Maybe if you ask really nicely, a really rich person would give you tons of money so that you can start your own business. Yup. And while you're visiting Fantasyland, you might as well ask for a piece of moon cheese. No one, we repeat, no one will give you money if they think it's going to tank. So you have to convince 'em that your business is going to be a rousing success. That's where a business plan comes in.
Unlike Chihuahuas and those little paper umbrellas they put in Singapore Slings, business plans have two major purposes in life:
- To provide you, the entrepreneur, with a detailed roadmap to Successville as you make your new venture grow.
- To convince people who have lots of money that you're the sort of person on whom they may confidently unload it.
We've put together a pile of essential advice and links to take some of the legwork out of wowing your creditors-to-be. With luck, intelligence, charm, experience, connections, and a little help from SoYouWanna.com, soon you'll be raking in dough as though it were scum on the bottom of your Olympic-sized pool. Filled with beer.
One last note: we're assuming that you have at least a tiny bit of knowledge about the business world. You're not setting up a lemonade stand; you're trying to get people to invest serious money in your business.
1. KNOW YOUR AUDIENCE
First things first: before you put fingers to keyboard, you need to take a moment and learn about the folks who'll be thumbing through your 50 pages of brilliant strategies and mind-numbing statistics. Typically, a business plan is created with the following money-holders in mind:
Angels
Venture Capitalists
Angels
Otherwise known as the "Bank of Mom and Dad," angel investors are wealthy individuals who become personally involved in fledgling ventures, lending their expertise, experience, and money. Often, the angel is someone who has a personal connection with the entrepreneur (and is therefore more willing to accept your subscription to Fortune in lieu of actual business experience), but angels can also be outsiders on the lookout for a winning business model that just needs a little push in order to make it fly. If your angel is a wealthy relative or someone you've golfed with for twenty years (or both), you have some latitude when it comes to your business plan (heck, the angel may even help out with it). If you're shopping around for outside money, on the other hand, you have to approach the angel just as you would approach a venture capitalist - with a can of mace. Just kidding. The point is, if you know the angel, your business plan may not need to be as perfect as if you were proposing to a stranger.
Venture Capitalists
If you don't know any rich and/or gullible people, then you're probably going to try to get your business funded by venture capitalists. Venture capitalists, or VCs, eat eager entrepreneurs like you for breakfast unless you can earn their respect; they're basically individuals organized into large firms that will give you money to fund your business if they think that you'll be profitable. In exchange for their giving you money, you have to promise them a percentage (that is, share) of your company. VC firms often specialize in a certain industry so that the various companies in their portfolio become mutually supportive. Their funds range from a few paltry mil to billions of dollars invested in a variety of globe-spanning ventures.
Venture capital is all about high-risk, high-return -- sorta like playing Russian roulette. The catch is, these people will be strangers, so the only way you can convince them to give you money is if they are persuaded by your business plan. The managers of these firms look at hundreds of business plans every year, and they reject almost all of them. So even after you've managed to get a VC firm to return your phone call (or paid some lawyer a gazillion dollars to refer you), the chances of your plan ending up on the scrap heap are large indeed.
What can you do to improve the odds? Well, even the most exciting business model bogs down a little in the cash-flow projections and technical specifications; a VC won't slog through your entire business plan until you've impressed the hell out of him/her with a stunning, exciting executive summary. We'll give you some pointers on how to do this later.
