Mike Doman
Technology Journalist

Mike Doman is a technology, lifestyle, industrial and education writer

Mike Doman
Technology Journalist

Mike Doman is a technology, lifestyle, industrial and education writer

A business plan can be the key to success for start-ups. So we got together some of Australia’s top angel investors to get their thoughts on what makes one great.

muru-d open plan office space

A business plan for start-ups becomes a bible. Part-manifesto, part-pitch document and part-justification for existence, nailing a business plan can be the difference between finance and failure.

To explore the intricacies of good business planning, we got some of Australia’s most revered entrepreneur mentors and angel investors from start-up incubator muru-D to weigh in. They are:

  • Chris Gabriel, Chairman, Director, Advisor, Mentor and Angel Investor of Alive Mobile Group
  • Phil Morle, CEO of ‘startup science’ provider Pollenizer
  • Laura McKenzie, CEO of female focused angel investors, Scale Investors
  • Andrey Shirben, Entrepreneur and proud early stage investor at Follow the Seed

Their answers are all markedly different, showing how diverse the start-up scene is and how, for start-ups, there are many different paths to travel to get to investment.

What do you look for in a business plan?

 

Chris Gabriel, Alive Mobile Group:

Before even looking at a business plan, the first thing I look at is the person or people behind the business plan: Do they inspire me and convince me that they can deliver? You can teach or buy skills but you cannot teach or buy passion. If they don’t have the passion, presence or perspective then it doesn’t even get to the business plan.

Once it gets to that stage, some of the key things I look for in a business plan are what problems are we trying to create and solve, a unique value proposition and differentiation, and sustainability of its competitive advantage.

Other things that factor in are their knowledge of the market and competition, a solid go to market strategy, a strong revenue model and bottom line return, as well as the skillset of founders. I also want them to have skin in the game.

Unless there is a sustainable value proposition that is creating and solving a need, is focused on the customer and can make money, then why bother?

Andrey Shirben, Follow the Seed:

I generally don’t look at a business plan at all, as I find them both boring and useless, but I only invest in technology startups. In the same way that one cannot become an entrepreneur by reading books about entrepreneurship while sitting on a comfy couch, I don’t believe there’s a blueprint for building a great business. Most of it is trial and error. In fact, lots of errors.

Putting the business plan itself aside, the most important part of the venture for me is the founding team. Ideas are worthless without stellar execution. Product ideas and directions come and go, but the people are the ones who will either make it happen or quit.  

What are the biggest mistakes start-ups make when it comes to business plans?                 

                       

Phil Morle, Pollenizer:

They refuse to change Plan A. It’s even worse when they avoid situations where they might learn flaws with the current model.

Laura McKenzie, Scale Investors:

I think particularly at the early stage people tend to be a little bit unrealistic about the time it takes to recruit staff, and often tend to be predicting that they’re going to be launching in new countries, new products, bringing on board new tech team members all at one time, which is pretty hard for anyone to do, however skilled they are. 

How do modern business plans differ from those made 20 or 30 years ago?

 

Andrey Shirben, Follow the Seed:

The cost of starting a business has drastically reduced over the past decade and it is possible to start a very successful company off the back of a credit card – look at Atlassian for example. And with all the Lean Startup methodologies out there, it’s very common to see a startup building an MVP (minimal viable product) and releasing it to the market without raising any money. Twenty years ago, you wouldn’t be able to do much without raising tens of millions of dollars and developing the product for a few years.

People are also less hesitant to try and more receptive to failure, although Australia still has a long way to go here.

Laura McKenzie, Scale Investors:

30 years ago I was still in primary school, so I can’t really comment on that! But I certainly think that generally businesses that we invest in now are less capital intensive, and I think the business plans tend to be less prescriptive and not as long term as those that I would have seen a decade ago, for example.

Is there anything that gets a business plan thrown out immediately?

 

Phil Morle, Pollenizer:

What gets thrown out immediately? A non-differentiated version of the same idea that hundreds of other people are also working on because they read about it on Techcrunch.

Laura McKenzie, Scale Investors:

Anyone that includes a DCF (discounted cash flow projection) in their pitch deck. Particularly for an early stage business, it’s just inappropriate. In many ways, it’s an act of fiction if you don’t yet have any customers or revenue. That’s the kind of thing that’s much more appropriate for an established business with steady cash flows.

What’s the most effective way of proving or validating a hypothesis or business idea, and how should this be communicated?

 

Chris Gabriel, Alive Mobile Group:

Testing the market through research, surveys and trials, engaging industry experts or key advisors, analysing existing industry or market trends; or ultimately going with gut feel based on experience.

Succinct articulation of the process followed in the business plan suffices, with details available as appendices, but critical is robust Q&A discussion between founders and investors to test thinking, knowledge, and responsiveness to pressure when key assumptions are challenged

Andrey Shirben, Follow the Seed:

Simply getting out there and trying it! The cost of releasing a product today is pretty low, so instead of spending too much time trying to create a scientific experiment with statistically significant conclusions – just build something and see whether people are using it and understand their feedback.

The most successful products I’ve seen were originally built within a very short period of time, but at the same time were modular enough to enable additions and alterations based on the customer’s feedback.

If there’s one section of a business plan start-ups should get right, what is it?

 

Phil Morle, Pollenizer:

Prove that there is a real problem to solve!

Laura McKenzie, Scale Investors:

I think the customer acquisition process. Really understanding those key metrics of what you need to do to get a customer on-board. Whether it’s an enterprise sale, whether that’s a SaaS based model or something in between – and the costs involved in doing that.

How can entrepreneurs and businesses make their business plan stand out from the crowd?

 

Andrey Shirben, Follow the Seed:

Be bold, take risks, get the best people around you, create a well-balanced and diversified team, and don’t listen to anyone telling you “this cannot be done”.  

Build stuff! It’s much easier to let the numbers talk when these are your actual numbers and not some “industry stats” or even worse, an “analyst forecast”.

And have skin in the game. It’s very easy to ask for someone else’s money, but the investors much more appreciate entrepreneurs who invest in their own ventures before asking for someone else’s money.

Laura McKenzie, Scale Investors:

They’ve got to be short, they’ve got to keep momentum to ensure that the listener or reader are engaged. Those have been the best pitches that we’ve seen and business plans that we’ve read.

I think it goes without saying that you need to ensure the spelling’s correct, the tables add up. Those kind of mistakes, you just lose your audience, and I have seen people be a bit careless about that.

How do Australian entrepreneurs differ from other markets?

 

Chris Gabriel, Alive Mobile Group:

The main difference is that Australian entrepreneurs come from a more local market perspective as they’re less exposed to global markets. This means they often lack the experience and expertise to position for and tackle global markets.

Laura McKenzie, Scale Investors:

We have a few US-based entrepreneurs pitch to us and I think that they do generally pitch better. They are more succinct, they do have more momentum, and they’re generally much more confident. I also think, and this may be inconsistent with others, that often Australian entrepreneurs overvalue their businesses, particularly at that very early stage.

Is there a business plan that you’ve rejected that’s gone on to do well? Why did you pass on it?

 

Chris Gabriel, Alive Mobile Group:

More than likely, yes there is. However I do not look back to what was or has been. I look forward to what is possible.

Andrey Shirben, Follow the Seed:

Seeing over a thousand startups every year, I’ve passed on heaps of good start-ups. In most of the cases it was due to a lack of time on my end to spend with the entrepreneurs to get to know them, so I was quick to dismiss it. Getting to know them is the most important part of the puzzle.

Think you’ve got the perfect business plan?

Head to the muru-D website here, to see what's happening.

Find Out More

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