Yes, Virginia, there is such a thing as a “living business plan.”
A living business plan is more than a piece of paper. It is, instead, something that any investor can see, touch, smell and even taste. It will take your new business idea from written concept to a real prototype—and demonstrate proof of concept.
Here’s how to make a dead business plan come alive.
Be Realistic: The first aspect of a living business plan is to make your costs the lowest they can be … and make them based on realistic assumptions.
Your business model needs to demonstrate that it will take less than 18 months to reach your break-even point. If you need more than 18 months to reach break-even, then you need to either change your business, or the way you do business. There are few, if any, investors (except maybe your parents!) who will wait that long for your business to start making a profit.
Create a Prototype: The next aspect of a living business plan is the creation of a real prototype. An entrepreneur armed with a good prototype is able to show potential investors how the proposed product will work without having to rely exclusively on diagrams or the investors’ powers of imagination.
Offer Proof of Concept: The final step in creating a living business plan is “Proof of Concept.” Once you have your working prototype, you must prove the economic feasibility of your business, and the viability of the product or service you are bringing to market. You need to get external confirmation that your prototype has a real market.
Once you can demonstrate Proof of Concept by showing the marketability of the product or service, then you have some degree of traction.
Basically, it all comes down to showing the investor that there really is a demand for your product or service. As the saying goes, “The proof of the pudding is in the eating.” There is no better way to develop investor interest than finding real customers who will part with their money to buy your product or service. No matter how small your sample, if you can show there is a market for what you’re selling, and you can show how that sample can be duplicated over and over again, then you can demonstrate a strong business opportunity.
To review, there are three important things a living business plan achieves:
1. It demonstrates to investors that your business is more than just an idea.
2. It helps an investor to evaluate your entrepreneurial skills.
3. It allows the investor to assess if the business concept is something that makes financial sense to pursue.
Especially in today’s challenging environment, the odds of finding an investor to part with their hard-earned money based solely on a paper explanation are slim. Why depend on such terrible odds when you can completely change the equation—and put everything in your favor—by creating a living business plan?
