From the 2007 Entrepreneur Week Resource Guide

There are two different documents referred to as "business plans." The only one we'll discuss here is fundamentally a marketing piece, pitching your company to an external audience—most commonly to potential investors. It's not really a plan at all, just as elevator pitches don't usually take place in elevators (which is a relief for those of us in Waterloo, where elevator rides tend to be rare and brief).

Viewed from 50,000 feet, business plans are pretty straightforward. You discuss market opportunity, technology, go-to-market strategy, competition, your management team, and a few other topics. Add some financial forecasts with accelerating sales leading to significant profits. It sounds simple, so where do things go wrong?

One of the big pitfalls, especially for first-time entrepreneurs, is not having a good enough grasp of business realities to distinguish optimism from delusion. Optimism is necessary, but I've had startup entrepreneurs—bright people and very good at the things they do best—tell me in all seriousness that they were going to go from no revenue (and no product, for that matter) to annual sales of $830 million in five years, and that this was a conservative estimate. I've seen an unknown startup forecast that 80 percent of its revenue would be going straight to the bottom line, with sales and marketing expenses equal to five percent of sales. I've seen revenue forecasts that would require the company to close five sales a day, every day through the year (with a direct sales model that requires relationship building and with no sales team in place except the CEO).

Maybe you don't see why these projections are unreasonable. They apparently seemed just fine to the entrepreneurs, and there's a good chance that you'll have something equally implausible in your plan. This is where you need to make use of expertise available to you. Show outlines of your plan to people with sales, marketing, finance, and technology backgrounds. You're probably stronger in one area than in the others and you'll want to have your plan tested from all angles. (You're welcome to contact me at gary@communitech.ca—we have a team of people with this kind of expertise available to you at no cost.)

Some quick tips:

• Don't underestimate the challenge: You're starting at (or near) zero. No customers, no name recognition, probably no sales team other than you. Potential customers will worry about how long you'll be in business, and every one of them has so far managed to run their business or live their life without your product. Inertia is one of your biggest competitors. You're going to grow one customer at a time, one sale at a time. Map out how that's going to happen.
  
  
• Don't be evasive about your competition: Unless you're dealing with very trusting or naive investors, you have two options for how they find out about your competitors. They can hear about it from you, or they'll find out for themselves. Guess which is better for your credibility.
  
  
• Choose an initial target market and product: Listing a bunch of potential applications for your technology just makes you look like you're grasping at straws. It has "come back to us in six months" written all over it. Yes, it might work if you're looking for funding to commercialize research, but investors are looking for a business opportunity. Make a decision and build a business case around it. You'll be lucky to be successful in one market. You need to focus your efforts.
  
  
• Identify your first five target customers: By name. You can't make contact with some ethereal market segment. Bring it down to earth. How are you going to reach them? What will you say? Why will they care? Get customer input early. It's much harder to create winning products working in isolation in your basement.
  
  
• Get to the point: You're not going to turn an unattractive investment opportunity into a winner with rhetorical skill but you might bury a good opportunity under so much verbiage that your message is lost. This isn't a term paper or a short story, and it's not about showing off your mastery of colourful adverbs or letting everyone know you've read a popular business book. Identify your product and market in your very first sentence.
  
  
• Make your key selling points stand out: They need to be clearly written and then you can use every typographical trick in the book to make them jump out, such as short paragraphs, bullet points, bold or underlined text, and descriptive subheadings.
  
  
• The purpose of graphics is not to make your plan "look professional": The rules for charts, photos, drawings, and so on, are the same as the rules for text. If it helps communicate your key selling points, put it in. If not, it's just a distraction.