February 5, 2002

How to Write a Winning Business Plan
When Success is Getting a Meeting

by Steven N. Czetli

A business plan takes the sprawling tentacles of an entrepreneurial idea and crystallizes them into a form that investors, prospective employees and customers can quickly grasp and get excited about, says Nancy Deckant, vice president of marketing and strategy at Soleil Technologies.

Deckant offered a seminar on writing winning business plans at phase one of third annual EnterPrize Business Plan Competition, hosted by the Pittsburgh Technology Council earlier this month. For a list of the winners of the competition and what their companies do see story below.

Deckant said one way to view a business plan is as a resume of your company’s plan for success over a three to five year period. “Like a resume, it needs to very quickly grab your reader’s attention and sell them on you and your product (or service) as something they want to be involved in. Whether it's an investor or a key member of your management team, or potential partners, this business plan will end up being circulated to people who ask: ‘What is your company about? Give me an overview.’”

Often, excerpts from the business plan will be pulled out and used as marketing verbiage as well as company background. So the considerable effort that goes into creating a winning plan can yield multiple dividends, Deckant said. “If you do it well, there will hopefully be a lot of people who want to be involved with your company.”

Shifting Creative Gears

New companies are born from ideas about how to create a better product, a superior service or something altogether new. They begin in a vague, intangible way, but in order to be understood and taken seriously by others must quickly become tangible and specific. That’s the job of the business plan.

“What writing a business plan does for me is that after collecting information about this particular idea for weeks, it=s sort of all there in my head,” explained Deckant. “A business plan takes it from being out there in the ether and confronts you with this opportunity. It requires thinking about things strategically as well in a very nuts and bolts way: How am I going to make this happen? If I can translate what=s going on in my head B and between all of our conversations that we=ve had among business partners and people who are interested in this, and put it in a concise, succinct, way, then I will be able to communicate that message to others.”

What you need to know before you sit down to write the business plan.

1. You need to know your target market. How large that market is. Is it a $10-million market or $100-million market. If it's a $100-million market, you might find some investors interested. But if it's a $10-million market , it would probably be more of a lifestyle business.

2. You need to know what target customers are going to be interested in buying your product.

3. You need to be sure that those customers have a really strong reason for buying it.

"What happens so often (from the customer’s perspective) is that we have so many opportunities that would be really nice to have; but we have to keep asking ourselves is this just a nice to have opportunity or will somebody really buy this," said Deckant. "Until I know those things, there isn't a reason to write a business plan because you only have one half of the equation. You can have a great technology but you have to understand this market picture and convey that. So I keep studying and I keep talking with people until I know those things.”

The three sections of a business plan

1. The executive summary gives you a 360-degree view with text excerpts from every other section in the body of the plan.

2. You have a back-end, which consists of supporting documents.

3. The body of the plan is where you=re going to put the information about your company.

The body

The body of the business plan includes the market opportunity. It answers the question: what are the market forces that are pushing people to buy your product?

You then look at the product and the marketing strategy and the competition. Investors will be really interested in looking at the four Ps which are Product, Price, Place, and Promotion.

Competitors should be identified specifically relative to your product. How does your product relate to what else is going on in the field? What are the features and benefits you have, compared to what they have?

Investors will want to know how your product has a significant advantage over the products that are already out there.

Business model: how are we going to make money?

It's surprising that someone will write a business plan and put in a price, but there is a whole dynamic about how you're going to make money and that often gets left out. It's stated, but not dynamically stated. I know it's important to investors. You have to be emphatic, this is how we will make money with this opportunity.

Sales and customers

Specifically, who is going to buy it? If you have customers who are they and why did they buy?

Financial summary: What's in this for investors?

Before you finish your business plan, no one knows that.

Under organization, the EnterPrize Award judges will look at whether you have no organization vs. a well-established organization.

The management team and the board of directors B who are the individuals? And what are the successful ventures that they've been involved in? What are their connections to the marketplace? The more you can show that connection, the more credibility you bring to your venture.

In fact, all this comes down to building credibility. If you're asking for $10 million, investors are not going to hand it to just anyone. You need to give them solid reasons why they should give it to you.

