A checklist for solid business plans

Pretty much on a weekly basis I get sent ideas, business plans and/or information memorandums for capital raising. Everyone who sends me one, tends to think it’s an expertly crafted, zero-risk proposal to achieve a massive return with a world changing idea.

I don’t.

So when a couple of weeks ago, Justin Brow asked me to speak to the mobile venture groups at MEGA, I decided to have a chat about the assertions that people make in their plans, and what I think of them. When I go through someone’s documentation, I classify each statement into one of the three types of assertion it is.

Facts & Inferences

First up, can your assertion be checked and confirmed? If not, it’s not a fact. And even if it is a fact, you’ve got to ask yourself: is it specific, is it unemotional, is it logical and finally, is it relevant? All too often a pretty graph or data can be sourced, but unfortunately it’s just not be relevant. I put the same test on any inferences made, plus they also need to be reasonable. Anyone can create dumb inferences, for instance Bobby Henderson, famously and amusingly, inferred in an open letter to the to Kansas School Board that global warming was in fact caused by the reduced number of pirates in the world since the 1800s.

Assumptions

Assumptions are always made in plans for new ventures, because that’s where the opportunity lies – in the unknowns. Assumptions should always be clearly highlighted and then matched up to milestones that validate them. Is there actually a market for the idea, or as Rob Ryan says – “will the dogs eat the dogfood?”   

But just because there are highlighted assumptions in a plan, doesn’t mean they are reasonable. Questions I may ask myself about assumptions include:  are they explicit or implicit, are they reasonable, and finally, how much effort and resources is required to turn these assumptions into facts? I regularly find that assumptions can be validated with a quick Google search, and unsurprisingly, lazy promoters of ideas don’t get investment (or a second chance).

Weasel Words

The final type of assertion I find in plans, and unfortunately the most common, are weasel words. Weasel words are typically vague assumptions masquerading as facts. It’s like the egg that has been sucked empty by the weasel and still looks okay, despite the fact that’s it’s empty. All too often I see examples like these:

“People say…” (Which people? How do they know?)
“Nobody else’s product is better than ours.” (What is the evidence of this?)
“Studies show…” (what studies?)
The vast majority…” (All, almost all, more than half – how many?)

So when I’ve finished the first pass of the documentation – it’s covered with my pen notations. A whole lot of Fs, As and Ws. If the W count is too high I pretty much throw the proposal in the bin without responding.

W also stands for “waste of time”!

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Brendan Lewis is a serial technology entrepreneur having founded: Ideas Lighting, Carradale Media, Edion, Verve IT, The Churchill Club, Flinders Pacific and L2i Technology Advisory. He has set up businesses for others in Romania, Indonesia and Vietnam. Qualified in IT and Accounting, he has also spent time running an Advertising agency and as a Cavalry Officer with the Australian Army Reserve.