They’ll want a 35 to 40% return for mature companies-up to 60% for less mature ventures. To figure out how much to invest in your offering, investors calculate your company’s value on the basis of results expected five years after they invest. Don’t skimp on the numbers, get overly optimistic about them, or blanket your plan with a smog of figures covering every possible variation. Give realistic, five-year forecasts of profitability. Venture capital firms usually want to cash out in three to seven years professional investors look for a large capital appreciation. Show when and how investors may liquidate their holdings. From there, assemble a credible sales plan and project plant and staffing needs.Ĭashing out. Project realistic growth rates at which customers will accept-and buy-your offering.State how you will continually innovate to survive. Show the nature of the industry e.g., franchised weight-loss clinics might grow fast, but they can decline rapidly when competition stiffens.Remember: Bigger isn’t necessarily better e.g., saving $10,000 per year in chemical use may mean a lot to a modest company but not to a Du Pont. Specify the number of potential customers, the size of their businesses, and the size that is most appropriate to your offering.Now use data to support your assertions about potential growth rates of sales and profits. Use “reference installations”-statements from initial users, sales reps, distributors, and would-be customers who have seen the product demonstrated.ĭocument your claims.This lets you determine whether potential buyers even exist. Offer the product to a few potential customers at a deep discount if they pay part of the production cost.Let some customers use a product prototype then get written evaluations.Provide evidence that customers are intrigued by your claims about the benefits of the new product or service: To make a convincing case that a substantial market exists, establish market interest and document your claims.Įstablish market interest. The Idea in Practice Emphasize Market Needs The problem is that, unless you’ve got your own capital to finance your venture, the only way you’ll get the funding you need is to satisfy the market’s and investors’ needs. A compelling plan accurately reflects the viewpoints of your three key constituencies: the market, potential investors, and the producer (the entrepreneur or inventor of the new offering).īut too many plans are written solely from the perspective of the producer. You’ve got a great idea for a new product or service-how can you persuade investors to support it? Flashy PowerPoint slides aren’t enough you need a winning business plan.
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