If you don’t, it’s like trying to drive to an unknown destination without a road map. It’s highly unlikely you’ll get there in one piece.
The most savvy business plan outline I’ve ever seen was constructed by the guys over at Sequoia Capital. They are world class private equity investors that have distilled business plans down to an art. Read on to find out what they recommend.
First, these are the characteristics they look for before they invest in a business. Whether or not you intend to find outside funding, take heed. These guys are experts and they have a thing or two to teach the rest of us.
Clarity of Purpose
You need to rationalize why the world needs your company. What is it you do well and better than the competition. Answer the question: “Why should a customer buy from you instead of your competition?” The more unique, the more powerful the business proposition. Summarize your purpose in one crisp sentence.
Launch your business into a large market that is growing. If you don’t, you’ll only be playing musical market share with your competition which is aggravating, fruitless and very, very expensive. Sequoia looks for markets that are at least $1 billion in size. Whew, that’s big time.
Now here’s a concept; find a target audience that has the discretionary cash flow to pay a premium for the product or service you are offering. If your product is unique enough and you present it in a compelling way to your audience, they’ll buy and come back.
This is not the first time you’ve heard this. The simpler the product, the easier it will be for a customer to know when they should buy from you. You may be able to offer many things, but don’t confuse the potential buyer. Do what Honda Motor Company did when they cracked the US market for automobiles in the 1970s—find an under-served niche, then over deliver.
Honda made compact cars that didn’t fall apart for baby boomers just entering the car market for the first time. They created a high-quality, fuel efficient engine the US automakers didn’t care about. Honda buyers were loyal and over the next thirty years, made Honda the #1 automaker in the world.
Focus. Don’t try to be all things to all people in hopes you’ll get some customers. Your customers will respond to your value proposition. You don’t have to serve everyone to make money. Serve those who need you the most, and serve them better than anyone else does. You’ll make a fortune.
Sequoia says “pick the one thing that is of burning importance to the customer then delight them with a compelling solution.” For example, we try to do that for you with our Best Small Biz Help training videos: Only what you need to know to make more money, available 24/7. Learn it, then apply it right away.
Unique matters. Don’t follow the crowd. Find a new way to solve a problem add value or relieve pain. “Create novel solutions and outwit the competition.” You’ll find new sources of value you can deliver to your customers.
The team determines the company’s destiny. Kick-butt people deliver kick-butt results. Don’t partner with friends unless they are the best at what they do.
You should be nimble in responding to changes in customer preferences or opportunities to solve problems faster and more effectively. Even being able to turn around a solution faster than your competition is comparative advantage. Be the bee with the bear. Beat the big guys. Fly fast and under the radar.
Spend only on what is critical. Leave your ego at the door. Bootstrap your idea until you can prove it works. The only time a bank or investor wants to give you money is when you don’t need it.
Start with only a little money. It forces discipline and reduces downside risk. You don’t have as much leverage to make foolish decisions. A large market with your customers dying to buy your solution brilliantly executed requires very little capital. Let the marketplace fuel your idea.
Make investors beg to invest. It’s the best feeling in the world.
This article was originally published by Best Small Biz Help
Published: November 21, 2013