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How to create an investor-ready business plan

A business plan allows you to detail a strategic operating plan, define and execute your value to customers and verses others in the market, and develop a robust financial model that details what you need to accomplish in order to meet your projections. This is an extremely valuable process to go through and document to have.

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When I am introduced to an early-stage company – either to explore helping them as an advisor or as an investor – if I like the initial discussion, I ask for a formal business plan as follow up. Far too often I am then sent a PowerPoint presentation. The PPT is colorful, packed with infographics and does help illustrate the industry and the opportunity. But it is NOT a business plan.

As discussed in last week’s column, the first step to creating a business plan is to develop an executive summary. If you hope to grow your business, raise capital and/or hire partners and employees in the future, you’ll also want to take Step 2: creating a formal business plan.

A business plan allows you to detail a strategic operating plan, define and execute your value to customers and verses others in the market, and develop a robust financial model that details what you need to accomplish in order to meet your projections. This is an extremely valuable process to go through and document to have. You will find that a business plan is an invaluable tool if you want to bring on a business partner or get in sync with existing partners or employees, and if you ever want to raise money it will likely be required by a potential investor or for bank loan.

I believe the sections introduced below are the most valuable topics to cover in a business plan. Some may be more relevant to you specifically, and others not as much, so use this as a guide rather than a golden rule.

Cover Page and Table of Contents: It may seem simple, but these are important. The cover page should make it clear what the plan will discuss. The table of contents will allow anyone reading the plan to skip ahead to the sections most important to them.

Executive Summary: Your previously developed executive summary should lead off the business plan.

General Company Description: Discuss how the business was born, the current state of operations and where you want to go.

Objectives & Exit: What are your “end game” goals? Do you want to save enough money to retire? How about sell the business to a larger competitor? Pass along the business to your children or a protégé? It is important to honestly define what you want the outcome to be so that you can tailor the rest of your plan towards these ends. It is also important to set expectations for those working with you.

Management: Provide a detailed biography for all the key leaders involved (even if it is just you) and discuss how prior experience and success will help achieve current goals. You should also discuss any leadership positions that will need to be hired for as your business (and the plan) matures.

Product & Service Description: Provide details on what you provide to your customers. You should prioritize the most important revenue streams first, but all should be mentioned. You should also talk about how and how much you get paid for each product you sell or service you provide.

Market Analysis: This section should provide a detailed description about your specific market. Include objective details like total market size, growth trends and customer behavior statistics. You should also provide subjective analysis on where you fit in and where customer behavior is headed. This section should also detail your competition. You may also want to do a SWOT analysis for the company here (Strengths – Weaknesses – Opportunities – Threats).

Marketing Strategy: Detail your strategy to acquire and retain customers, and to provide an exceptional customer experience. Include overall goals as well as specific and tangible strategies like online advertising, public relations and original content creation.

Investment Opportunity: This section is only relevant if you need to raise money to fund your business, but this includes both external money (i.e. bank, venture capital or angel investor) and internal money (i.e. your savings or family/friends money). Detail how much money you need, the premium that an “investor” will get for providing this money and how/when it will be paid pack. Even if it’s your personal money, you want to make sure you have a solid plan and a strong return on investment.

Financials: This is a vital component of every business plan, and as such it needs it’s own column. This will also be covered in the near future. Even if you only develop an executive summary and don’t do the full business plan – make sure you develop detailed financials. You need to build a sophisticated model that discusses all your revenue and costs. You should not work backwards from your financial goals to build this model – that is a common and big mistake. You need to start with realistic business assumptions that match up to your plan and then work towards determining accurate final projections.

As with your executive summary, the process of creating this document is as important as the document itself. Once complete your business plan is a detailed capsulation of everything about you and your business. You can use it to recruit employees, add strategic partners in peripheral industries and raise money. Do not ignore its value for you personally (and your management team) though. Make sure your efforts are in line with the strategy you have mapped out.

If market conditions change, then your plan likely has to change too. Finally, your financial model and projections should be used as an important management tool. If your assumptions prove to be off, correct them and project how this will affect your business. If done well, this plan and your financial model will help you optimize your business and avoid problems as you grow. It will be your roadmap to success.

