Too many entrepreneurs limit their opportunities by writing weak business plans. Great ideas are common; much rarer are businesses with the people and products to enter a market and take share or dominate. Only 1 % to 2% of all business plans presented to angels or VCs receive funding.
Companies don’t build themselves. People build companies. Ultimately, an angel investor is selecting a management team. A great team can make even a mediocre company achieve reasonable success, whereas a company with the best technology will not be successful with a mediocre management team.
Some of the key factors of a business plan that improve the success potential of a startup are shown below.
Success Factors
Factor
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Description
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Management
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• Years of operational experience in a similar industry
• Startup experience with a similar business model that led to a successful exit
• Willing to be coached
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Market
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• Addressable market that is fragmented and growing
• Customers already lined up
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Technology
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• Patent protected
• Creates strategically defensible position
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Competition
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• Shows that company has some competition, regardless of product or service
• Clearly summarizes competitors and key threats
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Business model
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• Similar to one or more used by successful companies
• Demonstrates that customers have real pain that product or service solves (“must have” vs. “nice to have”)
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Exit strategy
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• Identifies target acquirers
• Shows deal history of acquisitions and IPOs with key financial multiples and ratios
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Risks
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• Objectively assesses risks and describes actions to reduce, mitigate or eliminate them
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Financial projections
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• Shows conservative, expected and targeted figures with assumptions for each
• Focuses on cash flow and profitability
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Capital structure
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• Detailed
• Preferrably shows ownership by founders and only small numbers of unprofessional or inexperienced investors
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Investment desired
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• Places an offer on the table - indicates valuation
• Shows uses of funds in detail
• Details expected future rounds and uses of funds from each round
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