The week before last I published a post entitled Business Plan Outline I’ve Used To Raise Angel Investment that provided a detailed walk-through of an business plan outline I’ve developed/used to successfully raise angel investment. I wanted to follow up on that post by making an actual business plan available for you to download/revise/use that was constructed using the outline.

The following document is an almost a word-for-word copy of a business plan I created for my last company a year ago. The only thing I’ve changed are the names of our company, product, and team members. I highly suggest downloading this document and having a printed copy in front of you while reviewing my previous post – I think it’ll really help tie everything together quite nicely.

Example Busiess Plan

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Last week my company (Open Box Technologies) put itself up for sale on eBay. I published a lengthy post here on The Roach Post the morning the auction went live that provided some background on our company’s decision to sell, along with why we chose eBay as the vehicle. Over the last week I’ve appended a couple brief updates to the original post, however and now that we’re within 12 hours of the auction’s end, I wanted to share with you what the results have been so far.

As a little background for those who haven’t read my original post, the decision to put OBT up for sale came about as the result of our recent inability to raise a Series B round of financing. We had been working to raise this round since the middle of ’09, however we simply weren’t able to secure commitments at the level needed to support and grow our business over the next 12 months.

After much deliberation and discussion, we decided the best course going forward would be to pursue a sale of OBT. We ended up choosing an eBay auction as the sale vehicle for a variety of reasons, chiefly to allow for the participation of the widest possible range of potential acquirers. The results have been interesting.

Here’s a high-level overview of what’s occured since the auction went live last Wednesday 2/17 at 9:01am EST:

- The OBT eBay auction page has been viewed roughly 3,000 times
- We’ve received a total of 11 inquiries from potential buyers
- We’re currently in diligence discussions with seven of those companies

As some of you have undoubtedly noticed, the auction (which currently has zero bids) is due to expire this morning (2/24) at 9:01am EST. One thing became very clear to us by the end of the first day of the auction: no potential bidder, regardless of their level of interest was going to place a bid on eBay. It’s also interesting to note that none of the companies that have approached us have inquired about the eBay auction in any way. It’s simply been assumed that if there’s true interest on the part of a potential acquirer, both parties will take the necessary time to reach a mutually agreeable deal.

As such and in order to allow all prospective buyers to conduct due diligence to their satisfaction, we have decided to let the eBay auction expire and conduct all ongoing discussions on a direct (i.e., offline) basis. In this regard, we have requested that all prospective buyer proposals be submitted to OBT by next Friday, March 5 at 12:00pm EST.

Going into this process, our goal was to find a cost-effective way to broadcast news of the OBT sale to a broad range of potential acquirers, the majority of whom were likely not on our radar, and vice versa. While there’s no question a good amount of work remains to be done before we’ll reach a closing, the eBay auction has proven to be an extremely cost effective (emphasis on effective) lead generation engine.

I’m going to append brief progress updates to this post as we move towards our proposal submission deadline of next Friday 3/5. As always, I’d very much enjoy hearing your thoughts, feedback, comments, etc.

One final note: I just want to be clear that The Roach Post has no affiliation with OBT, its investors, or team beyond my role as a part time contributor. A couple of you had asked about this in your comments last week.

Today we announced the sale of my company, Open Box Technologies.  We will be selling the company – including our SesameVault online video platform – via an eBay auction that will run for 7 days, ending next Wednesday, February 24th.

The decision to put OBT up for sale came about as the result of our recent inability to raise investment adequate to support our plans and objectives going forward.  The OBT board and I choose an eBay auction as the sale vehicle to allow for the participation of the widest possible range of potential acquirers. This post is meant to shed some light on what precipitated our decision to sell, and why we’ve chosen eBay as the vehicle.

