The Value of the Business Plan

To often people ignore the power of pen and paper. Many people aspiring to become more in business have great ideas, but by the time they start talking to someone about investing in that idea or business, the details are either forgotten or not retainable by the potential investor.

There are many benefits to writing a business plan, and even completing a feasibility study for the project in the market for being funded. Other than the obvious benefits of knowing and understanding the markets and how a company could benefit from being introduced into a specific one, it gives the writer a professional’s insight to their own ideas and also offers a medium that can be placed in front of a complete stranger to go over the ways they could perhaps make money with a solid partnership with the venture.

This week I’ve researched two experts who have done great things with their business plans.

Reid Hoffman, the co-founder of LinkedIn and investor in PayPal and someone that is considered to be a prolific angel investor. Mr. Hoffman is an accomplished entrepreneur, executive and angel investor. He invests in many technological companies and usually helps drive them to success through their early stages and periods of explosive growth.

According to his guest blog on TechCrunch some of the most important aspects of the business plan include: the ability to reach a massive audience, the unique value proposition and whether the business will be capital efficient or not. This is part of the reason that he likes to invest in software and technology. A product like the iPod or iPad can grow from nothing to everything very rapidly.

The second expert I researched this week is David Skok, Mr. Skok has built three very successful companies that have exceeded 100 million dollars in revenue in 20 different countries and also employs over 800 people.

David best known for his value in helping JBoss, Netezza, AppIQ, CloudSwitch, Tabblo and Diligent Technologies to successful exits. David serves on the boards of CloudBees, Digium (makers of the very popular Asterisk Open Source PBX/telephony software), Enservio, GrabCAD, HubSpot, Meteor, OpenSpan, and VideoIQ.

David is a very popular blogger among entrepreneurs and spends a great deal of time writing articles on the viral marketing machine and how it can help new startups and business owners.

David wrote a great blog on which aspects of a business plan are important to the future owner. Some of his tips regarding the value of the business plan are: understanding how startups are valued, identifying risk, mitigation of risk quickly, matching the milestones of capital, validation of milestones and avoiding a down round at all cost.

Both of these individuals explain that key elements to an investor spell money and profitable return on their investment. Being confident in the person asking for the investment is a huge portion of their ultimate decision to invest or not to invest. Knowing and understand how the entire planning process works is a key element in securing the right funding for the project and also gives the future business owner the ability to better understand and negotiate the terms of the agreement.