Continuing from my post a few weeks ago, I wanted to comment on the elements of some of the strongest business plans I have seen in competitions:
Having a clear route to market: This involves identifying a tactical plan, not just a strategic plan, for how a venture will access its target markets. This involves an understanding of the potential customer’s demographics and behavior rather than using only the market size to estimate the number of potential customers and the eventual size of the venture.
Working with a knowledgeable team of advisors and mentors: Many first-time entrepreneurs face questions about their credibility or knowledge about a particular market or aspect of business operations. By finding industry and management veterans who are willing to share a bit of their time to help you navigate challenges, you can address concerns about how you will deal with problems that might arise. In addition, by including a list of current advisors, you can show that you are proactive in anticipating challenges.
Making sure to have a thorough understanding of the competition, particularly how it will react to new entrants: Naming your competitors and explaining why their product is inferior to yours is not enough. Competitors who are already on the market may have resources that allow them to engage in a price war or roll out a product similar to yours more quickly, thus undercutting your customer base. You should also consider companies that can easily re-purpose their production or sales force into your market. While intellectual property can offer some defense against infringing competitors, it can be prohibitively expensive to defend.
Building a profitable business model based on realistic predictions and market entry: Think about how the growth of your customer base may be influenced by the growth of your sales team and different phases of adoption of your technology by customers in addition to how much your customers would be willing to pay for your product and how many units you will sell. Remember, also, that pricing is both an art and a science. One of my favorite books on the topic is The Strategy and Tactics of Pricing: A Guide to Growing More Profitably by Thomas Nagle and John Hogan.
Mitigating risk: We all know that start-up ventures are risky. By enumerating possible risk factors and briefly explaining how you plan to address them, you show that you are aware of problems that may arise and add depth to your analysis. Often, the section on risk mitigation is included at the end of the business plan.