Click to Print

Wow Investors With a Web-Savvy Business Plan

In a tight credit market, use expertise to stand out from the crowd.
August 18, 2009
URL: http://www.entrepreneur.com/article/203080

As an online business owner or potential startup, one of the major documents you will need to write to monitor your business and to get funds from potential investors is your business plan. For many people this is a daunting task, but thankfully, software makes this a bit less stressful.

In today's marketplace, there are four fairly common sources of funds. While many believe venture capitalists are the best source for small businesses, less than 2 percent will ever get funds from them. This leaves:

Grants and banks will want to see your business plan, as will your family, friends and fools. Because of the tight credit market, business plans are being more closely scrutinized than ever and banks are looking for specifics before looking at Small Business Administration-backed loans or community bank loans. In today's climate, small-business loans are more often funded by community banks and credit unions.

So what do you need to revise and edit in your business plan before presenting it to potential investors or banks for review?

First, remove your own pay from the plan. Yes, you will probably be paying yourself, but you'll pay yourself from the profit. Online business owners should not have themselves written in as a cost each month, week or year. Banks look at this as loaning money to you rather than to your business. Part of your "skin in the game" is that you won't be paid unless the business makes money. This will usually drastically drop your startup costs, too.

Second, see what you can get "on the cheap." In the today's marketplace, so many companies are going out of business that this may be the perfect time to get startup equipment like computers for less than ever. Also keep in mind that if you're selling a food item and need a larger kitchen, many restaurants in need of extra money may let you use their kitchens at night for a small fee. Get creative, because your competitors certainly will.

Be sure that you also include free marketing in the business plan--marketing that uses tools like Twitter and Facebook, and not just paid advertising like Google AdWords. Investors and banks are really looking at how savvy you are in your web marketing campaigns.

Be sure that you consider all of the free tools and cheaper online work. For instance, there are sites that allow you to hire overseas programmers graphics artists for $300 or less--far cheaper than we have been able to secure these services in the past. Investors and banks want to know that you're doing your best to save money, and you can show them you are using free or inexpensive tools where possible.

Most new business owners also feel strongly that they need to do things like secure legal resources or an attorney, when often sites like LegalZoom give you access to legal professionals for much less. Show in your business plan how you have cut costs; you may even wish to show an original plan and then a side by side comparison of costs to show the bank or investor how you have cut costs given the climate.

In addition to being frugal, show all the ways your new web startup or existing web business can grow its revenue model; for instance, by bringing customers in free and finding creative ways to earn revenue later. Your business plan should show your phases of revenue building; will you offer forums and advice for free to get people using your site and then eventually phase in a low-cost model for monthly services? Will you include affiliate marketing that will bring in revenue? How often will you reassess your costs and revenues and make adjustments? What methods will you use to gauge customer response to your website?

It is vital that in this market you have a tight, controlled and systematically phased-in business plan to present to your investors or banking relationship manager. Show that you know the online market, your demographic and your potential customer base. This will increase your chances of getting funding in the tight credit market.