Tech Business Plan: Improve Your Chances of Funding for Your Technology Start-up or Business

Developing a Business Plan for a tech start-up or early stage business has specific challenges. You will need to cover the key sections of a business plan and address the 4 key areas an investor or funder will review. But you will also have to go a stage further to convince an investor that you have more than just an idea on paper.

Investors want to de-risk their investments and the more you can help them, the more likely you are going to see the colour of their money. Here are a few tips to help improve your chances of securing funding for a technology start-up or business:

1. Management: Make sure you have the right skill sets and can prove your capability to deliver. Investors like to see that the team in place (including any outsourced suppliers) have proven experience delivering the type of technology proposition you are seeking funding for. Knowledge of the market that you are addressing is also critical.

2. Specification & Costing - your investment proposal will be significantly de-risked if you can provide a functional and/or technical specification that has been validated and costed out for the initial phases of development. Summarise this in a product road map that shows milestones of design, prototyping, development, testing, and launch as well as longer term opportunities for growth. 

3. Execution Control - Investors will pay particular attention to your ability to control the development process. It is all to easy to find technology propositions that go over time and budget. Whatever your proportion of in-house and outsourced development show that you have control of the process of development and retention of any Intellectual Property (IP) during development.

4. Working Model / Illustration - If you don't have a fully functioning prototype then develop a mock-up that illustrates the proposition. Communicating the potential and functionality of your proposition is made a lot easier by visualisation.

6. Customers & Sales - If you have customers and sales you have a proof point that there is interest in your market offering which helps further de-risk the proposition in the eyes of an investor. Where this is not possible then see if you can seek letters of interest, letters of intent to purchase, or can demonstrate a significant following of your product or service via social media or within your specialist area of industry.

7. Investors - Choose them carefully and mind your language. Explore the right type of investors for you (hands on or off) and research them in some detail to try and understand their motivations and investment criteria. Once you have done that be careful not to alienate through the use of highly technical language or concepts that may confuse. Remember, investors are primarily interested in a commercial return for their investment - speak to them in a language they will understand.

Finally, if you are looking for inspiration, take a look at the 2013 Technology Pioneers recognised by the World Economic Forum. There are some well known previous winners (Mozilla, DropBox etc.) and both past and present inspire with their potential to change the way we live life or do business.

Good Luck!

Jon Hunt
Lead Consultant
The Business Plan Team
www.TheBusinessPlanTeam.co.uk

The Business Plan Team specialises in helping entrepreneurs, start-ups and growing businesses translate their vision into a coherent and executable business plan that can help secure funding and guide internal management. It provides a range of services from early feasibility studies through professional business plan development, to introductions to sources of funding. It is based just outside Oxford, UK.

If you are thinking of engaging someone to help you with developing your business plan take a look at our article on how to select a business plan consultant. 

10 Key Sections of Your Business Plan

Follow a typical structure for your business plan as it makes it easier for anyone evaluating it. Bankers and Investors see hundreds of plans and if they have to work out whether you have all the information it will likely end up in the reject pile.

The following sections should be in every business plan:

1. Executive Summary: This should be no more than two pages, compel the reader to read on, and be written last of all once all other sections are complete.

2. Company Background and Legal Entity: How and why the company came into existence, what products and /or services it offers, any track record of performance and its legal status.

3. The Market: This should include current statistics and trends on the market being addressed. It should also include an analysis of the customers in the market space - who they are, how and what they buy. It should culminate in the market opportunity facing the company. 

4. Company Product and/or Services: What are you proposing to bring to the market to meet the market opportunity?

5. Competitive Analysis: This should include an analysis of your direct and indirect competition and culminate in how your offer differentiates from that of your competitors in such a way that will gain you competitive advantage.

6. Sales & Marketing Plan: This identifies your target audience and details how you are going to reach it as well as giving a summary of your sales forecast.

7. Operations: This section shows how your business is going to deliver your product or service operationally - who does what and how.

8. Management Team: This is a key section that needs to show that you have the experience and skill-sets within your management team to deliver your proposition to the market.

9. Financial Plan: This is a summary of your financial projections, cash-flow highlights, breakeven, and investor proposition.

10. Appendices: This should include all the detail that you need to support your plan but would make the body of the plan too long if it were included. This will likely include detailed financial statements, management resumes, legal documents, letters of interest etc.

You should also remember that completeness and coherence are important. It won't matter how well written an investment plan if you have omitted to include how an investor will get a return (yes - it happens!) or your marketing plan doesn't address current trends in the market.

Finally, remember to emphasise the three critical elements - Market Need, Product to meet that need, and a Management Team able to deliver the plan.

