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Over the years I have watched many people succeed and some fail at starting new businesses. As they begin to define their ideas on how and why the world needs their new product or service, certain personality characteristics begin to emerge regarding how they approach their new challenge. Its in the writing of their business plan that these personality characteristics of the entrepreneur begin to emerge.
A good business plan is a road map for the founders of the company to follow. Its a living, breathing document and needs to be constantly updated. As events change over time, the business plan needs to reflect these changes. Its not just something that venture capitalists require in order to get funded, and its not cast in concrete either.
Entrepreneurs who over-analyze even the smallest details can get bogged down very quickly and start to fall behind on meeting certain milestones. New ideas have a shelf life. Since history demonstrates other people could also be working on a similar idea, time is important even critical in some cases!
The greatest example of time-critical events was the discovery of radium by Marie Curie in France in 1898. Madame Curie registered her discovery exactly one day before another group who also discovered radium could register their idea. They lived less than two miles apart and did not know each other! A very small world indeed.
Many new entrepreneurs also make the mistake of spending far too much time designing company logos, visually exciting packaging, and fancy web sites complete with splashy graphics. It might feel good to see mock-up ads, but the foundation for the building must be fully understood and complete architectural drawings in place before you put your company flag on the rooftop of your new twenty-story corporate building. Its the well-thought out and well-written business plan that takes good ideas and turns them into successfully fundable companies. If your business plan is over 25 pages, then youre probably not that focused and need to reconsider how youre presenting your business case.
Venture capitalists are experts in quickly evaluating business plans. It comes down to some very basic fundamentals, and they include: Are the people starting the company qualified to do what they say they can do? Do they really understand how much money it will take to get the product or service into the marketplace and generating revenues? Is the sales forecast believable, and more importantly, is it achievable? Lastly, do they understand how long it will take before red ink turns into black ink?
Any entrepreneur forecasting profits during the first or second year of operation is probably not going to get funded, because they are demonstrating they really dont understand how difficult it is to get to profitability. It usually takes four or more years to reach profitability and multiple rounds of funding to get there! Since multiple rounds of fundraising are often required, keeping a business plan current means you are always ready to show potential new investors why your company is a good investment.
Balance is the key here, and understanding the importance of the big picture while paying attention to the smaller details will begin to separate the people who get funded from the ones who waste a lot of precious time. We all know you cant get time back. Starting a business is a wonderful experience and paying attention to some of the pitfalls first is something entrepreneurs need to be fully aware of before they begin their business-building journey.
William Dollar is a Senior Contributing Editor for the Wisconsin Technology Network, and has his own consulting company at www.billdollar.com
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