WHY WE’RE SELLING

The genesis of our decision to put OBT up for sale goes back to April 2009. Prior to April, we had spent the better part of previous 9 months developing the second version of our product, SesameVault 2.0. Everything we had learned since the launch of SesameVault 1.0 in 2007, including who our customers were, what they wanted, and how to serve them and make money went into the design of SesameVault 2.0. The launch of this product on was a major event for our company and the first step in a 12 month plan we had constructed to become the leading SMB online video platform. The only thing standing in our way: a very immediate need to raise additional financing.

Beginning in June – after the post launch dust had settled – one my partners and I set out to raise a Series B round of financing. Being that we were still a relatively young/small company and were only looking to raise around $2M, we focused our efforts on angel investors and early stage VCs in the Seattle, Boston, and New York areas. Very soon after embarking on this effort we secured commitments from two angel investors and a small VC firm amounting to about 60% of our goal. However, as the summer wore on we found it more and more difficult to secure additional commitments. It became clear we weren’t going to be able to close by our early-August goal and as such, decided to push our planned closing back to early November.

Picking up our efforts again after Labor Day, my partner and I found it to be an even more difficult fundraising environment. Aside from the small VC in New York that had made a commitment towards our round, virtually every other VC we spoke with ended up passing for one reason or another, usually stating that we were too early or that the total we were looking to raise was too small. Further, many of the angels we met with told us they simply weren’t making any additional investments at that time. To be honest, we were stumped. On the one hand we had commitments from angels and a VC who had come to us, but on the other hand most every group we met with wasn’t excited enough to invite us back for a second meeting.

In an effort to make sense of our situation, I had a number of conversations with OBT board members and advisors over the latter half of October. While a few urged us simply to take the commitments we had (again, totaling roughly 60% of our goal) and adapt accordingly, others expressed concern that perhaps we weren’t raising enough money. After much examination and discussion, the team and I determined that given the time that had elapsed since we originally set out to raise our Series B round and the various changes that had occurred in the market/economy at large, we would in fact need to raise even more money to sufficiently execute our 12 month plan. However and unfortunately, raising more money was clearly not an option. As such, in early November I recommended to our board that we suspend fundraising efforts and pursue a sale of the company.

WHY WE’RE USING EBAY

The original inspiration for using eBay came from a Ycombinator-funded web calendar company named Kiko, who after being made irrelevant by Google Calendar put their business up for sale on eBay. That said, I recommended that we use eBay to sell OBT for three primary reasons: 1) it’s cost effective, 2) it allows us to control the timeline, and 3) it’s public. While the concept of selling a business on eBay may seem strange (I’m not arguing that it’s not unorthodox), those criteria closely matched what the board and I were looking for in a sales vehicle.

Regarding cost, eBay is exceedingly inexpensive. On a sale totaling more than $100K, eBay’s commission is roughly 1.5% and the cost to list in under $100. By comparison, even boutique investment banks charge base retainers of around $20K/mo simply to determine if they can sell you business. If they find the answer is yes, sale commissions can easily be over 10% of the gross sale price.

In terms of time, we don’t have a lot to spare. As many of you know, eBay auctions range from 1 to 10 days; we’ve chosen a 7 day auction for OBT. Any alternative (engaging an investment bank, conducting a guerilla sales effort of our own, etc.) would have likely extended beyond our remaining runway.

Finally and most importantly, eBay auctions are public. We’ve spent the last two and a half months reaching out directly to companies we have identified as potential acquirers. However, there are companies we have been unable to reach and others that we likely haven’t even identified. It’s our belief that the attention generated by/inclusiveness of a public auction has the potential to bring these companies to the table.

