Goldilocks Teaches Us About the “Just Right” Business Plan


Before you go and start soliciting your business for funding, make sure that your business plan is concise, to the point, and specific to your audience (investors). You don’t want your business plan to be similar to the Goldilocks and 3 Bears story by having a bowl of porridge that was too hot or too cold. You want that plan to be to that last bowl Goldilocks tried that was just right! The way your plan feels, written, and the audience it speaks to will be contingent on if you receive funding. Just like the porridge, if your business plan has just the right amount of content then it will be eaten alive by the sharks (aka investors).The long and drawn out legacy business plans are quickly becoming a way of the past. Investors, Banks, and whomever else who is going to read your business plan does not really want to read your 60 page plan or even something as simple as a business model canvas.


Heidi Brown 2010

The Business Model Canvas is a great jumping off point for vetting out your ideas, making sure your value proposition is aligned with the entire canvas. If you want to know more about the canvas please visits the beginning of my last blog series. There are a total of 9 blog posts that describe the business model generation in detail and how to apply it to your own business.

So what is a funding plan you might ask?

A funding plan is a type of business plan that is approximately 8-pages, current, has reliable information, and is aligned with the company’s future direction. What you don’t want your funding plan to be is a legacy 30-page business plan that typically acts as a better door stop than useful material. Remember that your funding plan is called a plan for a reason, to plan for the future, and be used as a continuous reference for management as future decisions are taken under consideration.


The content you want in your plan will open the glass door for outside investors and companies to see what is really going on inside your company. Give a detailed overview of your company and talk about your mission and values. Give an overview of the employees and people who work in the organization. You will want to give a thorough and detailed explanation of the competition. Provide an analysis that looks at the strengthsweaknessesopportunity and threats (S.W.O.T.) to your company. This type of analysis is powerful and with little effort you can see the weaknesses of your business and uncover opportunities. A SWOT analysis looks at what is going on internally exploring strengths and weaknesses; and externally uncovering opportunity and threats.


The purpose of your funding plan is to hopefully receive funding from an interested party. The plan is the front end of a lending package. It is also going to act as a pacifier giving the bankers ongoing comfort. The funding plan will also act as private placement of equity. Your funding plan will also be used by management and leaders of an organization to help guide them in their decision-making. It will be useful as a financial control tool and most importantly when you begin soliciting your business to sell it buyers will want to review your funding plan. I mentioned earlier that funding plans are sometimes, probably most the time, used as a doorstop.


Pancake Manor 2015

Two elements in your funding plan are…

  1. Product or Service is a description of your product or service your company is selling.
  2. Process is the direction, growth, and development for your associates. Creates an atmosphere of critical evaluation, intellectual resources, and what is most valuable to the business.

When selling your business know who your audience (the Investor) is and where they are coming from. Is it a holding company that probably seeks a minimum of 85% to 100% ownership of your business? Or is it a Venture Capital firm that is seeking approximately 30% of ownership.

RULE OF 3’s:

  • 3 years Venture Capitalists (VC’s) have an exit strategy in place to be out of that specific business. In today’s landscape after the dot-com crash VC’s have pushed it back to 5 years.
  • 30% return on the money each year. This is typically paid over the span of multiple years; however, the amount comes out to be 30% return on investment each year.
  • 3 times invested capital at the end.
  • 30% equity is the minimum VC’s look obtaining of the company they are investing in.

5 Basic Types of Investors:

  • Beginning process think 3 F’s, family, friends, and fools.
  • Angels is early stage investors that are typically a loose group that invest as individuals.
  • Venture Capitalist is an entity that invests at 30%.
  • Private Equity Group (PEG) takes a minority position in a company that intermediates groups that you can sell to.

    Alyson Schafer 2008
  • Synergistic Buyer or Initial Public Offering (IPO). Synergistic buyer can be operating in the same industry or thinks your company will complement their existing business. IPO is not the direction you want to take your company, so stay away!

You might have already asked yourself what investors look for in that ideal company.

  • Scalability
  • Founders are sophisticated and present themselves and their company well.
  • Founders are realistic.
  • Different variation
  • The market does not need to be educated on the product or service. Educating the market is expensive and absorbs $ capital.
  • Defensible intellectual property (old thought, no longer applies).

When selling your business remembers that the 1 offer is the same as no offers. Make sure to hire a 3rd party to sell your business and that you are never the seller. You also have an emotional investment and having a 3rd party allows for more time to respond by being able to step away from the negotiation table and consult with you, the client. Know who you are selling your business to. In some instances, it might be better for your reputation to lose a little money in the transaction by selling to a more reputable buyer.




So what do you think?

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