Before shows like “Shark Tank,” the only way to receive funding was to get money from investors or to enter business plan competitions. This led me to the Queen’s Economic Development Corporation (QEDC) StartUP! competition.
The QEDC provides services for businesses and neighborhood development. The program taught me how to write a plan and run a business. I won second place and earned $5,000 to build what is now a media production company that provides content to television networks and global airlines.
Since then, I have competed in several competitions and have always made it to final rounds or taken home a financial award.
This year, I get to be the judge or “shark” in my own backyard. As one of the judges for the QEDC, it has been extremely fun to participate, but unlike what you see on television, it is a lot of work, not just for me, but the entrepreneurs who compete.
Like most investors, I wish I could fund all businesses, but the reality is I can’t. However, entrepreneurs don’t realize that they can ensure they get funded by sticking to the criteria that most investors use to judge a business. To help you win, here are six factors I expect when judging a business plan.
The first factor I look for in a business plan is the originality of the idea. Many people dream up great ideas, but the entrepreneur must sell “why” their idea is great. In layman terms, what’s the solution to the problem they are solving?
This is where I gauge passion and whether this is a business or a hobby. Sometimes, people think that a great idea can be enough to sustain a business when actually it is a hobby.
My job as the judge is to determine if they have successfully identified a sustainable business or service. Remember, a good idea doesn’t have to be rocket science, but it must be scalable.
The second factor I want to know about is the industry the business is in. Judges and investors are typically experts in the industries they invest in. If they are not, it is your job as the entrepreneur to explain to us why the market needs your service or product.
I do my own research, but you pique my interest with factual and compelling information. You would be amazed at how many people claim that market research doesn’t exist or share old research. (Any research over three years old is invalid.)
If research doesn’t exist, you should be creating your own by surveying potential customers or running a trial of your business as a proof of concept to gauge your place in the industry.
The third factor is to show evidence of success. When I evaluate a business, I want to know if your business model works and has potential customers. You do not necessarily have to show profitability because this would serve as validation of your idea as a solution to the problem affecting your industry. If the evidence is compelling enough, an investor will want to help you expand.
The fourth factor I look for in a business is the team. Many entrepreneurs (including myself when I started) think it looks good and is cost effective to avoid having a team. As a judge, it alarms me when I see a sole entrepreneur with no advisors, partners or experts to support them. It suggests an inability to manage core operations because you are juggling too many.
Partners or employees don’t have to be on payroll to be counted. It indicates to investors you have people to manage aspects of the business you may not be knowledgeable of, which is what a leader does.
Even if you operate a business solely based on your skill, identify the external resources that help you thrive, such as suppliers, accountants, or delivery people. So always highlight the team and why each of you is qualified to sustain the business.
The fifth factor is marketing. Despite the proverb “if you build it, they will come,” marketing does not work this way. It is more like “if you build it and promote it a lot, they will come.”
As a judge, I want to know how you intend on getting your product or service in the hands of a customer and why this strategy works. Your marketing strategy doesn’t have to reinvent the wheel or be innovative. However, it should have quantifiable goals with key performance indicators of success.
Any generalized marketing jargon is a red flag that indicates you have not researched targeting your customer.
The final factor I review is the financial projection. I review it last because I want to ensure that everything in your business plan is accounted for in your projections. I examine how granular your expenses are, which helps me to decide if an investment is warranted.
All costs, whether it be toilet paper to machinery, should be included. Many entrepreneurs fumble in this section because they exclude costs to show profitability. If I see in a financial statement that you will generate a $1 million in year one, I get worried because most startups won’t earn that immediately.
If I do not see a reasonable break-even point, it means you have not efficiently calculated sales. If I see a lack of personal investment, I get worried. Why should I invest in you if you won’t? Therefore, include everything.
As one of the judges for the Queens StartUp! Competition, my job is never to dispel your dream or tell you how to run your business. My role is to make sure that you know how to run it.
As much as I hate to admit, I know that you will not have all the answers to your business. However, if an entrepreneur provides thoughtful and thorough explanations for each of the six factors supported by a dedicated team, research, testing, and passion, it tells me and any investor you have mitigated the uncertainty by preparing.
When you do that, it guarantees you will navigate investment meetings comfortably and one day potentially become a business plan winner.
The next QEDC Start UP! Business Plan Competition will open in August 2017. For details, check their website. Karleen Leveille is a Queens-based entrepreneur who owns a production company that supports major television networks.