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The Four Cornerstones of Every Business Plan
June14,2010 The thought of preparing a business plan for the rst me can be very in mida ng. There are many "moving parts," and its easy to get lost in the details.
About The Author
Akira Hirai is the founder and CEO of Cayenne Consul ng, a rm that has helped hundreds of entrepreneurs prepare for the fund raising process by cra ing strategies, business plans, nancial forecasts, and pitch decks. Akira started two technology companies in Silicon Valley during the dot com bubble. His previous experience has spanned investment banking, management consul ng, so ware engineering, and sales management. He earned his A.B. in Engineering Sciences at Harvard University.

The task becomes much easier if you think of your plan in terms of four essen al cornerstones that serve as the founda on of all business plans: Opportunity, Solu on, Execu on, and Outcomes. Pre y much anything that goes into a business plan falls into one of these four categories:

Opportunity

Solution

Business Plan Execution Outcomes

1. Opportunity: Every successful business exploits an opportunity. Opportuni es arise from "problems" that customers are willing to spend money to solve: they want to stay in touch with friends (Facebook and Twi er); they want to eat a tasty Italian meal (Olive Garden); they want to be er manage their enterprise data (Oracle); they want to commute to work in a fun but fuelecient vehicle (MINI Cooper); they want to get and stay t and trim (LA Fitness). The Opportunity por on of your business plan delves into the nature of the problem: who experiences the pain; the severity of the pain; the trends aec ng the source of pain; how people are currently addressing the pain (both subs tutes and compe tors); and how much people are willing to spend to alleviate the pain. Broadly speaking, the Opportunity is a descrip on and analysis of your poten al market.

AkiraHirai Cayenne Consul ng 714.TOP.PLAN akira@caycon.com @akira_hirai www.caycon.com

2. Solu on: This is your brilliant idea. Exactly what are you introducing into the marketplace that takes advantage of the opportunity you've iden ed? How does it work, and how does it solve the problem? What are the features and benets? How will you price it and posi on it in the market? Have you patented it? How does it stack up against compe ng solu ons to the problem? A lot of rst me entrepreneurs think

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Hot Sauce! Secret Sauce for Entrepreneurs

that a brilliant solu on is the most important ingredient in building a successful business, but it's only one of many important elements. 3. Execu on: Execu on the hard task of turning ideas into products that people will buy is what separates successful entrepreneurs from dreamers. What is your plan for comple ng the development of your product and ge ng it ready to market? How will you generate awareness and close sales? How do you manufacture and distribute it? What kind of facili es will you need? What kind of management team will your company require? What does the product cost to manufacture? How will you make money? How will you overcome the regulatory hurdles? What types of business partnerships will you need to forge? What could go wrong, and what can you do to mi gate the risks? How will you carve out a protable niche and keep compe tors at bay? What kinds of variable and xed expenses will you incur to make this happen? How much investment capital will you need to pull this o? 4. Outcomes: This is your vision of the future outcomes if things go according to plan. How much of your product will you sell each year over the next ve years? How will the inevitable changes in markets, consumer behaviors, and compe ve oerings aect outcomes? How much cash and prot will your company generate? What will your balance sheet look like in ve years? Can you get there without running out of cash? If your company becomes successful, what are the viable ways for your investors to cash out? Use these cornerstones to organize your thoughts. When you sit down to start working on a business plan, grab four blank sheets of paper and write the words Opportunity, Solu on, Execu on, and Outcomes across the top. Now, start brainstorming. Get as many ideas down as possible. Don't worry about structuring things into a business plan yet. If one of your sheets looks empty compared to the others, then you have more work to do. When you're done, put these sheets of paper away for a few days. When you're ready, go back and look for a powerful, compelling story line that links the four sheets together. Next, go through each sheet and cross o the items that don't support the story line. A business plan, regardless of your target audience, is essen ally a narra ve that es these four cornerstones together. Thus, by going through this simple process, youve half way to having a wellconceived rst dra of your business plan!

CAYENNECONSULTING
2010 Cayenne Consul ng LLC

innovate|grow|succeed