Bilingual Entrepreneurs

It really helps if the presidents or founder is bilingual. By that I mean that he or she is able to talk about the technology and talk about the market. That in itself brings tremendous credibility.

Elevator Pitch

You have to put an elevator pitch about what your company does: describe it. It's good to put a little history of your company because investors always want to know how did the partners get together? What have you been doing?

How investors judge opportunities

You can go into six different books and they will give you six different ways to write your business plan.

I know what I'm putting in front of you is different from what is in the information that comes with the EnterPrize contest.

I've just found this a useful way to go about communicating with investors in a way that takes you from market size and all that lofty stuff right down into your target market, and talking about what their problems are in this area. What are the market forces that will push your customers to buy?

Market opportunity

Here is what market opportunity is about. Market size, competitive environment; target market, the problem that they have and the solution which I am offering. My sections don't flow perfectly, but they flow perfectly in terms of getting people engaged with my idea. So take what you like and leave the rest.

For each market size, the judges will look at this and say, is this a small shrinking market or is this a large and growing market? Investors get excited about large, growing markets. Someplace where there is a lot of activity. They are looking for a place where there is a lot of activity, where there is a niche that you can take over and dominate. Those are the things that investors specifically look for.

They also look at: Is this going to be hard to market? Is it going to be a tough sell? Are we going to have to compete against 60 people or 6 people, or are we going in there with something unique that none of them has?

So, go through the sections and try to remember your audience.

What compels your customer to buy?

Generally, it's around some changing technology. Or the industry has changed because the government has made some regulation changes that will change the way transactions are done. Or sometimes it's if I just had X, I could make three times as much revenue as I do now.

Or ask if the customer is going to say, 'This would be nice to have' or is this solving a problem that is keeping the CEO awake at night?

My potential customers might say, 'You know, that would be great.' Well, I ask, 'How great? How great is it really? Be specific. Is it something that you will buy?'

Product marketing strategy

It's really helpful to have a section in there that says: How it works.

This is a product that is used in one way. These practical examples go a long way to make investors comfortable in terms of different environments where products might be used. So B go to that next step and put in a couple of examples. Who might be using it and how they would use it.

The four Ps

Product offering, Price, Place and Promotion.

This gets down to how your product is to be marketed.

Product vs product offering

The product offering is a little different from the product itself. Because my product might be Body Media's sensor that you wear on your arm when you are doing exercises so you can record your heart rate.

My product offering might be this sensor is hooked up to the Internet and there is an internet service that goes with this and so I want to convey that connection. How much it will cost not just for the product but for the Internet service that goes along with it. How people are going to get in touch with this. Are they going to the Highmark site where they will be encouraged to sign up for the program to help you do exercises as a preventative health measure to help you be more healthy while using your product? How are you going to get people to sign up to use your service at your price? And how will you promote it?

If you are competing in the Enterprize Business Plan contest, you want to make sure you have each aspect of those things covered.

Competition

How does your product stack up to other people's products? Who are you directly competing with? The evaluation criteria looks at whether this is a nonproprietary product that anybody can make and catch up to you. Or is it patent protected?

If you already have your patents, in the business plan competition we'll be looking at if there is an unfair product advantage?

Downplay the technology detail Make the product tangible. Try to build a complete picture for your audience. And a note to all of you who love technology as much as I do: We still haven't gone into a great description of technology. It's sometimes very hard to tear ourselves away from it, from a detailed description of it. But put that description in the back. People to whom that truly matters to will go back there. But keep your investor focused. And let them fill in the gaps at their leisure.

Product and how it works

Use examples; differentiate yourself from your competition. Show as best as you can in graphics, text, tables or other means, what your product is and how it is different from your competitors' products.

Business model

How are we going to make money? The proof of your market viability is in having customers. And the credibility of the management team is judged by how much they have had contact with real customers. And we can say we know that they want it.

The contest is looking for realistic plans that take into account your customer's price sensitivity relative to the value of your product offering.

Other sections are: risks and contingency plans. It's important to think about these. and I'd say take the one or two biggest concerns you have and offer some solutions for them. For a regular business plan I think you can put these in the back. But for the EnterPrize competition you should have it in here.