Is Your Business Plan on Target?

It doesn't matter if your business is already up and running or in the beginning stages, it needs to have a document convincing potential investors and lenders that the business is worth the risk. Most business plans don't accomplish this.

One of the most common problems with a business plan is that they lovingly describe the awesome technology, product or service. The people behind these plans believe that readers will fall in love with the idea and invest right away or provide loans.

Define the Pain

Stop there. They don't care how fabulous your idea sounds. They want to know what problem(s) your idea solves. Great example: Many considered Betamax technology superior to VHS, yet Beta failed and VHS soared until DVDs came out. This shows that superior technology guarantees nothing. It takes more than technology to see success.

So support your idea's ability to solve real problems with evidence from customer case studies, market research and anything else that can show that people experience this problem and need a solution. How many times have you had to hunt down a lost remote? That's a real problem and one company discovered this by talking with customers. It added a feature to its technology that locates misplaced remotes.

Define the Target Market

If you can't figure out the market that most benefits from your solution, then you need to keep looking until you find it. The people who read business plans won't take it seriously if you don't spend the time understanding your market. You should know your market well enough to create two people complete with their names, ages, background, money earned, etc.

I've heard stories from people who said that their target market ended up being different from when they first started working on their business plan. At last, they took the time to discover a better market, but imagine how many more sales they would have had early on and perhaps success getting enough cash flow.

Tackle Your Numbers

The smart investors know how to ask the right questions to challenge your numbers including margins, costs and transaction types. So while your numbers might look darn good, they may not be. So find yourself some experts to look over your spreadsheets and numbers to potential weak spots.

Also look for your flaws. No investor will believe your business is perfect and going to execute without problems. Identify weak spots and be up front about those. You'll get more respect. Share past failures and lessons learned. Really, anyone who hasn't experienced failure isn't someone investors would like to work with. Besides, when you're honest about everything, you're more likely to gain trust and have more credibility.

For some example templates to help you with planning and metrics, check out The Toilet Paper Entrepreneur's resources.