DETAILS OF THE AUCTION

The OBT eBay auction went live this morning, February 17th at 9:01am EST. It will run for seven days, ending Wednesday, February 24th at 9:01am EST. Bidding started at $500K and a reserve has been set. All OBT assets are included in the auction. The big items include:

• Product: The SesameVault website, application, and platform
• Customers: All SesameVault customers and users
• Intellectual Property Rights: Three patents covering SesameVault and it’s commercial applications
• Production Infrastructure: Servers, storage devices, and networking equipment responsible for powering the SesameVault product
• Development Infrastructure: Servers and workstations used for the development of the SesameVault product
• Office Infrastructure: Fixtures and furnishings, including a killer ping-pong table

PARTING THOUGHTS

I founded OBT in 2005 with the vision of providing small businesses with the tools they need to leverage video on the web. Our team has spent the last four and a half years turning that vision into reality; building a fantastic product and a good book of business on significantly less capital than other competitors in the online video platform market. That said, it is clear we have brought our business as far as we can – in order to continue operations and take it to the next level, SesameVault needs to be taken under the wing of a company that has the resources to support it.

Stay tuned over the next week.  Should be an interesting ride.

Update (2/17 @ 18:10 EST): It’s been a little over 9 hours since the OBT/SesameVault eBay auction went live. Been a very interesting day. Here’s what’s happened so far:

• Over 1,200 people have viewed the OBT/SesameVault eBay auction page
• We’ve been contacted by four companies requesting additional information
• Two of those companies we had not previously identified as potential acquirers

Will continue to provide updates here on this post as the week progresses.

Update (2/22 @ 15:35 EST): We’re past the mid-point of the OBT/SesameVault eBay auction. Lots of good/interesting things have happened since it went live last Wednesday morning. Here’s a quick update as we head into the final stretch:

• Over 2,800 people have viewed the OBT/SesameVault eBay auction page
• So far, we’ve been contacted by a total of nine prospective buyers
• We’re currently in serious discussions with five of these companies

Will post another update this time tomorrow.

Ah the business plan. Many entrepreneurs and startups slave over these documents, pouring countless hours into building and revising them. Why? For a number of different reasons, most of which don’t produce any real value once the document has been completed.

As previously discussed, I believe there is really only one reason to write a business plan: to raise money. I highly suggest reviewing my previous post, “Business Plans – When and How to Use Them,” before using this outline to construct your own.

This post provides a detailed breakdown of a business plan template I have developed/refined over the last couple years and which I have used in raising multiple rounds of angel investment. In my opinion this template is most appropriate for a company that has been operating for a period of time, has a product in the marketplace, and is looking to raise a larger round of financing.

I will be following up this post on Tuesday with an example business plan I created using this template that you will be able to download/revise/use. There is no Holy Grail business plan template, however, I’m confident that if you answer the questions outlined below, you’ll be able to create a solid business plan that you can use to raise angel or venture investment.

COVER PAGE

There are two goals to strive for with a cover page: 1) make it aesthetically pleasing/distinct and 2) make sure to include your company name, plan title, date of the plan draft, and your company’s contact info. In general I’d recommend making friends with a freelance graphic designer to help assist you in designing a cover.

TABLE OF CONTENTS

Provide a quick breakdown of the information contained within your plan. Be sure to keep your table of contents to around a half page; no need to reference every little point or section, just the big stuff.

EXECUTIVE SUMMARY

Please refer to my previous posts – Executive Summary Template and Downloadable Example – for information on how to write a solid executive summary.

REVIEW OF THE MARKET

• What business are we in?

The first paragraph! You may recall this and the next question are also part of the Executive Summary Template I went through in my previous post. There are three elements that I would encourage you to include in your answer to this question: 1) company name and the market you compete in, 2) your product name and what it does, and 3) how your product is sold. The goal in answering this question is to provide your reader with a clear (albeit high-level) understanding of who you are, the market you compete in, what your product is/does, and how you sell it.

• What have we accomplished?

Investors want to see that you’ve made progress towards your goal before you ever thought about raising money. Even if you’re just getting started, it’s key to include some of your accomplishments right up front. Doing so makes you real, as opposed to all those other business plans that are simply pitching “good ideas”.

• Who are our competitors?

Rule #1 regarding competitors: never say you don’t have any! Saying that may cause investors to burst out in laughter and/or get up and leave the room. Seriously though, everyone has competitors; knowing who they are and how to position your business against them demonstrates you have a firm understanding of the marketplace and that you’re prepared to fight and win. My general rule of thumb is to break competitors into two groups: direct and indirect.

