Bootstrap Your Business or Find Outside Funding?
Published November 9, 2011 | 
Questions to Answer Before You Create Your Business Plan
There are times when the nature of the business has a bearing on what type of capital funding you will use and seek. But, you should understand at the beginning that if you don’t have startup experience, a definable and attractive market niche, essential scalability, and a very realistic chance of liquidity in three-to four-years, then outside investment sources including angel investors or venture capital, is probably not in the cards. And let’s face it, as the reality is that some of the bigger ideas just simply can’t, and therefore won’t happen without major capital investment.
For those of you that might not know, to “bootstrap” your business simply means to do it all by yourself, in addition of course to owning it yourself. So typically that also means scaling the business down to a level of activity that’s a manageable focus for you. Quite often people will include debt-based capital or borrowing money in the bootstrap plan for their business, but in the instances that borrowed money is used and has to be repaid, the lenders have no formal ownership in the resulting business, nor do they want any ownership.
Included in the mix of possible capital requirements, there are some businesses that could go either way. An invention that could disrupt a market might be one that could attract angel investment. Of course the entrepreneur could keep it to themselves, with the clear understanding that without an investment, they’d grow the business at a much slow pace, thereby running the risk of having competition knock off their invention and subsequently take over the market. 
In the end, that’s never an easy decision to have to make.
You should clearly understand that just because you can, doesn’t mean you should get investments. More times than not, investors become partners and to a certain extent, bosses. There is just no way for you to have investors and full independence. But on the other hand, you might not be able to build the business without additional resources to what you can gather by yourself. There are significant tradeoffs here also, and it all depends on the variables of who you are, what your business will be, and what it is you want.
Now clearly, if you have a great idea along with the resources including tenacity, knowledge, time, the right skill-set, and can maintain a secondary source of income, you should by all means try to bootstrap your business. Then again, if you are lacking one or more of those attributes, you must then carefully consider angel investors and even possible incubator type organizations that are willing to make an investment in your start-up, even before you get the first paying customer of your business. But understand there might be a price to pay in the form of a substantial cut of your business.
Nevertheless, the good news is that either choice you eventually decide on, the fundamental principles of starting a business are the same no matter which direction you decide to take.
- It always starts with a good idea, but make sure it’s one that’s easy to understand and explain, and actually solves a real problem in the market.
- You need to determine and completely understand your target market niche, and then validate your idea. It’s important to do these essential tasks before you invest a lot of time and money into the idea.
- A well thought-out clear and concise business plan is vital to provide you with the roadmap to your business success.
Competitive Analysis – Define the Competition
Published January 3, 2011 | Competition
The Competitive Analysis segment is the most misinterpreted segment of the business plan, primarily because business and investors frequently characterize the expression “competitor” in different ways. 
Businesses commonly characterize “competitors” as businesses that provide comparable products and services, and since every product or service is distinctive in some ways, many businesses strongly suggest in their business plans that they have a small number of or no competitors.
Investors tend to use a great deal more perceptive characterization of competition, explaining it as any service or product a customer can use to satisfy the same needs and requirements as the business might fulfill. This includes businesses that provide comparable products, replacement or substitute products and other consumer choices including performing the service or building the product themselves (DIYs). Falling under this all-encompassing definition, any business plan that professes there isn’t the existence of competitors seriously damages the credibility and standing of the management team.
Competition Dilemma
In the identification of competitors, businesses frequently discover themselves in a complicated position. Looking at it one way, they would like to demonstrate that they are distinctive and list no or just a few competitors. Nevertheless, this has a damaging implication. Considering that if there are no or few businesses in a market segment, then it must imply there might not be a substantial enough consumers with needs to sustain the business’s products and/or services. But on the other hand, should it be the case that there are too many competitors, then the market may be too saturated to sustain the successful profitability of a new competitive participant.
Resolving the Dilemma
Resolving the dilemma of competition is somewhat easy if the Customer Analysis is prepared and completed correctly. That segment makes known the customer’s strong desires and needs that the business products and services 
directly satisfies, and any business (or DIY action) that also serves these needs is a competitor.
There are more often than not types of the competition that compete to different extents with a business’s products or services. Because of this, the Competitive Analysis section ought to include sections for both direct and indirect competitors. Direct competitors are those that serve the identical target market segment with comparable products and services. Indirect competitors are those that serve the identical target market segment with different products and services, or a diverse target market segment with comparable products and services.
Industry Analysis – Data Sources and Industries
Published December 30, 2010 | Data Sources
Generally speaking, The Industry Analysis normally contains many facts, figures and future industry projections. For this data to be believable, the analysis should be sourced through independent research whenever it is possible. The opinions of the business’s management are basically insufficient to persuade a high-level investor, and dependence on “anecdotal” information can negatively impact the integrity of the entire plan.
