It has never been easier to start a business.  For $20 you can buy a domain name and your first month of web hosting, and you will be up and running with the next Facebook by next weekend right?  20 years ago the first step in starting a business was writing a solid business plan, but today many web entrepreneurs take the Lean Startup methodology and simply start experimenting from day 1.  Although I highly recommend using the methods discussed in the Lean Startup to launch your web-based business, there are 2 reasons it is still important to develop a business plan for your website or application.

Defining The Market Potential

 Writing a business plan helps an entrepreneur define whether or not there is a potential market for their product or service.  Just because you and your high school buddies came up with a “great” idea for a website at the bar last night, does not mean that anyone is actually looking for your solution.  When you are building a website, Google makes defining your market potential incredibly easy with the Google Adwords Keyword Tool.

Let’s say you want to create a web application that teaches someone how to play the kazoo.  The first question is whether or not anyone is looking to learn how to play the kazoo.  Simply visit the Google Adwords Keyword Tool and type in “How to Play the Kazoo.”  As you can see below the keyword tool shows there are 1,600 monthly searches on Google for that keyword phrase.

Now the question is whether or not 1,600 potential monthly searches is enough to start/sustain your business.

In comparison, “How to Play the Guitar” receives over 1.2 million monthly searches on Google.  As you write a business plan for your website make sure to use the free data available to you with the Google Adwords Keyword Tool to define your market potential.

Defining The Financial Potential

The biggest danger of jumping into a business without writing a business plan is that you may simply be wasting your time.  You need to determine that the business has the potential to be a financial success someday; otherwise, you might as well spend your time relaxing on the beach instead of wasting it on a business that can never turn a profit.  Just because there is a market that wants your product or service, that does not necessarily mean you can provide that product or service profitably.  For example, you might be able to create a website to sell paper weights, but if it costs $10 to ship the orders, and customers are not willing to pay more than $10 for the product, then it doesn’t matter how many you sell the business has no potential.  Working through the business plan process will help you avoid investing months or years of your life in a business that ultimately can’t be sustainable.

Although it is easy to just set up a website and start marketing your new product or service, a simple business plan can help keep you from investing too much time into a business that will never go anywhere.

About the Author:  Adam Hoeksema is the Founder of ExecutivePlan which helps entrepreneurs write business plan executive summaries in order to raise capital.  Adam is also the author of How to Write a Powerful Business Plan Executive Summary.

A recent client was advised by his immigration attorney to prepare a business plan as part of his EB-1 petition.  An EB-1 is a category of immigration application that is specifically used for aliens with extraordinary ability who wish to apply for a Green Card.  Usually these applications are submitted by employers, but highly qualified workers are able to self-petition.

EB-1 petitions are for entertainers, athletes, business people and others who have extraordinary ability.  In the case of business people, our client’s attorney believed that a business plan would support the claim that the applicant would be working in the U.S. and had a plan to be successful.  The int is that getting a Green Card is a big challenge no matter who you are and anything you can do to improve your chances of success by enhancing the application will help.

BizPlanIt can write a business plan that will improve your chances of getting your Green Card by distinguishing you and your skills through the use of a business plan.  For more information on this topic visit our website (www.bizplanit.com) or these other helpful sites – www.immihelp.com, www.workpermit.com, and www.foreignborn.com.

As an entrepreneur you have probably been told that you need to be prepared at any moment to recite your elevator pitch.  The problem is that one elevator pitch is not right for every situation.  In fact, there are at least 4 situations that might require a different version of your pitch.

1.  The Classic Elevator Pitch – The idea of an elevator speech is your 1 minute pitch to Bill Gates if you happened to have him alone in an elevator.  Bill asks you what you do, and you have 10 floors to explain to him why your business deserves a small $10 million dollar investment from him.

2.  The Dinner Party Pitch - Let’s say you are at a dinner party and everyone is taking turns explaining what they do for a living.  This is clearly not the time or place to pitch your business as a potential investment.  You simply need a couple sentences to explain your business as simply as possible.

3.  The Board Room Presentation – You might be asked to pitch your company in front of a group of potential investors.  In this situation you may even have a pitch deck with a handful of slides to present your unique selling proposition, market potential, management team and financial projections.  Fortunately you will typically be given time to prepare in advance for this type of pitch.