Direct competitors are companies that are going after the same customers as you are with products/services that fulfill the same need as your product/service. Indirect competitors are the companies you think you should keep your eyes on; maybe they aren’t going head-to-head with you today, but they could in the future.

• What have they done recently?
  • Product?

For each of your competitor groups, you want to talk about what they’ve done and what they’re currently doing in terms of products/services. How have they positioned their products? Are they focusing on any new features or services? Are there any general product-related trends you can identify? Who are the innovators versus the followers? The purpose of answering these questions is to provide a general assessment of your competitors’ offerings. Don’t worry about directly comparing their products to yours – we’ll get to that shortly.

• Strategy?

In this section we want to identify the go-to-market strategies for each of your competitor groups. How are their products sold/delivered? How are they pricing their products? Who are they selling their products to? Have there been any major changes over the last 6-12 months? The goal with this section is to paint a picture of how your competitors do business and to show where the holes/opportunities are that you plan to exploit.

• What do we think will happen next?
  • Market actions?

Time to take a step back and talk about market size and trends. There are a couple things that you should strive to address in this section: size and growth of 1) the overall market and 2) the market segments (i.e., the markets within the market). The richer the information you’re able to gather the better picture you’re going to be able to paint. As I’ve mentioned in previous posts, I’m a big believer in spending a little money to get a real market research/analyst report (e.g., Forrester, Gartner, IDC, etc.). Getting a real report does two things: 1) it provides you with a trusted source and 2) can provide a level of detail you straight up won’t be able to get by trolling through newspaper/journal articles.

While you could probably stop there, I usually add a little extra to this section regarding how the market movements/changes have or will affect how you and your competitors do business. Again, a key here is to show that your ahead (but not too far ahead) of the curve – the market is moving/growing/changing and you’re in the best position to take advantage of how business is and will be done.

• New solutions/competitors?

We’ve already talked about existing competitors, their products, and market strategies (i.e., the playing field). Here is where you want to discuss the likelihood of new competitors/solutions being introduced into the market over the next 9-12 months. Is your market getting a lot of attention/investment? Are general market shifts/changes creating opportunity for more or new types of entrants? Point being, you want to show that the course your plotting across the playing field is going to be relatively unobstructed.

• Competitor actions?

What are your competitors going to be doing over the next 9-12 months? Extrapolate your competitors’ product and market strategies forward and try to identify where you think they are going to be in 12 months.

As an aside, I think this is always a great spot to put as analyst quote that reaffirms your predictions around product, market, and competition. If you’d like to talk about how to get an analyst quote, shoot me a tweet @roachpost.

STRATEGY GOAL

• What do we want to achieve?

You’re going out to raise money because you want to do something. The strategy goal is that thing and includes three components: 1) where you’re going, 2) when you’re going to get there, and 3) how you’re going to get there. It’s important to be very clear and concise in defining your strategy goal – this really is the heart of why and investor would put their money into your company. In general your strategy goal shouldn’t be more than two sentences.

• Short term?

You’ve defined your strategy goal, now you need to talk about timing. I tend to use the short term as an opportunity to talk about what we’ve done over the past 3-6 months, and what we’ll be doing over the next 2-3 months to better set ourselves up to achieve our long term goal. In general, your short term goal should 1) be in support of your long term goal and 2) a period of time no longer than 6 months.

Your short term goal doesn’t need to be more than a paragraph in length. Again, the purpose is to show investors that you’re already moving forward with achieving your overall plan. You always want to be giving investors the impression that you’d like their involvement, but that the train is already pulling out of the station.

• Long-term?

