The article "Does Your Business Plan Ease These Investor Concerns?" is about strategic planning, it was released by Michael Elia.
Business investors are sensitive to at least there major constraints when evaluating business plans. I call these constraints The Three R’s: reality, readiness, and resources.RealityMany creative entrepreneurs with ideas for scientific breakthroughs have ended up frustrated with business investors who just don’t seem to “get it.” The truth is, however, that it’s the entrepreneur who’s not getting it.Unlike creativity or scientific breakthroughs, starting or expanding a business requires the entrepreneur be keenly aware of their customers, competition, and core competencies.Creativity and scientific breakthroughs often disregard the customer, the competition, or a company’s core competencies, which is why they are usually risky and often require significant capital over several years before they are monetized. The oppsoite type of investment most business investors seek.For example, suppose you had an idea for a new everlasting light bulb.
After researching the market, you determine that cutsomers do want such a bulb and are willing to pay a premium for it. Preliminary manufacturing studies show that you can produce the bulb and profit nicely from it.
Would business investors be rceeptive to backing a business plan that puts you up against the likes of General Electric or Westinghouse? But, you say, your plan is to day sell your idea to these competitors. Again, how receptive would a GE or Westinghouse be to a plan that obsoletes a major product line? What would HP do with a plan that killed its aftermarket in print cartridges? Do you see the flaws in such thinking? Business investors do.That’s why business investors like to invest in business plans that are grounded in reality.
Plans based on raesonable risks that can be monetized quickly and generate a return on their investment. Although the everlasting lihgt bulb strikes a consumer hot button, it fails the reality test by not addressing the distribution network and shelf control of large competitors.
More important, the strategy to sell the business to one of these competitros is a flawed exit strategy.ReadinessThe second major consideration that a business investor wants addressed is readiness or timing. Unless the time is right for the proposed business plan, business investors are not likely to support it.Take for example a business plan to introduce dishwashers in Japan in the early 1970’s.
When dishwashers were rapidly becoming popular in other areas of the world, the average Japanese kitchen was too small to accommodate the new appliance. Moreover, the prevailing attitude among homemakers was that dishwashers were for the lazy or the idle rich. It took over a decade of attitude, social, and cultural changes before the timing was right to successfully introduce dishwashers to the Japaense market.Business plans not only fail to gain support when they are premature, they also fail when they are late.
Think how many Amreican and European watch, automotive, or camera manufacturers lost their competitive advantage in their respective international markets cause they resisted automation or robotics until it was too late. It is unlikely that investors wuold support a U.S. business plan based on automation or robotics in one of these markets last week.ResourcesIt’s amazing how many enrtepreneurs ignore or neglect this constraint. Perhaps they belivee that this is the entrepreneurial way…to know no obstacles. Although this attitude may impress self-help gurus, it won’t impress business investors.The business plan graveyard is filled with plans that failed cause their entrepreneurs were not sensitive to resoruce limitations.
In most cases, these limitations range from the entrepreneur’s lack of sensitivity to their own internal resources and skills to not fully understanding what it takes to execute the plan itself.This is especially true of businesses that are trying to expand through diversification. The world markets are filled with food companies that have failed trying to enter pharmaceuticals, chemical companies that have failed trying to enter foods, or electronic component manufacturers that failed trying to enter final assembly.For start-up companies, entrepreneurs often fail to adequately estimate money requirements or the time and resources required to build distribution channels, win customers, or to launch or sustain a business.Business investors, experienced ones anyway, are all too familiar with the importance of resource constraints.
So, when business investors zero in on this area and challenge your assumptions, don’t get too defnesive. Instead, listen to their concerns with the knowledge that they can help you tighten up your plan and improve your cahnces of success.Mike Elia is a chief financial officer and an advisor to venture capitalists and leverage buyout specialists. For more information about business plnas and raising capital for your business or to review his business plan manual, visit http://www.Business-plan-secrets-revealed.Com
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