Hoyt David Morgan is an entrepreneur, angel investor and business strategy leader. He is an investor and/or adviser to a handful of exciting and high growth companies, and has been a part of several high-value exits. He is passionate about customer experience, smart business and helping innovative companies grow... and sailing.

Business Entrepreneur

Entrepreneurs: You’re unemployable in your own company, must define your role

(ENTREPRENEURS) Once you’ve built a successful business, it’s time to reexamine your role and determine where you fit in best.

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startup optimize to key metric

In my experience, most entrepreneurs are “accidental entrepreneurs.” They happened to be good at something, or they had a unique one-time opportunity to provide a product or service to the market. Then years later, they wake up one day and realize that they’re running a big business.

As an entrepreneur, one of the unintended consequences of building a business is that you become essentially unemployable within your own organization. After living the life of freedom, flexibility and responsibility of being a business owner, it’s difficult to go back to a “nine-to-five” job. This is why many entrepreneurs don’t enjoy staying with their businesses after they’ve sold to other organizations. Within months, they are frustrated that they’re no longer in control and the new owners are (in their opinion) making poor choices.

I see many situations where entrepreneurs are bad employees in their own organization. In fact, they may be the worst team members in the organization by having inconsistent schedules or poor communication skills and/or by inserting themselves into areas that aren’t useful. They can also have too much freedom and flexibility. And while most entrepreneurs insist on clearly defined roles, expectations and goals for all of their employees, they don’t always take the time to define their own roles, expectations and goals.

So why do entrepreneurs become bad employees?

I believe that it’s because they don’t have someone holding them accountable. Think about it: Who do they report to? They’re the owners. Part of the definition of “owner” is being accountable for everything but not accountable to anyone. Having a board of directors, a peer group or a business coach can provide some accountability for them, but another solution is to clarify their roles in the company and then abide by those definitions.

If you find yourself “unemployable” in your business, it’s time to define your role. It starts with outlining your main focus. Do you concentrate more on day-to-day execution or strategic, long-term decisions? Do you consider yourself an owner-operator or an investor?

Most entrepreneurs start as an owner-operator and put in countless hours of sweat equity doing whatever needs to be done to build the business. But over time they reinvest earnings in the business and hire a management team so they can step back and take on a more strategic role. Sometimes it’s not clear when the entrepreneur makes that transition, which can lead to challenges for the entire team.

Focus: Strategic Overview

If your main role is in dealing with long-term, strategic decisions, then it’s important for you to communicate that to the team. Clearly delegate tactical roles and responsibilities to the leadership team.

I’ve seen many instances where owners do more harm than good by haphazardly injecting themselves into tactical decisions that should be handled by the leadership team. Instead of jumping in when they see something they disagree with, I encourage owners to actively “coach” their leadership team to be better leaders. The approach of micromanaging every decision of others will frustrate everyone and lead to an underperforming organization.

I have one client that decided his role was to build strategic relationships and work on a new service offering. He was confident that his leadership team could handle the day-to-day operations of the business. Over time he discovered that being in the office every day was actually a distraction for him and his team. So, he moved his office out of the building.

To maintain his ownership responsibilities to the company, he scheduled one afternoon a week to physically be in the office. Team members knew they could schedule time with him during that weekly window when he temporarily set up office space in a conference room. Not having a permanent office in the building also sent a message to the team that he was not responsible for day-to-day decisions. Sometimes not having an office in the building is better than the team seeing the owner’s office empty on a regular basis.

Focus: Day-to-Day Execution

If you decide that your role is in the day-to-day execution of the business, then clearly define your role in the same way you would define any other team member role. Are you in charge of marketing? Sales? Finance? Operations? Technology? R&D? Or, some combination of multiple roles? Take the time to outline your responsibilities and communicate them to the team.

Just as you define your role, also define what you are NOT going to do and who is responsible for those areas. After all, sectioning off some tactical work does not abdicate you from long-term decision-making. You must set aside time to make the long-term, strategic decisions of the company.

Being an entrepreneur sounds glamorous to those that haven’t done it, but ultimately, the owner is accountable for everything that happens in their organization. It can be quite sobering. And while some entrepreneurs have a delusional belief that they can do everything in a company, it’s not a path to long-term success.

