This may be a bit off-topic for this group, but here goes anyway...
As I mentioned here before, I am in the process of starting a new business based around turning a hobby project of the last few years into a commercial venture. I'm going through the whole process of developing a business plan for three to five years with projections for sales, revenue, routes to market, staff levels, expenses, R&D investment, etc.
This is presented by advisors as a necessary step. How can you be confident the business will succeed, they ask, without a clear picture of the end goal and a good idea of how you are going to get there.
But, I respond (ignoring everything my English teacher tried to drill into me), I know the rough outline of what I want in three years, and I know that the major milestones on the way are A, B and C.
Yes, they retort, but you have no balance sheet for the end of year two, and no indication of how you will spend the marketing budget in years two or three.
And so it goes back and forth. I resist what amounts to BDUF in the business plan, while being pressed for more and more detailed projections.
So do any of you inventors of process care to take on the challenge of FDD for business planning? ;)
Brian.
More Info
Hi Brian,
can you provide some more info. Particularly, are these advisors just advisors or investors?
There's quite a bit to talk about here but much of it can be different if this is a one person venture, as a hobby, self-funded.
You can apply the rigors of a business plan and cashflow projections etc. but you don't have to. Of course, if this is externally funded then you almost certainly will have to provide some of this - even if only an angel investor.
As far as the plans and projections etc. at the end of the day it's a guess and the answers, in this case, will be very important but the model that gives them is just as important. This is one of the secrets of consulting IMHO - that is, the answer is not that significant but how you arrived at it is. i.e. the model. If you can present the model for how the answer was calculated, then people can dissect the model and tweak it if they disagree with it, and thus calibrate the answer accordingly. Same sort of thing applies for a sales projection and etc. that you've listed.
The other piece of info that is needed to really have a meaningful discussion about this is whether it really is a single person, as a hobby, self-funded venture or that you intend to grow beyond that now. i.e. if it is now looking like a small company then there are some important day 1 questions such as "what is the end game?"
I'm no expert at all this but I've had quite a bit of experience in it from just about all the perspectives. It would be an interesting discussion to have.
My personal $0.02 - a lot of this planning is worth doing.
Jeff
Explore other Avenues
Depending on the state of developmenet your product/solution there may be other areas for funding. For example if you are based in the USA you could look at the Advanced Technology Program.
These programs often provide proposal kits that should give you a good idea of what will be required.
David
Make that $0.04
Hi Bob,
Interesting question. Over the past few years of building my own business I've seen elements of FDD come into play on a number of levels, but my business was self funded so I didn't need to convince any investors to part with their money. If you're looking for venture capital, you'll need to give the investors something to give them confidence that they they will get a return. Unless you've got a track record of building profitable businesses, the investors aren't likely to be convinced by a rough outline and major milestones. They want proof that you've thought it all out and know what you're talking about - that's what the business plan does.
You could look at the business plan along the lines of BDUP but the purpose of the business plan is to get investment, not build a piece of working software. If that's what the investors want, that's what you'll need to give them. Otherwise your only choice is to self fund. If you're considering that option I can tell you from experience that planning is well worth the effort. I didn't start with a plan and it has taken two years to start putting something together which is already having a profound effect on the business. In hindsight, I can see how not having a plan made the past few years harder than they needed to be.
I'll add my $0.02 to Jeff's, planning is well worth the effort and I wished I'd done more upfront.
Martin
Hi!
I don't know much about this, but having done one business plan and collaborated in another one, I don't think that a process similar to FDD is needed since in my case it was developed by 2 persons.
But generacally it is very simple IMHO:
1) Sales Projections (Focus/Goals) complete with market analysis (competition, demand forecastm etc)
2) Sales Development Plan - With the results of 1, show how will you apply the money to develop your commercial staff
3) R & D Development Plan - With the results of 1, show how you will apply the money to develop your product, including staff levels
4) After Sales Support Plan - With results of 1 show how this can be developed, including staff levels.
5) Fixed Costs - Facilities/Rent, etc etc
Do this 5 points for each year. You can consider each of the 5, Feature Sets.
If you are or plan to look for funding, integrate on your plan the funding rounds (first round, second round, third round) that will be needed along time. If this is the case then I would consider this funding rounds as major milestones complete with pre-conditions and post-conditions.
You have to understand that in order the business pragmtics behind round 1, 2 or 3 are different. For instance, for round one most what it is needed is an excellent idea, good or excellent CV complete with some business experience. As for what it can be an excellent idea depends on the domain and the problem that your product or service is solving, and if there is a clear demand for such a solution, breaking the technical barrier into an appealing business value proposition for your target market. So if you sustain this very well you will for sure suceed. You don't only need a VC, you need one that can understand what you are saying and eventually can help you close important deals so choose carefully as the wrong VC can actually drive you to a dead end that you don't have the skills to overcome.
One last thing, on each round plan to achieve a break even as soon as possible.
Hope it helps,
Nuno Lopes