4.  The Networking Event Pitch – Entrepreneurs who understand networking know that networking is about the other person.  You should be asking questions and making connections, not pitching your products or services.  But you will probably be asked what you do at some point, so it is important to be ready with a brief explanation that may intrigue the other person to ask more questions.

You might think you have an elevator pitch ready, but you really need to think about how your pitch should vary in different situations.  You don’t want to waste an opportunity with a potential investor or client, but you also don’t want to embarrass your spouse at your next Holiday party by announcing your company’s core competencies, market potential, and business model.  So take half an hour to sit down and perfect your elevator speech for these four situations before it is too late.

Adam Hoeksema is the Founder of ExecutivePlan.  ExecutivePlan helps entrepreneurs write more powerful business plan executive summaries in order to raise capital.  The ExecutivePlan Executive Summary Toolkit provides entrepreneurs with executive summary templates, samples, and a detailed ebook on how to write an executive summary.

When I first started my business plan consulting firm I hired a good friend of mine to design a brochure and other marketing collateral. The project consumed a good amount of my time over the course of a month. While it turned out to be much more effort than I had anticipated, working with my friend – let’s call him Steve for this discussion – was overall a great experience. I was very pleased with both the end result of the materials as well as the process Steve and his team took me through.

After completing the process, I began passing out my shiny four-color business cards and brochures to anyone and everyone I met during the course of my day.  From attorneys to CPA’s to venture capitalists to entrepreneurs, I never passed up the opportunity to hand out my brochures. I must have put brochures in the hands of more than 1,000 people throughout Arizona and Southern California.

With all of those brochures floating around the southwest United States, I figured my phone was sure to start ringing and probably never stop. Well, as you may guess the phone rang rarely over those first few months.

So, what did I do? I promptly put a call into my buddy Steve to ask him what was wrong with the brochures. Was the content he wrote not as persuasive as I thought? Were the images and colors just not impressive enough? Maybe we should have doubled the number of pages. It had to be the brochure. Something must have been wrong with the brochure. If the brochure was doing its job my phone would certainly be ringing, wouldn’t it?

Ok, this story never happened.  Well, I did hire a friend of mine to design a brochure.  But the part about me blaming Steve and the brochure he designed never happened.  I realized very quickly that it was not the brochures responsibility to sell my business plan services – it was my responsibility.  The brochure was nothing more than an introduction, a way to expose myself to people I wanted to meet. It was up to me to develop a relationship with a prospect, convey the value I was bringing to the table, and convince them that I was the right person to help them achieve their goals.

Why do I tell you this long winded story? Because, we speak with entrepreneurs every day who believe that an outstanding business plan is the singular key to funding success. With an outstanding business plan in hand money is sure to follow.

However, this is often not the case. Similar to the brochure for my company, a business plan targeted at investors is primarily a communications tool.  It is a way to expose your business model and value proposition to investors. It provides investors comfort that you have at a minimum done your homework.

If your business plan results in a meeting with an investor it has done its job. That is its primary responsibility and some might say only job – to help you get a meeting.  Everything from that meeting on is up to you and your ability to find a willing investor and convince them to part with their money.

So, before you throw your business plan (and most likely your business plan consultant) under the bus, be sure to remember that it is you, not your business plan, that will ultimately determine if you are successful at raising capital.

Need a second, third or fourth opinion about the quality of your business plan?  Then schedule a FREE 30-Minute Telephone Consultation with a member of our team today!

The Best Way To Grow Your Business Into A Basketball is by Having The Right Investors And The Right Team!

This is the last article in our series where we discuss the six very important truths that all entrepreneurial-minded scientists and/or inventors should understand in their quest to turn an idea or invention into a home-run multimillion dollar business.  Click Here to check out all six articles.

An Entrepreneur Has To Select His or Her Mindset To Grow The Business

When push comes to shove, it boils down to you sitting in front of a mirror and asking yourself which type of entrepreneur you want to be:

• The entrepreneur who grows his or her business into the size of a Basketball, but who may not own 100% (or even 15%) of the eventual company after investors, consultants and management take their slice; or
• The entrepreneur who hordes his or her equity, owns all or a vast majority of equity in the company, yet fails to come anywhere near their vision.

When Working With an Entrepreneur and His or Her Mindset – You Can Choose

It may not always be as simple or straightforward as the following two examples, but you should be able to tell an entrepreneur’s mindset by the actions and words employed.