All entrepreneurs have to decide what their role should be in their organization – even if it means that they’re contributing to their “unemployable” status.

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Business Entrepreneur

Startups love pondering inclusion, yet half have no women in leadership

(STARTUPS) Tech startups are a huge part of discussing diversity and inclusion, but something as simple as hiring women in management somehow remains elusive.

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women in leadership lean out

According to the Silicon Valley Bank’s annual report, over half of startups have no women on their leadership team. None.

As hard as this fact is to believe, it is also hardly breaking news. Organizations who have surveyed startups and technology companies for the past several years have seen that long-standing trends that disadvantage women and other genders in the tech space are still at play.

Like many other gendered debates about the treatment of women and other minority workers, this problem is seemingly a Catch 22 or a chicken and egg situation. Critics will continue to argue that the reason ladies aren’t in leadership roles is because they don’t have innate leadership qualities or that once their non-male employees have proven themselves, then they will start getting the resources and promotions that they say that they desire.

Like many other myths about women in the workforce, these beliefs only serve to reinforce the status quo by transferring the responsibility for these frustrating conditions onto the marginalized party.

These beliefs are busted not only because they’re tired gender clichés, but because we have hard data that proves the financial and cultural benefit in long-term effects of women leadership in tech.

However, for all the discussion of diversity initiatives, the likelihood of traditional funding going to women-led startups is still small.

For now, startups with women in leadership roles were more likely to get their funding from investing teams that were also led by females. Wouldn’t it be great if other investors began to not only understand that in 2019 it’s imperative that a company’s leadership reflect the diversity of the employees that comprise it? That workers will be more motivated, feel more understood, and have greater buy-in when they identify with their management?

Empowering women is how more get involved in tech. Diversity of leadership helps organizations thrive. And if something as simple as binary gender diversity is such a tremendous challenge, all other diversity issues are still (unfortunately) a large mountain to climb.

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Business Entrepreneur

C. J. Walker: America’s first self-made millionaire was a black orphan

(ENTREPRENEUR) When you think of our nation’s first self-made millionaire, C. J. Walker is probably not the picture that may come to mind, but this generous genius made it to the top, breaking every glass ceiling possible.

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These days, it seems like Oprah gets all the bragging rights. I don’t think it’s quite fair that some car-gifting mogul gets to bask in the glory of a path that was paved a century ago. **No offense, O Great Winfrey. You’re cool, too. Please don’t take my Altima back.**

It’s time to pay our respects to the first female self-made millionaire in America. My friends, I’d like to introduce you to your new idol, Sarah Breedlove, better known as Madam C. J. Walker.

This gal had just about every card in the deck working against her. Both of her parents and all of her siblings before her were born into slavery. Her mother died when she was five, and her father passed the following year. Orphaned, she lived with her older sister until she married at age 14.

As if that wasn’t enough, a mere two years after her first child was born, Sarah’s husband died. I mean, she just couldn’t catch a break. Unfortunate event after unfortunate event. She then moved to St. Louis to live with her brothers, working as a washer woman for a mere dollar a day. Classic rags-to-riches stuff.

Her brothers worked at a local barber shop, and she wound up learning a thing or two about hair care while sharing a home with them. This planted the seed that would lead to her working with Annie Turnbo Malone, selling African American hair care products. As she learned more about hair, she must have realized she had a knack for it, because she decided to roll up her sleeves and put some indie elbow grease in.

After moving to Denver to work on her own products, she married Charles Walker, who provided the advertising know-how that would help her venture succeed. She adopted the name C. J. Walker and began traveling and training women in the fields of beauty and sales.

Eleven years later, in 1917, she called her first convention of so-called “beauty culturists” in Philadelphia. Here, she rewarded her top agents as well as those who were the most philanthropic towards local charities.

What I love about C. J. is that as her business grew, so did her awareness of the social climate around her. She never forgot where she came from, never hesitated to give back, and never gave up. She lectured on topics such as women’s independence, helping educate other black women in the ways of business.

Upon her death, it was determined that she was the wealthiest African-American woman in the country. In true C. J. style, she left two-thirds of her future profits to charity.

If I ever get mega-famous, I’m doing it the C. J. Walker way: Keep a level head, educate and help others, and put your community first.

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