THE

ENCHANTING BUSINESS PLAN

Title Page
The purpose of the title page is to orient people so that they know who you are. From the start,
you need to look more professional than you are, so spend a few bucks on a decent logo.
Include your contact information on this pageGod forbid that an investor is interested in your
company and has to search for how to get in touch.

Executive Summary
This section is the so-called elevator pitchthirty seconds to explain what you do in a clear, if
not wow, manner. For example, Manufacture solar panels that are 2 x as efficient at 1/10 th the
cost. In many pitches, fifteen minutes goes by, and I still dont know what the company does.
But I have heard that you are a proven team with a proven technology in a proven market.
Heres a power tip for wowing people: Tell your audience (if its true) that youre already doing
$100,000/month, youre adding 1,000 users a day, or youre in beta tests with five Fortune 500
companies. In other words, you have proof that the dogs are eating the food. This is why the
longer you can bootstrap without raising money, the more powerful your pitch.

Problem/Opportunity
The purpose of this section is to cause your audience to salivate when they hear about either
the pain that you relieve or the opportunity that you enable people to tap. Note: this is about your
customers pain or opportunity, not yours. Your opportunity is a derivative of what you do for your
customers.
Rookie entrepreneurs cite a bull shiitake study from a market-research firm that proves that the
opportunity is big. Something along these lines: according to Jupiter Research, there are 300
million Americans, one in four owns a dog, therefore there are 75 million dogs, each dog eats
two cans of dog food per day, therefore there is a 150 million can per day total addressable
markethow hard can it be to sell 1% or 1.5 million cans per day?
Make this section work by either addressing a problem/opportunity that is intuitively obvious (for
example, people who want to listen to music) or, if the market size isnt obvious, discussing a
case study or scenario (for example, the person who runs social media for Virgin America
needs to monitor Twitter, Facebook, LinkedIn, and now Google Plus). The goal is to enable the
audience to fantasize about how great the market is, not for you to prove it using high-order
mathematics.

Unfair Advantage
By now, the mouths of your audience should be watering because they understand what you do,
theyre wowed by the potential, and now they need to start to believe that you can take
advantage of this green and fertile pasture. They want to know, Why you? What is your
competitive advantage? Why is the field tilted in your direction?
Stuff that wont work: We really believe in what were doing. As opposed to the five other teams
that the audience met today that doesn't believe in what theyre doing? We have a patent. So
you have years of time and millions of dollars to litigate? We have the first mover advantage.
There are probably ten other teams as far along as you are, pitching just up the street. We are
smart and work hard. Unlike the other five teams the audience met today? Get real: this isnt
elementary school where trying hard is enough to get by.
Stuff that will work: You were the vice president of sales for Google, so you know all the buyers
of the major brands. You ran industrial design for Apple. You have a PhD in materials science
from Stanford. You implemented social media for Starbucks. Your audience wants to believe
just give them a rational reason to do so that is beyond were hardworking folks who really
believe in what we are doing.
What if you didnt work for Google, Apple, or Starbucks, or you dont have a PhD (or any degree)
from Stanford? Then do this: take your best and brief shot with competitive advantages, admit
that you dont have a perfect, world-class team to deflect objections, and move quickly to a
demo that makes heads explode.

Sales and Marketing

Here answer the question, In a world of TVs, telephones, websites, blogs, social media, and
smartphones, how are you going to roll out your product and make a dent in the universe?
Again, investors want to believeyou just have to give them something believable. Whats not
believable? Well use viral marketing. Viral marketing isnt a strategyits at best a goal, not a
means to a goal. And the single greatest determinant of viral marketing is luck, so saying that
your strategy is viral marketing is the equivalent of saying that your strategy is to get lucky.
What is believable? Your established contacts with the buyers of large companiesthat is,
circling back to the Unfair Advantages section. Investors love it when they hear that you have
already lined up brand name, referenceable customers or partners. Other believable means:
email database that your founders have compiled throughout their careers, a successful pitch to
SXSW for a panel, 50,000 Twitter followers, and 50,000 Google Plus followers.
What if you have none of these? Thats why they are called unfair advantages. Lifes tough
you just have to be willing to grind results out. If everyone had them, the field was level, and
everyone is created equal, then they would be called fair advantages, which is an oxymoron.

