission. Tip from Rob Strandberg, who heads the Enterprise Development Corp.: Think about how you put together a PowerPoint presentation with bullet points. “Make your points short and important.”
[Tip: In the Business Plan Challenge, entrants can have one additional page for a graphic or photo, a good place to put that financial chart.]
The panelists also talked about the power of the pitch, and shared war stories about entrepreneurs who froze up when they got in front of investors. Memorize, rehearse, always have it at the ready.
John Hall, who heads the new community program called Goldman Sachs 10,000 Small Businesses at Miami Dade College, recommends rehearsing three different pitches: 30 seconds, three minutes and five minutes. “In a 30-second pitch, you can really talk about only three things, so be efficient, compelling and effective.”
Record yourself on your iPhone over and over again, rehearse with your mentor, become so familiar with it no one can interrupt you, the panelists said. Make sure you always include an ask, such as: Can I send you my executive summary and a demo of my product?
“And a good entrepreneur is ready for all the obvious tough questions. You might not want to raise all those issues in the pitch, but have the answers at the ready,” Strandberg said.
Where can an early-stage entrepreneur go for capital in South Florida? Think outside the box, the panelists recommended. Sometimes your first customers or experts in your industry can be your first investors. Seeing industry experts seeding your business will help with follow-on investors.
Another avenue is Kickstarter and Indiegogo, which can not only bring you needed funding but customers and credibility, said Richard Ginsburg, co-founder of G3 Capital Partners. “Every day you are seeing product and service companies validated by $30 and $40 investments,” he said. But he cautioned to make sure your company is ready; the majority of campaigns don’t pick up traction.
The panelists recommended reading trade journals in your industry, the blogs of top investors such as Fred Wilson and Brad Feld, and books such as Outliers by Malcolm Gladwell and The Hard Thing About Hard Things by Ben Horwitz. Top accelerators and business schools often post helpful explainer videos and how-to information. If you have a food-product business, see the movie Nothing But Cakes, Tomas said.
Some final tips:
• Show your passion. While this may seem hard on paper, it can come through.
• Please don’t say you have no competition. Find out who your competitors are and learn from their mistakes. Include in your plan a competitive grid or at least a small section about your competition and your differentiator.
• Tell us how you plan to market your product or service. And if you can, offer some hard evidence that it will sell. This could be a commitment from some target customers. If you have tested your idea with potential customers, include that too.
If you are putting together a business plan for the first time — as about half of the Bootcamp audience was — know that those 30- and 40-page business plans of the past are really not in vogue. These days, early-stage investors are most likely looking for an executive summary, investor deck and a strong set of financials.
Plus, the business plan acts as a road map for you to plot your strategy. So if you are entering the Business Plan Challenge, the three-page plan we ask for will be quite relevant and useful in your business.
“Quite frankly, this exercise you are going through for the Business Plan Challenge is really important because it is helping you hone your pitch,” Krinzman said.
Follow @ndahlberg on Twitter.