Ditch Your Business Plan

98% of venture capitalists say they could become interested in a company without a complete written business plan

Written by ProfitGuide Staff

Who needs a business plan? Fully 98% of venture capitalists say they could become interested in a company without a complete written business plan, according to a study conducted by author David Gumpert. In his book, Burn your business plan: what investors really want from entrepreneurs, Gumpert says most investors are skeptical of business plans and aren’t upset by entrepreneurs who skip formal plans in favour of detailed investor presentations.. Here are 12 questions that presentation must answer:

  1. What is the opportunity? What is the problem you are fixing? And, if it’s a new problem or opportunity, why has no one tried to fix this problem before? If they did, why didn’t it work? But there’s more to answering this question than simply demonstrating that an urgent problem needs fixing, you also need to convince potential backers that huge premiums are to be gained by those solving the problems.
  2. What gives you special advantages in solving the problem? Investors refer to the competitive advantages that entrepreneurial businesses bring to the marketplace. The ideal competitive advantage is something proprietary-say, a patent on a new product. But other advantages can be your management team’s prior experience or having a head start in the industry.
  3. What makes you think that the people involved in your company are especially qualified to grow this business? Why is this a business only you can do and/or why is this business right for you? Include evidence of past performance in your answer.
  4. What is the model? Describe your scheme or approach to conducting your business and generating recurring revenues.
  5. What makes it scalable? This refers to your ability to ramp up volume quickly with minimal additions of new people.
  6. How do you know you’ll have customers? Don’t try to justify business based on external market studies. Focus on what you have done to identify customers and prospects. Investors want to know about your surveys and test marketing initiatives-the harder the evidence, the better.
  7. How do you connect to customers? Are you going through retail channels, direct mail, using the Web, or some combination? If you already have customers, do you have methods for staying in touch with them? What evidence do you have of repeat sales?
  8. What is the secret for your expected sales success? Do you have a super salesperson on board or a proven sales technique that can be easily taught to others?
  9. What have you learned from the competition? Never say you don’t have competition, because that’s a red flag for investors. To answer this question, think about who your competitors are, what they do well and what they don’t do so well. Point out things your competition does well and which you would like to emulate or do better. Specifics will especially impress investors.
  10. What are the risk factors? Every business entails risks; investors want you to acknowledge them. Just don’t dwell on the negative.
  11. How will you make money? Provide a synopsis of your financial projections. You should also try to anticipate this question: How will your margins be impacted once the competition really heats up?
  12. How will you use the funds you raise? Investors are more concerned than every that their money will be used for activities that most directly generate revenue and profit. They would rather hear you itemize how investment funds will go to hire three new salespeople and develop sales support literature than to complete R&D.
Originally appeared on PROFITguide.com