How to create a business plan.

San Diego investor Ken Olson gives the following guidelines and cautions for preparing a business plan:

Create an outline.
- explain the risk and the return.
- restate the positive.
- mention the dangers and how you plan to deal with them.
- restate the uniqueness of your proposition.
- explain why the timing is right.
- say why the investor should believe in you.
- emphasize “this is real - we can win - the rewards are worth the effort and the risk.”

Prepare a summary.
- a description of the business.
-why is the product unique or special?
-what are you selling to whom?
- projections for revenue are?
-what are the main challenges?
-what are the temporary advantages?
-define the funding objectives.

Then edit the summary.
- what would raise eyebrows?
- what would smell strange?
- what wouldn’t be viewed as credible?
- why won’t it cost more and take longer?
- what big questions jump out?

Add an appendix, to include:
- competitive literature.
- articles from trade journals.
- resumes of key players.
- target customers.
- product specs, drawings, photos, patents.
- specify ownership and capitalization.

List the company’s objectives, long- and short-term. Include milestones for the next two years and milestones for the next three months. It’s critical to meet the latter.

Define the market opportunity.
- the need.
- the market.
- its size and growth rate.
- why you know this.

Don’t overstate the market. Segment it down to what you’re really talking about. Show where the market claims come from - footnote it.

Describe the team.
- management team.
- board of directors or board of advisors.
- the service providers, especially lawyers.
- the capital providers.

The reader will likely ask, “Who else is in? Are their interests aligned with mine?”

Don’t exaggerate the team’s capabilities. It helps to have experienced independent directors as part of the team. If lawyers and accountants are part of the team, they should provide their services for free for the first year or two so they can get your business when you’re bigger.

More on this tomorrow.