By Daymond John
Trying to approach investors with a great idea but no concrete business plan is a recipe for failure. I might love the idea of boneless baby back ribs, but I bet you can guess my answer if Al “Bubba” Baker had just walked up to me on the street and said, “Hey, Daymond, I have this great idea for taking the bones out of ribs. You should give me some cash for it.”
As much as I’d like to, I can’t just partner with every entrepreneur who has a “great” idea for a company, but I can definitely pick out good investments when I’m given all of the right information. That’s why your business plan is so important to getting funding for your business. But, of course, you can’t just throw together any old “plan” and head out the door to meet your investors. You have to make sure that you have all of your bases covered. So, what do you need to include in your business plan?
PROOF OF CONCEPT
First of all, you need to show that your idea is more than just a cool concept but that it can succeed as a business. For example, my proof of concept for FUBU was evident in how many rappers and fans I already had wearing and buying my clothes. There are all kinds of ways to show proof of concept, including sales numbers, a successful crowdfunding campaign, market studies, and more. Start with evidence that your idea will actually translate into a workable and profitable business model, and your investors are going to be a lot more likely to keep reading (or listening).
Next, you need to know who you’re competing against. What other companies (or individuals) are out there doing what you do or creating a similar product that yours will be competing with? What kind of numbers do they pull in each year, and how do you intend to compete with them? What sets your brand apart from them?
A SOLID CONTINGENCY PLAN
Knowing your competition and what you’re going to do to set yourself apart from them is great, but it’s still not enough. You also need to know how you can fail. What are the potential pitfalls and opportunities for failure for your brand?
If you can demonstrate that you’ve thoroughly researched how your company can fail, then you can show that you’ve planned for those conditions and situations. You can show your investors that hitting a stumbling block won’t throw your brand into a tailspin and that you have contingency plans for what to do when you reach those obstacles and challenges.
Once your investors have a good idea that you know how to run your business and that you’ve thoroughly planned how you’ll beat your competition and what you’ll do in case of failures, it’s time to start talking numbers. Use your past performance and market analyses to make realistic projections for your business’ growth in the coming months and years. Show how investor capital will help you reach those projections, but don’t make your projections so high that they’re unbelievable. Show us growth and profits that we can believe in.
Finally, you’ll want to include all of the relevant numbers that affect your business. How much does it cost to create your products? What are you paying your employees? How much will hiring new employees increase your sales? What will you be spending on marketing? What have your margins looked like so far, and what do you project for them in the future?
Get as detailed as you can in all of these categories, and you’ll be on your way to creating a business plan that will show investors exactly what they need to see to fund your brand.