Does Your Business Plan Ease These Investor Concerns?

Business investors are sensitive to at least threethe world, the average Japanese kitchen was too
major constraints when evaluating business plans.small to accommodate the new appliance.
I call these constraints The Three R's: reality,Moreover, the prevailing attitude among
readiness, and resources.RealityMany creativehomemakers was that dishwashers were for the
entrepreneurs with ideas for scientificlazy or the idle rich. It took over a decade of
breakthroughs have ended up frustrated withattitude, social, and cultural changes before the
business investors who just don't seem to "get it."timing was right to successfully introduce
The truth is, however, that it's the entrepreneurdishwashers to the Japanese market.Business
who's not getting it.Unlike creativity or scientificplans not only fail to gain support when they are
breakthroughs, starting or expanding a businesspremature, they also fail when they are late.
requires the entrepreneur be keenly aware ofThink how many American and European watch,
their customers, competition, and coreautomotive, or camera manufacturers lost their
competencies.Creativity and scientificcompetitive advantage in their respective
breakthroughs often disregard the customer, theinternational markets because they resisted
competition, or a company's core competencies,automation or robotics until it was too late. It is
which is why they are usually risky and oftenunlikely that investors would support a U.S.
require significant capital over several yearsbusiness plan based on automation or robotics in
before they are monetized. The opposite type ofone of these markets today.ResourcesIt's
investment most business investors seek.Foramazing how many entrepreneurs ignore or
example, suppose you had an idea for a newneglect this constraint. Perhaps they believe that
everlasting light bulb. After researching thethis is the entrepreneurial way...to know no
market, you determine that customers do wantobstacles. Although this attitude may impress
such a bulb and are willing to pay a premium for it.self-help gurus, it won't impress business
Preliminary manufacturing studies show that youinvestors.The business plan graveyard is filled with
can produce the bulb and profit nicely from it.plans that failed because their entrepreneurs were
Would business investors be receptive to backingnot sensitive to resource limitations. In most
a business plan that puts you up against the likescases, these limitations range from the
of General Electric or Westinghouse? But, youentrepreneur's lack of sensitivity to their own
say, your plan is to some day sell your idea tointernal resources and skills to not fully
these competitors. Again, how receptive would aunderstanding what it takes to execute the plan
GE or Westinghouse be to a plan that obsoletes aitself.This is especially true of businesses that are
major product line? What would HP do with a plantrying to expand through diversification. The world
that killed its aftermarket in print cartridges? Domarkets are filled with food companies that have
you see the flaws in such thinking? Businessfailed trying to enter pharmaceuticals, chemical
investors do.That's why business investors like tocompanies that have failed trying to enter foods,
invest in business plans that are grounded inor electronic component manufacturers that failed
reality. Plans based on reasonable risks that cantrying to enter final assembly.For start-up
be monetized quickly and generate a return oncompanies, entrepreneurs often fail to adequately
their investment. Although the everlasting light bulbestimate cash requirements or the time and
strikes a consumer hot button, it fails the realityresources required to build distribution channels,
test by not addressing the distribution networkwin customers, or to launch or sustain a
and shelf control of large competitors. Morebusiness.Business investors, experienced ones
important, the strategy to sell the business to oneanyway, are all too familiar with the importance
of these competitors is a flawed exitof resource constraints. So, when business
strategy.ReadinessThe second majorinvestors zero in on this area and challenge your
consideration that a business investor wantsassumptions, don't get too defensive. Instead,
addressed is readiness or timing. Unless the time islisten to their concerns with the knowledge that
right for the proposed business plan, businessthey can help you tighten up your plan and
investors are not likely to support it.Take forimprove your chances of success.Mike Elia is a
example a business plan to introduce dishwasherschief financial officer and an advisor to venture
in Japan in the early 1970's. When dishwasherscapitalists and leverage buyout specialists.
were rapidly becoming popular in other areas of