For an entrepreneur who chooses to horde his or her equity, this person can be very guilty of seeing his or her future business as a basketball from the very start.   This is an entrepreneur who frankly you should stay away from, as you will never get your appropriate share of the pie, i.e. equity, if you are an employee or new partner.    It is not a “win-win” scenario but rather an “I win, You lose” mindset.

For an entrepreneur who has the mindset to share the pie, this person (1) realistically understands that ideas are the size of marbles, (2) has big aspirations and visions, (3) understands the gaps in turning his or her ideas into revenue; and (4) makes a conscious decision to bring in talented people and investors to help grow the business.

There is no guarantee, but the road to success seems far less bumpy for an entrepreneur who has the mindset of sharing the pie with the right people and investors, rather than for the one who may end up owning 100% of nothing.  Of course, it also comes down to the business and the business problem being solved; however in most cases, an entrepreneur does not change his or her mindset.

Which mindset do you have?  Share your thoughts in the comment section below or visit us on Facebook.

You Know Your Business. We Know Business Plans.

For many years, that was the tag line that my co-founder and I lived by here at BizPlanIt. While we have since moved on from that tag line, the thought behind that line still lives on today in our company.

One of the most common questions we get from prospective clients who are starting a business is “how much do you know about XYZ industry” or “have you worked with many companies that sell ABC products or services”. After nearly 14 years, we have indeed worked in most major industries and so we are able to confidently answer yes to this question in most cases.

But, truthfully the answer to the question does not and should not matter to you when looking to hire a business plan professional.

As business plan consultants and writers, it is our primary mission to help our clients develop clear, concise and compelling business plans. If we have done it right, our clients will be able to confidently put their best foot forward as they meet and speak with investors and lenders.

Whether or not you hire us (or another business plan writing firm), it is your job as a startup entrepreneur to do the necessary due diligence so you become the expert in your industry. When you sit down to persuade an investor that you have the next great something or a unique solution to a problem, you must demonstrate a 360 degree mastery of your business.

Rely upon your business plan consultant to communicate your message in a powerful and convincing manner, as well as help you deepen and strengthen your value proposition. But, it is up to you to do the necessary homework that will ensure your success.

So where should you turn for expert advice in your industry? It all comes down to building a network of people that can help you fill in the missing pieces.

For instance, we recently completed a business plan with an entrepreneur starting a car wash in the northwest United States. Early on, he met with realtors who specialized in locating parcels of land appropriate for a car wash. This helped him get a better understanding for the relationship between location and demographics and how it would impact his daily customer count. He met with car wash equipment manufacturers who helped him understand his construction, equipment and supply costs, as well as generate a revenue estimate based upon their experience working with hundreds of other car washes. He met with a marketing and branding expert who helped him to better understand how he was going to promote his offering to the local market.

After spending dozens of hours speaking with these individuals, our client had the details he needed to complete his plan. But, more importantly he had gained the knowledge he needed to develop a powerful business plan and set himself up for funding and business success.

No matter how much your business plan writers and consultants know about your business and industry, your funding success will still come down to how well you sell yourself and your opportunity. Are you ready?

Think Big, Yet Be Very Realistic In Assessing  What Your Company Needs to Grow

This is the fifth article, in a six part series (click here to start from the beginning) in which we are reviewing the six most important truths that all entrepreneurial-minded scientists and/or inventors should understand in their quest to turn an idea or invention into a home-run multi-million dollar business.

By definition, an entrepreneur thinks up big, audacious ideas and believes, with a high degree of certainty, that he or she can create a Basketball. This aspiration is essential. An entrepreneur definitely needs to wear “rose-colored” glasses and to dream big. In his or her mind, there is a basketball – the David statue within the marble (see Blog Post #1). Otherwise, for example, Fred Smith would have never started Federal Express after receiving a C grade on his business plan.

I am also certain there is a cavalcade of additional examples of entrepreneurs who succeeded when almost everyone else said their idea was not good and that it would always be a Marble. Bottom line: An entrepreneur absolutely needs to have strong convictions and the passion to turn the dream into reality.

