They tricked me! NWEN told me I only had to answer five questions, but I essentially wrote a business plan. Just five questions, one page each, but each question had questions inside it. For "Describe the market in terms of characteristics and size," I ended up doing market research to get very precise data, then I analyzed the data to narrow in on exactly my target market. And the innocent looking question "What will be the funding requirements to grow?" caused me to create a cash flow spreadsheet to be able to provide an answer.
In the process, I ended up doing two complete rewrites. On Tuesday, I sent out what was basically the best business plan I'd ever written to a bunch of my advisors. The feedback came back that it needed a ton of rework. I did a complete top-to-bottom rewrite and sent out a new version on Thursday which was a lot better -- the new best business plan I'd ever written. Back came feedback. Yes, it was better, but it was still way off from what it needed to be. So on Friday and over the weekend (thanks to NWEN extending the deadline), I rewrote it once again and on Monday I sent out what was now clearly the best business plan I've ever written. I hope it's good enough!
I used Word to do a comparison of the first and third versions of the plan. In case it's not clear, red indicates text which changed between the first and third versions of the plan.
Despite all the red, there's a lot of similarity between the versions -- after all, they're describing the same business. But the way in which they say it changed completely.
Here are some of the things that I've learned.
Start with a hook. I decided to start every page with a hook, a sentence or two that summarizes the page. In essence, put the summary at the top, not the bottom. Your readers might not get to the bottom.
This isn't a literature contest. I had some writing that I was really proud of. It was eloquent and had a great feeling to it. Save that for your novel. I tossed almost all of it and now I have a lot of short to-the-point paragraphs and bullet points.
Stories are OK, but keep them short. Real world stories that convey customer pain that you will be addressing is a good thing. On the first page, my hook is a story that illustrates the customer pain I aim to solve. This is the only place where I kept some of the great prose I'd written.
Answer all the questions. If they've asked a question, don't make them read between the lines. Provide the answer as directly as possible. What's the value proposition? How does your business scale? What are you actually doing?
Don't answer all the questions. I like to be complete, but if you're generating your own questions, there are lots that just don't need to be answered. I removed a ton of information that was answering unasked and, probably, unimportant questions. Working through and figuring out those answers wasn't a wasted exercise -- I still know the answers if I get asked them.
Forget technology. This one was particularly hard for me. My first version had half a page on technology and more in my bio. Investors want to know that the technology is doable and that the team has the technological expertise. They don't care about the actual technology. My final version has almost nothing about technology, even in my bio.
Scaling is about your business, not your technology. Following on to the last point, investors will assume that if your business is successful, then your technology will scale (they may want details on this during due diligence). But, at the beginning, they want to know if the business is going to grow through greater market penetration, opening up additional markets, selling more expensive versions, selling additional products, etc.
Get real numbers. I think every single talk that I've been to about business plans or pitches trots out the line that you can't just say that you'll get 1% of a billion dollar market. You'll hear investors talk about the addressable market over and over again. It took me way too long to internalize that, but, when I did, it took me a lot less time to get real numbers than I thought it would.
Use real numbers. Investors will know if you're hand waving when you say you need an $X million investment with no explanation. Cash flow projections aren't that hard. Figure out your assumptions and be ready to talk about them, but get some real numbers.
Be positive. Every business plan is, in some sense, a guess. You don't have to say "We plan to..." or "We hope to..." or "We don't know ...." Everytime you do this, your readers view you as less positive, less certain, less able to be successful. They know it's all a plan and that there are many things that you don't know yet, so don't hit them over the head with it. Personally, I tend to be a bit too honest about my deficiences (for example, many people have heard me say "I suck at marketing"). The business plan isn't the place for that.
Don't be afraid to ask for help. If you don't ask, nobody will help you. I've said it before and I'll say it again: I am very appreciative of my advisors.