Your long-term goal is really how you’re going to go about achieving your strategy goal. For a startup, you probably shouldn’t be talking about a period of time more than 12 months (multi-year financial projections, exit plans, and other business plan appendices are a different story). Keeping the long-term timeline to between 9-12 months is going to help/force you to talk about how you’re going to achieve your goal in a specific manner. Specifics are good. ☺

Unlike your short term goal, describing how you’re going to achieve your long term goal is going to take a few more words. Personally, I like to do this by addressing the specific goal associated with each element of my business. This concept will be explained in a future post, however we view the core elements of a business as Cash, Customer, Prospect, Product, Team, Infrastructure, and Brand. All businesses are made of up of these elements, and using this breakdown will help to provide investors with a complete understanding of how you intend to achieve your long-term goal. So, lets go through each of these elements and talk about what you should think about putting down.

• Cash?

How much is it going to cost to achieve your strategy goal? Where are the three or four primary areas where you will be putting these funds to work (i.e., use of proceeds)?

• Customer?

How do your customers relate to achieving your strategy goal? How are you going to keep them happy? Do you have plans to develop/leverage them in any way?

• Prospect?

How do your prospective customers factor into achieving your strategy goal? How will you be qualifying and selling prospective customers? What are you doing today and how will this change to better position you to achieve your goal?

• Product?

How about product? Are you going to be enhancing an existing product? Do you have plans to launch additional offerings?

• Team?

Do you need to expand your team to achieve your strategy goal? What are your key leadership hires going to be?

• Infrastructure?

What infrastructure needs are you going to have? Infrastructure should include everything from the things that produce and deliver your product (e.g., servers/hosting services in the case of a web software company) to the equipment and services your team needs to support their activities.

• Brand?

What brand and marketing activities are you going to employ to achieve your strategy goal? Such activities can include press relations, direct marketing, developing affiliate/partnership programs, attending industry events, etc.

EXIT

• How does this end/what happens next?

The exit strategy is an area I’ve personally tripped up numerous times in the past. It took me a while to realize that without having an exit in mind, no matter how far off an exit was, I wasn’t addressing one of the most important items to any investor: how they’re going to get their money back. Whoops!

While the purpose of the plan is to define the where, when, and how of your business over a specific period of time, the exit strategy should show the investor that you have an understanding (more like a belief) of how you’re ultimately going to realize a return for their investment. Exit strategies can range from going public, to selling to a strategic acquirer, to simply scaling. Defining your exit strategy is less about making big promises (e.g., “we going to sell”) and more about demonstrating you have some understanding of where and when the likely exits will be for your company (e.g., “we’ll be in a position to explore a sale in 12-18mo).

APPENDICIES

• Legal and administrative

Angels and VCs don’t like signing NDAs. Further and in consideration of the fact fundraising is more a kabuki dance than a binary process, I don’t think it’s a great idea to kill the mood by asking someone to sign an NDA just so they can get a copy of your business plan. It’s like asking a girl to commit to a second date before the first one is even over! That said, I always append my business plans with a simple, one-page disclaimer that states the plan is confidential, shouldn’t be shared with anyone, etc., etc., etc. I will include a copy of this appendix in the example business plan I’m going to post on Tuesday.

Parting thoughts…

You’ll notice that I’ve left a number of things out of this outline, including detailed information on team, financial statements and projections, and product features/services/pricing. Whether you decide to include these items in your business plan should depend primarily on the stage of your company. As mentioned, this plan template was last used for a web application provider that had been operating for a couple years, had a product in the marketplace with customers using it, and was going out to raise a second round of financing. All of that other information was either attached to the business plan as appendices, linked to on our company website, or contained in a separate document.

While I encourage you to take whatever you like from this outline, if your company is just getting off the ground, I’d suggest using the Sequoia Capital template we included in a previous post.

As mentioned, I’ll be following up this post with another on Tuesday that will include an example business plan I developed using this framework that you’ll be able to download/revise/use. Although I’m sure there will be many future adjustments/iterations, this outline has served me well over the past few years and I’m confident it’ll do the same for you. Please feel free to leave any comments or shoot us a tweet @roachpost if you have questions or would like to discuss any items included in this post.

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