Most important and, perhaps the most valuable advice I can give — an entrepreneur must match this intensity of vision with a deep, internal assessment of reality, i.e. have a clear understanding of what it will take to turn this shiny Marble into a company that can grow, sustain itself, and reach the vision of the Basketball. Put another way, the entrepreneur must clearly understand, without illusion or hockey-stick projection, the time commitment and work effort required, the capital investment required to support this projected work effort, and the number of new, paying customers needed to reach future growth milestones/projections.

This “internally and honest” gap assessment is critical as it frees up the entrepreneur to shed these “rose-color” glasses and see if these milestones can be accomplished alone or with the current, talented people already in the company. To reiterate from the 4th article in this series, this allows the successful entrepreneur to understand that giving up a piece of a marble is a great thing to do — to the right investors and/or the right team (or person) — in order to have the highest probability of success to meet these milestones.There should be no fear in giving up the proper piece of the company, in its current marble state, to then secure the proper talent, and go for it.

Truth #5 can be summed up as follows: An entrepreneur must think like he or she has a basketball, clearly understand and execute as a marble, and find the right, talented people to help achieve the necessary milestones to attain their vision. If this occurs, then the entrepreneur has a higher probability for success – and will, over time, achieve sustainable growth, as the entrepreneur remains grounded, realizing that basketballs simply do not happen overnight.

At a recent SBIR conference, I sat down to talk to an inventor. As we talked, I learned that he had recently received his patent. He went on to tell me that he believed he owned a $10 million Basketball (see prior my prior blog posts for further explanation). What I saw was that he owned a shiny marble worth much, much less.

I was intrigued with his patent and its commercial potential. I explained to him how MindForce could get involved to help him locate a licensee in exchange for a percentage of his future revenue. He looked at me and point blank said “why should I give you part of the revenues – why do you deserve such a large sum of money.” In his mind he was holding a bronzed Basketball as a fait accompli (see Blog Post #1).

He has it all wrong. The inventor was looking at the world at what he is giving up (a huge slice of his pie) rather than what he is receiving. The reality is that there presently is no pie for him to give up. The pie he is “giving up” is a slice of a pie that will exist in the future. Let’s do the math.

Today, an inventor has a Marble worth, say, $1 (his patent), and what he needs to do is license it in order for it to turn into a Basketball (the proverbial $10 million business). The Inventor is approached by a 3rd party (who may offer hard work and/or capital) who says, “I can turn your Marble into a Basketball and, for our example purposes, if it reaches $100 (milestone-based reward), I want a reasonable stake – say 25%”. The 3rd party is not asking for a piece of the Marble (it’s small, shiny and frankly not worth much). The 3rd party is instead offering to help the Inventor grow his $1 marble into a $100 Basketball and when it achieves that level they will split the $100 pie ($75 to the inventor and $25 to the 3rd party). Yes, the Inventor does not have as big a Basketball to himself (the $100 Basketball), but in reality, the IP, today, only has the potential to be worth $100 or more. Today, it is still just a $1 marble. Can he get their on his own – maybe or maybe not. But, with this third party’s help he certainly has a better chance of making it a reality.

Inventors and patent holders need to fundamentally understand that turning ideas and patents into valuable businesses is difficult and early stage product development very risky. When a 3rd party (whether it’s a venture capitalist with money, a firm like MindForce, or an individual who wants to join the management team) asks for a slice of the Basketball in the future and wants to be rewarded upon hitting milestones – say at tennis ball size, softball size, bowling ball size and finally basketball size – he is not asking for a piece of the Marble, today. It is earned by sweat, by action, by doing, and a great deal of time.

As I walked away from my conversation with the inventor at the SBIR conference, I wished him a great deal of luck. Perhaps he really does have a Basketball and will ultimately succeed in owning 100% of an actual Basketball (the $10M he claimed it was worth). To me, I saw a shiny Marble, a lot of work yet to be done, and an inventor with unrealistic expectations who more than likely will own 100% of nothing. Although, he will always have a Marble to fiddle around with in his spare time.

Before we get to far into the New Year it would be a good time to think of what we want to achieve, what goals we have in place, what are we hoping and expecting to have achieved by the end of the year.

The old adage “failure to plan, is planning to fail” is so true. Perhaps even more so now as we’re still grappling with economic uncertainties.

We’re probably more ‘blessed’ that at any other time with the rise of social media. How can this help? Social media gives you the ability to see what your competition are doing, what they’re planning.

