Short and Sweet
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You're got an e-business idea, a team to make it happen and maybe even a prototype Web site. Now all you need is money. As you begin to write your plan, a thought inevitably occurs: "Since i'm planning an e-business, shouldn't this plan be different from one for a regular business?"
You're not alone. "We get that question over and over," says Tim Berry, president of Palo Alto Software Inc., publisher of Business Plan Pro software in Eugene, Oregon. "What about an internet business plan? How is it different?"
In fact, e-business plans are different from traditional business plans. If you want to raise money to turn your idea into an e-business, your plan must reflect those differences.
Size is the most obvious variation. A traditional business plan can exceed 100 pages, whereas e-business plans should be no more than 30 pages. That's partly due to the feverish atmosphere surrounding investments in internet companies-investors who once took months now have days to make decisions, according to venture capitalist Chip Austin, co-founder and managing principal of New York City-based i-Hatch Ventures.
Bala Veeramacheneni can attest: "Fifty pages turns off venture capitalists," explains 32-year-old Veeramacheneni, CEO, president and co-founder of BazaarE.com, an 11-person Flushing, New York, firm that pools buyers and sellers of products via the internet. Veeramacheneni, who's been showing investors a 29-page plan for BazaarE.com since December 1999, has found angel investors and venture capitalists are always impressed with his business plan. So impressed, he's already received $600,000 and is seeking $5 million more.
E-business plans contain less detail in the financial section. Because the Internet economy is still new and many companies have no sales history, there's less to say. "You have to take a leap of faith in terms of what a cash-flow model will look like," says 35-year-old Tom Brennan, who, as vice president of strategic alliances and co-founder of Boston-based TimeBills.com Inc., helped write a plan that raised several million dollars to start the 27-person business ISP.
Market assessments for e-business plans are also less time-consuming than traditional plans. Skip the reams of research on market size and customer characteristics. Instead, quickly summarize the market opportunity.
Not all parts of an e-business plan are more brief, however. There may be more emphasis on your people. Austin, who's invested in more than 25 e-commerce companies, looks for teams of what he calls "natural owners" of the opportunity. This means people whose backgrounds assure they can start and run a company.
In addition, because so many e-businesses are attempting to exploit new opportunities, plan writers must adequately explain the concept to investors. BazaarE.com's business plan includes an appendix with three white papers, each four or five pages long, that explain crucial concepts in the business model. Each white paper contains definitions of key terms, diagrams of technology and references to other sites.
You'll also need to include explanations of the front-end and back-end strategies for the web site. For the back end, dig into the technology behind your site, explaining which server you'll employ. Describe in the front-end section how the site will appear to users.
As the Internet economy matures, investors will demand more detailed financial pro formas. Even today, the basic rules of business planning remain valid for e-businesses. Austin says the executive summary, which briefly explains your business, is still any plan's most important part, as that's the first thing investors look at. You can learn more about planning traditional and e-businesses at www.bplans.com or through JIAN software (www.jian.com), publisher of BizPlanBuilder software.
While celebrating the e-business difference, Berry encourages plan writers not to lose sight of what they're writing. "The truth is," he says, "it's still a business plan."
Mark Henricks, author of Business Plans Made Easy (Entrepreneur Media Inc., $19.95, www.entrepreneur.com) and Mastering Home Networking (Sybex Inc., $29.99, www.sybex.com), writes on business and technology issues.