Jon Hunt
Lead Consultant
The Business Plan Team
www.TheBusinessPlanTeam.co.uk

The Business Plan Team specialises in helping entrepreneurs, start-ups and growing businesses translate their vision into a coherent and executable business plan that can help secure funding and guide internal management. It provides a range of services from early feasibility studies through professional business plan development, to introductions to sources of funding. It is based in just outside Oxford, UK.

So You Want To Secure Investment?

Well, It all sounds straight forward enough - with an identified and receptive market, well targeted product, sound management team and a plan that conveys a commercially viable proposition who can fail? Well in reality, many people fail to tick all the boxes on the above. This can be through blind faith (someone will see the wonderful opportunity despite the missing bits), understanding (of what a sound management team looks like, for example), or cabin fever (been so long looking at the business that self-delusion has set in).

However, even assuming that a business can avoid these pitfalls, the routes to securing investment at the moment is challenging. There are so many businesses looking for funding that sources of debt or equity funding have a wide choice over which to spread their risk.

So how do you get your business proposition noticed? Well, here are a few ideas.

1. Be realistic and avoid extravagant claims - it may be that you are the next Green, Branson, or whoever but most people are not. Avoid claims you cannot substantiate. Small can be very profitable and attractive. Don't overstate your own position or the claim for your product or service.

2. Show a clear path to profitability and exit - investors like to see measurable milestones against which the progress of the business can be measured and funding drawn down. If you don't have financial or commercial awareness your business will fail without someone with executive authority to work along-side you.

3. Show clearly how you are going to use your funding - investors and banks do not like to see large pots of money allocated randomly across the board. They like to see how, specifically, the funding is going to be used and the anticipated outcomes of that funding.

4. Show a solid cash-flow and a good ROI. Worst case scenario is that the business fails to meet targets, runs out of cash and doesn't deliver anything back to those who have invested time and effort into its growth (p.s. that includes you). Be realistic, don't ask for too little money and if the Return on Investment is not good you should question why you are doing it... and asking others to back you.

5. Keep it Simple - don't claim world domination of a market in 3 years. Instead, make sure the core of the business is deliverable & profitable and also highlight potential upsides once the business is established.

The rest is down to you.  A backer needs to believe in you - and specifically that you can deliver. There is no point over-selling yourself - you will be found out. Tell it how it is and your vision of how you want it to be but make sure it is rooted in reality. Too many people over-promise and under-deliver - don't be one of them. It is easy to lose your credibility and very hard to get it back.

Jon Hunt

The Business Plan Team

http://www.thebusinessplanteam.co.uk/

Overcoming Start-Up Hurdles

Even when you have done your business plan and think all your ducks are in a row there will be another hurdle to overcome. This is the nature of the start-up, particularly if you are trying to push the boundaries and deliver innovation in your industry.

Your business plan will detail how you will execute on your opportunity. However, in the start-up environment the only constant is change and that throws up new hurdles and challenges to overcome. It is how you deal with these hurdles on a professional and personal level that will set you apart from your competitors and see your business succeed or fail. How can you do this?

1) Face the hard issues up front and head on. Don't let your passion for what you want to do blind you from reality. It is easy to side-step (or at worst ignore) the issues that may fundamentally affect your core business proposition especially if you don't have experience dealing with them. Get them out on the table early on - be honest with yourself and others - it will save enormous grief in the long term. If any issues are serious enough to affect your core business you should review your financial assumptions to see how they affect your forecast going foreward.

2) Don't be afraid to seek advice. No-one has the answers to all the questions that they will be faced with in starting a business. The art is to recognise your limitations and ask the right questions of the right people. Where you have weaknesses build a network of support (professional, informal, non-executive) and use it to overcome problems as they arise. You don't have to know everything, you just have to know where to find the information that will enable you to make the best decision. Budgeting in your business plan for the cost of periodic advice is wise at least on a contingency level.

3) Be ruthlessly professional. When you come across a hurdle deal with it thoroughly and without exception. It is a threat to your success and that of your business. If you don't it will likely come back and cause you problems in the long term. A number of relatively small un-addressed problems can drain the business and pull it down. Executing a business plan relies on the ability to deliver success amidst change. The way you deal with issues as they arise conveys a message to your employees, investors, and partners. If you deal with issues openly, professionally and ruthlessly you will gain their respect even if your business plan is not achieved in full.

Keep track of your progress against your business plan and forecast. Revise it as necessary when your original assumptions are challenged. In the process, face up to the difficult issues, seek advice and be ruthlessly professional.

Good Luck!

Jon Hunt
The Business Plan Team
http://www.thebusinessplanteam.co.uk/
The Business Plan Team specialises in helping entrepreneurs, start-ups and growing businesses translate their vision into a coherent and executable business plan that can help secure funding and guide internal management. It provides a range of services from early feasibility studies through professional business plan development, to introductions to sources of funding. It is based in just outside Oxford, UK.