If you’re not using social media to grow your business, to research, and connect now is the time you definitely need to be at least adding it to your planning for the coming year.

You’ll be amazed how many ideas you can pick up from others that could help you with your planning, whether it’s to how or what to plan, or what other goods/services you could offer your customers/clients. People online will be talking about what they’re doing – pick their online minds, pick up some tips.

Gone are the days when you have to trawl through mountains of material to research, with a few simple keystrokes using search functions on various social media sites we can access what could be vital information to help us with our future goals.

If you’re looking for a new product, chances are someone’s talking about it on Twitter, FaceBook, LinkedIn or other sites.

Can you really afford not to be using platforms like these to help you maintain and grow your business?

If you’re not sure what you could be using, check out “Social Media – You Need to be on Board” and “Do You Have a Social Media Strategy?“.

Set some time aside, browse the many discussions taking place, search for what people in your industry are talking about and add anything useful to your planning for the coming year.

Don’t miss the train, and above all don’t fail to plan.

Part 4 of a 4-part series on identifying technology needs; see part 1, part 2, and part 3.

Back in the early days of computing, friends frequently asked those of us who worked at computer magazines what kind of computer to buy. The answer was always the same: what do you want to do with it? The response wasn’t meant to be snarky. The answer would be different based on whether you were doing games, graphics, or basic office tasks.

If anything, the answer is even more complex today, especially for small and midsize businesses, if only because there are so many more options. We’ve gone from a world of desktop PCs to one populated by desktops, laptops, tablets, and smartphones, each one amazingly powerful and connected.

But there are also more options when it comes to acquiring and supporting hardware and software. So let’s take a few minutes to look at those three aspects: systems, how to acquire them, and technical support.

Employee Systems. This is tough because if you start by thinking about hardware, you miss the big picture. All companies, no matter what their size, run on information – items such as who called, how many widgets should we build, what’s the best way to communicate with my customers? Are most of your employees deskbound or mobile? Do they need to communicate with colleagues and customers regularly or periodically? What could you do more efficiently if you increased your employees’ ability to communicate, either electronically or by voice?

As winter approached, I had my gutters cleaned. Within 15 minutes after the workers had left, there was an invoice in my e-mail inbox. It had clearly been sent from the truck using a wireless device and either a broadband cellular or broadband data network (the first is optimized for voice, but accepts data; the other is vice versa). No waiting until the end of the week or month to send out invoices; talk about a smooth way to smooth out cash flow.

With mobile devices, you have to think about issues of battery life and wireless coverage, but generally the closer your employees are to data input and output devices, the more efficient they can be.

Back-Office Systems. The next aspect to look at is your back-office systems – the systems your employees will be accessing, whether from their desk or the field. Again, there have been all sorts of changes in this area. Ten years ago, you were highly like to have a Windows-based server or an AS/400 running business applications specific to your business. You can still do that today, but an even less-expensive option is not to own software at all.

Look at your options for what’s known as software-as-a-service, or SaaS. The best-known is probably Salesforce, which lets you keep track of customers and their preferences on a computer hosted by Salesforce itself. You and your employees access this information over the Internet, and you pay for the privilege on a monthly basis rather than by making a big, up-front investment. Upgrades are automatically included. Suddenly a big part of your computing costs become capital expenses rather than operational expenses, which makes them more predictable on an ongoing basis.

One caveat: if you’re going to take this route, make sure you have a highly reliable network. Otherwise, you put your employee productivity at risk.

Finally, you can turn to a local reseller or integrator to sell you your computing system. Having someone local is always valuable, and depending on your size and budget, they can also act as your IT department.

Technical Support. That brings us to the last facet – how to keep it up and running. As noted, you can hire the services of a local computing professional. Depending on the system, you can probably arrange for varying levels of support for lower costs. For instance, you may set up a contract whereby you can get service in two to four hours for your network, or within a day for your desktop computers.

This is one area where a hosted system comes in handy; if there’s a problem with a laptop, you can just have one or two in reserve. Swap the problematic one for another, and your employees can still access corporate data, because it doesn’t exist on the hard drive – it’s on the Internet. Nevertheless, having a reliable computer professional on hand can help you diagnose issues and give advice.

The great thing about having multiple options is not only flexibility, but also the range of pricing options available. More than ever before, small-to-midsize businesses can offload the headache of technology and just concentrate on deriving the benefits.