Competition
Most entrepreneurs write a section that says that there is no competition or that the competition
is feeble. The problem with the former is that that lack of competition indicates that you are
either addressing a market that doesnt exist or you dont know how to search on the internet.
The problem with the latter is that the competition probably isnt feeble if youre going after a
meaningful market. And your competitions competition section probably says youre feeble, but I
digress.
You want competition. It shows, though it doesnt necessarily prove, that the market is
attractive. Your task with this section it to show how and why you can beat the competitionthat
is, what you can do that it cant. You also want to provide information about your weaknesses
vis--vis the competitions. There are three reasons to do this.
First, it shows that you know how to use the internet, and youve done your research about the
capabilities of the competition. Second, it shows that youre intellectually honestor at least not
delusional. Third, if you tell people what you cannot do, theyll believe you when you tell them
what you can do.

Business Model
Investors are not your friends or soul mates, so they want to know how youll make moneyand
therefore how youll make them money. The key to this section is simplicity: show that you rely
on simple, proven business models, not a new technique that has never been done before.
These kinds of business models include sales, licensing, advertising, sponsorship, affiliate fees,
digital bling, and upgrades to additional features and services.
Pick one or two and stick with them until you need to try another one or two. Many entrepreneurs
throw up (in more ways than one) multiple models because they think several revenue streams
will make investors believe that the company is more attractive. However, its far better to have
one business model that prints money than several that dont.
In fact, you could purposely exclude an obvious additional revenue stream. Then when an
investor has an aha! moment and shows off his brilliant business strategy mind by mentioning it,
you could flatter him by adding it to your plans and exclaim, Wow, this is why we need a
seasoned investor like you. Then, theoretically, the brilliant investor has a psychic investment in
your success.

Forecast
I hate this section because everyone knows that youve made up numbers that are big enough
to interest people but small enough to prevent them from laughing out loud. (I see a pitch a week
that conservatively forecasts the fastest sales ramp up in the history of man.)
Alas, you need to communicate the rationale behind your fabrications. My advice is that you
make your first year sales $0 because your product will be a year late and make your fifth year
sales $75-$100 million if you want to raise venture capital. (History has shown that your actual
results will be 10% of your most conservative forecast.)
You should concentrate on the reasonableness of the assumptions behind your business model
and forecast. Business models vary, but think along these lines. Are you going to do more
business than Apple, Google, and Cisco achieved in their first five years? Because the likelihood
of this is smaller than the odds that Ill play in the NHL.
Do you need roughly the population of India to make your model work? Are you assuming
advertising CPMs that are 20x Google Adsense rates? Do you predict that more than .5% of the
people who see your ads click on them? Do you require more than 1% conversion rate from free
to paid use of your service?
The first two rows of the forecast are windows into the soul of your company because it reveals
how many customers and employees you need. If you need an ungodly high number of
customers to make your sales numbers, youll discourage investors. If you need an
unrealistically low number of customers, investors will think youre clueless.
Ditto for employees: if you need a lot, something is wrongor maybe your business isnt
scalable. If you hardly need any, then investors, again, will think youre clueless. It is a wicked
web that you must weave to make investors truly believe.

Team
This is the infamous team section. You may wonder why its not earlier in the business plan.
After all, youve heard and read that investors invest in teams, not simply products, services, or
markets. The problem is that at the point of investment, its hard to truly know that a team is
good. If this was possible, then investors would only back good teams, and every investment
would pan out.
The fact is that your team isnt proven or completethis is why youre having to raise money. If
you were Steve Jobs, John Chambers, Steve Case, Larry Ellison, Howard Schultz, Jeff Bezos,
or Bill Gates, you (a) wouldnt need outside money and (b) you could simply make one or two
phone calls to get it. You certainly wouldnt be reading about how to make a good PowerPoint
pitch.
The most likely case is that you can show that your backgrounds are relevant to the market that
youre serving and the technology thats necessary to build. For example, its a stretch to think
that a bunch of friends from Home Depot are going to find the cure for cancer. But it is believable
that they could create a DIY advice site sponsored by Home Depot with ads from Orchard
Supply with a freemium model that requires membership to receive answers to questions.
Dont let this depress you. The people who founded the great tech successesApple, Microsoft,
Yahoo, Google, YouTube, and so onwere hardly proven entrepreneurs. In fact, you could
make the case that these companies represent unproven teams in unproven markets with
unproven technology. In other words, they were zero for three according to what investors are
looking for.

Status and Milestones

The purpose of this section is to tie a bow on the present. You recap where you are in terms of
delivery of your product or service, how customers are reacting to it and what the next major
milestones are. A word about milestones: these are events that are so big that youd call your
spouse up to tell him/her that it occurred. For example, printed stationary isnt a milestone. A
milestone is an event such as shipping, first sale to a customer, website launch, or profitability.

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