Investor Down-Time: Your Business Planning Uptime!

As the festive season approaches investor thoughts go to planning their holidays and time away to spend their gains. This always signals a downturn in investor activity and is the ideal time to write that business plan, or fine tune the one on file, in readiness for their return in mid- to late January 2011. Of course, investor and general consumer confidence is still wavering and the news of Ireland's bail out will raise further questions of contagion and "who's next?".

The High street lenders also go quiet too at this time of year. They are also necessarily conservative on their lending policies in light of the economic conditions and further financial regulation. Any request for borrowing needs to be supported by a coherent and realistic business plan that takes into account the current economic climate.

But there is always appetite for investment in a good proposition that has a clear market opportunity and a team on board that will deliver. Make the most of the up-coming down-time and ensure you have a plan for 2011 that will position you well to accelerate out of recession.

Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk
tel: 0800 088 7806

Why is now a good time to do your business plan ?

Of course every business varies according to the need for a business plan, but for many start-ups or existing businesses looking to raise funds the summer months provides an opportunity to prepare. Why is the holiday season a good time for preparation ? Well, for many businesses the summer period means a tail off in business activity and the taking of annual leave.

For prospective start-ups this provides the opportunity to bring your ideas together outside the pressure of your existing work environment - step back from the day to day grind and plan your way ahead. We have many people coming to us who, under pressure of work, need help in putting a plan together. This is a chance to consider, evaluate and assess the feasibility of your ideas.

For existing businesses this time is also valuable to review an existing business plan, measure progress against it and examine potential future strategies. So often, this is difficult in the heat of "doing business" - take a little time now to gain perspective and re-orientate.

But perhaps the most important reason for developing your plan now is timing. For businesses looking to raise funds this is a quiet time of year. Many potential investors are enjoying the fruits of their labours abroad and are taking time out from reviewing investment opportunities. This applies as much to investor networks, VC funds as well as individual High Net Worth (HNW) investors. In my experience the investment community slows to a crawl before coming to life again in mid September and October.

So, whether you are a start-up or existing business, now is the ideal time to get your business plan and pitch documents together, re-work the presentations and get everything ready for the Autumn.

Good Luck !

Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk

How long and detailed should my business plan be ?

We often get asked by clients "how long" and "what level of detail" is required in a business plan. We generally give advice based on a number of factors including the target audience and the amount of funds being raised, but there are some equally important factors that you should consider.

In terms of length and detail there can be a significant difference between a SME business plan that seeks to raise £10,000 and a corporate business plan looking to raise £100m. The extent to which you need to provide detail on market and competitor research for a £100m plan may require a feasibility study that references current research that can in itself be costly. For a smaller business plan this level of detail, for example on competitor financial performance or data on your local market, simply may not be available in the public domain. Even if it were, the cost of procuring it may well outweigh the benefit that this analysis would bring. Remember, the main process of providing information is to reduce the risk profile of the investment.

But even the most detailed information on its own is not sufficient. In providing business plan services we come across many entrepreneurs who have invested considerable time and energy in developing the detail in the business plan, However, in many cases this adds up to little more than a collection of facts. Whatever level of funding you are seeking to start-up or expand your business, the business case for investment (either from a debt or equity perspective) needs to be made clearly. In other words, the argument for the business case is as important as the level of detail provided to support the business plan and needs to be made clearly in simple logical steps.

As important as the argument and detail is to provide a plan that acknowledges the interests of your target audience. Whether approaching angel investors, VCs or a bank, you need to show an appreciation for their investment or debt strategies and provide as much relevant information as possible to enable them to make a decision in your favour. Remember, these people get many plans across their desk on a daily basis. If they see one that simply lacks enough information to assess whether it has potential or not in terms of their own investment strategies the chances are that they will put it to one side where it will gather dust.

Finally, be concise. Irrespective of length and detail the reader should be able to grasp the key aspects of your business plan within 10 minutes . Only then are they likely to drill down into more detail.

Be concise, develop a sound argument and provide relevant supporting data. If only it was as easy as it sounds !

Jon Hunt
The Business Plan Team
Business Plan Services
www.TheBusinessPlanTeam.co.uk

Before you invest time and money in a business plan make sure you really have an opportunity!

The business opportunity (or proposition) is one of the fundamental elements of your business plan and as such it should be completed ahead of almost anything else. Some people include this as part of a feasibility study, others on its own, and many not at all! But if you are going to end up with a professional business plan you are going to need to address this early on.

But how is your opportunity best identified and supported? How can you ensure the business opportunity is compelling?

As I said in my last blog the easiest person to fool is you. You have every right to put your own money where your mouth on the basis of your "gut feel" but if you are looking for a bank or investor to do the same, your gut feel is not going to be enough to secure funding. As far as possible you need to put aside your motivations and personal conviction and become objective.