Industries
Most businesses compete in multiple overlapping industries. The business that produces and markets medical appliances for doctors, as previously mentioned, participates competitively inside the healthcare industry, the medical appliance industry and the manufacturing industry. In addition to centering attention on the definition and assessment of the relevant market as previously detailed, the Industry Analysis should include full details and complete descriptions 
of all of the markets in which the business participates.
Finally, Industry and market trends should include potential market growth with facts, figures and projections normally over a timeline of two, three, five or sometimes ten years. The estimates you develop should always be supported with detailed information about any changing market trends, latest industrial technological and hi-tech developments, unpredictable customer profiles and any other significant factors related to industry. It is critical to support your researched assumptions with reasonable goals and objectives. If you overstate and exaggerate the projections of market share and size, it will only lead to unwanted questioning and ultimate rejection of your Business Plan by potential investors.
Executive Summary – Explaining the Business
Published October 19, 2010 | Most investors are snowed under with business plans, and frequently give them no more than a brief review. 
Consequently, it is crucial that the initial page of the Executive Summary excites and encourages the investor to gain more knowledge insights about the business.
The Executive Summary’s first page must include a succinct description of the business, a narrative of the market size and market need for the business’ services or products, and a dialogue of how the company is exclusively qualified to satisfy this need.
Condensed Explanation of the Business
Whether you believe it or not, after reviewing the initial page of most business plans, investors most often do not comprehend the business in which the company is operating! This is for the most part true when a company is engaged in a complex, extremely technical business. It might seem clear, but it is crucial to always keep in mind that investors cannot invest in what they do not completely comprehend.
The Executive Summary must make the definition of the business easy to understand in order to increase interest and encourage an unmistakable understanding. Leave it to the rest of the plan to tell the full, complicated story.
Obviously defining a business most often calls for simplification. For example, an “online retail seller” might also be introduced as “a business engaged in the purchase and distribution of products over an extensive geographic range.” Clearly the former and simpler description is more valuable in establishing the stage for the investor to discover what is distinctive about the company.
To sum it up, it is extremely important to demonstrate to investors that there is an apparent and convincing need for the product or service.
It is crucial to convey to investors that the company has positioned itself in an identifiably large and emergent market and there exists a clear and convincing market demand for the product or service. Understand also, it is very important to characterize or define the market through the reference of trustworthy sources as to the markets size and projected growth. In today’s economic environment, it is particularly essential that the plan substantiate the customer’s ability and willingness to pay for this need.
Your Business Road Map
Published October 18, 2010 | 
To prove and set up important credibility it is crucial that a business plan does not allow too much for market sizes, take too lightly the competition, or get carried away and project results too aggressively. To be more precise, they must present reasonable game strategies for accomplishing success, including:
• Highlight past accomplishments: One of the best indicators of future success is a company’s past record of success. The formal business plans prepared for previously funded companies must illustrate what milestones they set and were able to achieve with those funds. New businesses must show how the achievement of past successes by the management team will make it possible for the company to meet and prevail over expected challenges.
• Clearly understand and define the realistic and relevant market: Incorrect sizing of a company’s target market is an illuminating indication of a badly rationalized business plan. Let’s take the U.S. healthcare market for example, even if the U.S. healthcare market is a trillion dollar market, a company does not exist that could reap $1 trillion in healthcare sales.
To be more precise, a more meaningful measure is the appropriate market size, which represents the company’s sales if it were to secure 100% of its specific niche of the market. Always Keep in mind that defining and communicating a believable appropriate market size is considerably more persuasive than offering generic industry figures.
• Understand and accommodate to customer needs: Investors have an extremely precise focus on the company relationship with its customers. In its business plan, a business must clearly make a statement about how its products and or services meet precisely identifiable customer wants and needs, and recognize which target markets most demonstrate these needs.
The business plan must also delineate an easy to follow and reliable roadmap of the company’s strategies to fully understand its customers.
• Establish barriers to entry: A business plan must include strategies that best demonstrate how the company not only can, but plans to develop long-term barriers around its customers. Asserting a first mover advantage is plainly not persuasive enough in today’s funding environment.
• Develop realistic financial assumptions: Many lenders and investors go straight to the financial section of the business plan. It is extremely crucial that the assumptions and projections in this section be as accurate and reasonable as possible. Plans that show market penetration, operating margins and revenues per employee statistics that are inadequately logical, incompatible or purely unlikely, to a great extent harm the reliability of the whole business plan.
In complete difference, clear-headed, well-thought out financial assumptions and projections convey operational reliability and trustworthiness.
Understand it is more imperative than ever to present lenders and investors with a practical, realistic and convincing business roadmap that plans for success. Such a business plan sets a company apart from the literally thousands of other companies actively looking to raise capital, and strongly indicates to investors and lenders that your company is effectively well-managed and prepared for success.