So, one of the best approaches to this core area of the business plan is to ensure that you derive the opportunity from objective independent market data where possible. The bottom line is that the more evidence that you have supporting your business opportunity, the more credible will be your business plan.

The first option to explore is freely available internet-based research and freely published information from industry & professional bodies. Even press releases may give you some top level market data. Make sure you cross reference sources and ensure they are reliable. There are also market research reports available from a number of sources that cover different industries and sectors. Be sure you know what you are buying before you start paying out hard cash.

Once you have some useful data then carry out some analysis and financial modelling to see how the opportunity stacks up under different scenarios. Once you have this complete you will be able to “qualify” your opportunity – define it and put it in the context of the market. In some cases where the market is large and diverse it is as important to say what your opportunity is not as much as what it is.

The next stage is to “quantify” the opportunity – establish the size of the opportunity. This can be done in several ways depending on the nature of the market (unit sales, demand for services, survey data) but is often based on a set of assumptions and should always include an estimated value in terms of revenue potential.

So, once you have a qualified and quantified opportunity all you need to do now is show how you are going to execute on this opportunity in the rest of your business plan.

Good Luck!

Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk

Do You Need To "Let Go" So Your Business Can Grow?

In providing business plan services we deal with many entrepreneurs across a wide range of industries and we are regularly inspired by their commitment and enthusiasm for their business whether it is a start-up or a growth business. We often see entrepreneurs with a clear vision for the business that will drive it forward but in the execution of a business plan this can also be the limiter of its potential if it means an inability to “let go”.

In these cases we see business opportunities that look sound and have great potential but are limited by the entrepreneur’s desire to make judgement calls in areas of business where they lack experience, knowledge or relevant skills. The critical need is for the entrepreneur to be able to "outsource" in these areas and draw on experience of others, trust their judgement and act on their advice if the business is to be a success.

In some cases the entrepreneur is unable to take that leap of faith and remains in their personal “comfort zone” of control where they rely on their own judgement and at best pay lip-service to advice. The result is often delay, prevarication and poor decision making.

Why is this? Well, firstly the easiest person to fool about your business is yourself. It is easy to stay within the bounds of the vision you have created and stick to your plan – opening it up to others exposes it to the risk of someone identifying weaknesses and putting your vision under threat. For someone who has already invested much time and energy in getting to where they are this can be a big risk.

In addition, the entrepreneur can often be reluctant to face up to their own limitations and cede some control of an area of business where someone else is better able to make judgements. For some people there is a reticence to trust another person and act on their advice – and there is no point in engaging with an expert if the advice is then disregarded in preference to one’s own assessment. This inability to “let go" can constrain, or even prevent, a business starting up or growing.

So how can you get to the point of "Letting go"? This not only requires some element of self-awareness but also an ability to have the confidence to acknowledge this to others, be able to source a better qualified person, and manage their input effectively. At the end of the day it is about being a good manager, as well as a good entrepreneur, which can be lost in the excitement and passion for a new business.

So, don't fool yourself ! A third party independent opinion (which doesn't need to be expensive and can sometimes be free or subsidised) can often help by putting your approach in a broader context that will make the decision making process effective and increase the chances of success. In our business we are open about how we think you should choose business plan services and measure ourselves regularly against these criteria. Whatever role or project you are going to outsource you should ensure you choose your counsel wisely and be clear on what basis you are prepared "let go".

Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk

What an investor or funding organisation looks for in your business plan

I was recently discussing with a friend the best way to describe how investors often review business plans following my post below on the "Three Cornerstones of a Business Plan" and we decided that another really helpful way of understanding what investors look for is the "4 P's" - "People", "Proposition", "Plan" & "Payback" - generally in that order of priority. If the venture does not provide a good match in all 4 areas investors will not part with their money - they will see the risk as too high !

So how do they review these criteria for investing ?

People
Qualified, experienced, people with a track record of success represent a far higher likelihood of a company succeeding than a team with little commercial experience, an unrealistic plan &/or no track record of setting up or managing a new business.

Proposition
If the team have the necessary credibility & the proposition is compelling (with unique selling points & the potential to generate a healthy profit in its target market), the venture will start to look like an appealing investment opportunity.

Plan
The quality & practicality of your 'Business Plan' is a critical document for investors. If your plan conveys (in easy to understand terms) what is compelling about your venture, why it will make money in a competitive market & that you have a seasoned team capable of building a profitable business, the company will be worthy of serious investor evaluation.

Payback
If the investor can see an exit strategy through which they can achieve a good payback over the short to medium term (a multiple return on their investment for their shareholding, such as a trade sale or stock market flotation), the likelihood of the venture securing an investment at terms that work for both parties, increases significantly.

Thanks to Grant for our discussions on this

Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk