The first business plan I wrote was a basic outline for a small residential real-estate venture.  It detailed the property, the company equity in the property, re-curing expenses, estimated value of the property, competitive rental market data and expected cash flow.  This simple, one-page, business plan helped secure a $10,000 private loan, that has hence been repaid.  This business is still operating successfully and profitably.

Putting together a business plan for a start up is a different matter.  The financials are not there yet, and financial forecasting is at best a guess.  Instead the business plan must focus on  ideas and products that serve to fill a gap in the target market.   It must also demonstrate why this company and this product is well-positioned to fill that market need.   Next, I’ll strive to write a start up business plan…

Sigma1 Financial: A Business Plan for Revolutionizing Financial Portfolio Software.

The Market —  Sigma1’s market analysis reveals a stunning gap in the B2C financial software space.  The exists plenty of portfolio analysis software, but nothing that is truly portfolio-optimization software.  I refer the reader to two prime examples:  1) Quicken Premier 2012 (R) and 2) Financial Engines (R).  Both tools help investors manage and analyze investment portfolios.  They help with tracking asset allocations.  Financial Engines goes further by providing portfolio advice on increasing or decreasing risk level and changing allocations between the following asset classes: cash, bonds, large-cap stocks, mid/small-cap stocks, and international stocks.  In some cases Financial Engines partners with other firms and recommended changes can be implemented automatically.

Competing products tend to focus on broad market sectors and have little to no support for individual stocks and non-traditional-asset-class ETFs (such as gold ETFs, sector ETFs, convertible securities ETFs).

Market analysis of the B2B space is more challenging because publicly available product data is scarce.  Nonetheless, in online social media conversations with investment professions, several features of Sigma1 software appear to be unique.  For now market analysis of the B2B space is an ongoing process.

Core Product(s) — The Sigma1 Financial Engine, presently code-named HAL0 (HAL zero), is based, in part, on heuristic modeling, machine learning, and evolutionary algorithms.  HAL0 has gone through rigorous alpha testing and has proven itself to be very robust for alpha code.  Surrounding the HAL0 core are both traditional and proprietary financial heuristic and quantitative investment models.  These models have been transformed into utility functions that plug into the HAL0 optimization engine.  Additionally, there are scripts and add-ons that enable 2-D and 3-D data visualization using standard Open Source tools such as gnuplot.

Beyond the Products:

The software developer:  I have been coding and investing since I was ten years old.  In college (undergrad) I earned a degree in Electrical Engineering with a minor in Computer Science, graduating with a 3.97 GPA.  After my undergrad work I developed electrical engineering software for Hewlett Packard, Agilent Technologies, and Intel Corporation.  I lead software development on a 5-person team that created the “silicon construction” engine used by 200+ engineers in the R&D lab.

While working and HP and Intel, I took graduate-level coursework in both Finance and Electrical Engineering.  During that coursework, my partner and I created software that used EA and heuristic methods to quickly solve difficult non-linear engineering problems.  It was years later, that I realized these methods could be adapted to optimize financial portfolios… using not only classical modern portfolio theory (MPT), but also other methods beyond MPT.

I also manage a proprietary trading fund within Balhiser LLC and have written over 150 investing articles posted at

Software Infrastructure and Development Model:  There is a crucial difference between undisciplined “coding” and real software development.  Both can create software that works in the present moment.  A structured software development model, however, creates software with a future.

Sigma1’s HAL0 software development environment (SDE) includes a revision control system, software regression tests, unit tests and tailored software testing support  and debug tools.  Some of the regression tests required special effort to work with the (pseudo-random) algorithms used in the software.  Careful use of srand() and rand() calls allows HALo to maintain robust regression testing capability.

Further, a revision history and log, dates back to day 1 of software development.  It charts what bugs were found and how they were fixed.  It explains what tradeoffs were made and why.  The revision history and comments in the software suggest possible improvements.

The HALo SDE makes it much easier to add and test both run-time improvements and new features.  And, it would allow other software developers to more quickly come up to speed on the code.  This would allow new developers to collaborate on or even take over HAL0 software development.

Marketing, Branding, Company Structure:   Currently Sigma1 and HALo IP and assets are held within Balhiser LLC.  Among these assets are approximately 40 registered domain names, about 20 of which are suited towards portfolio optimization software.  My goal is to secure US trademarks on one or more of these names.  Obviously overt disclosure of these would be unwise at this time.

Having learned that building web and social media awareness is not an overnight process, I have begun building that online presence using a variety of avenues, including  This process in is its early stages, but Googling “Sigma1 Financial Software” or “Financial Software Heuristics” produce page 1 results.

The Business Model — The Sigma1 Financial Software model includes both B2B and B2C components.   The B2B model is centered around leasing the portfolio optimization engine and software add-ons to money managers, institutional investors and/or investment advisers.  The optimization is not limited to portfolios alone, but can also optimize funds and proprietary-trading accounts.  Along with software leasing fees, businesses are likely to require training in the use of software.  Limited training could be negotiated as part of the software lease agreement, however additional training will also be a revenue source.  Finally consulting and custom-feature development may be additional revenue sources to the business.

The B2C component of the business model is currently planned to be completely internet-centric.  A very limited free online version can serve 2 purposes.  1) As a marketing tool to induce users to pay for a full-featured subscription-based model, 2) possibly, as a source of ad revenue.  A full-featured paid-subscription B2C version would be ad-free and feature larger portfolios and greater investment modeling, optimization, and visualization features.


* Product names, logos, brands, and other trademarks featured or referred to within this document are the property of their respective trademark holders.

2 thoughts on “Drafting a Business Plan

  1. Adam

    Some really helpful tips here, I am actually trying to get a start up going at the moment. so of course I am desperately in need of a comprehensive business plan. One thing that I am confused about is my portfolio analysis. I don’t know how it fits in with my personal stock and investments. Any advice would be greatly appreciated.

    1. admin

      Hi Adam,

      I took a quick look at the website and here’s my takeaway. Yes, asset valuation is a key component of portfolio optimization as is portfolio analysis. Specifically, a common approach to portfolio construction involves finding undervalued assets (forecasting higher expected returns) and historic risk data. Using an asset-valuation model to forecast expected return generally assumes that asset values will return to their (ever-evolving) true values. A missing variable in transforming an asset-valuation difference into expected return is time frame; how long will it take for undervalued assets to return to their “true” values.

      The expected-return estimate is made for a variety of assets (stocks, bonds, ETFs, etc); The other component of portfolio construction is risk-measures. There are two “generic” risk measures I personally favor 1) portfolio standard-deviation (after re-investment of dividends, interest, etc.), 2) deviation from the “total asset universe” [a measure of diversification, or relative lack thereof].

      These first paragraphs are in reference to your comprehensive business plan query. Simply put, valuation + risk analysis are the bread and butter of portfolio construction. BTW, the piece that “HALo” brings to the table is an efficient portfolio construction engine.

      As to personal investment advice, I must currently refrain from offering personalized investment advice. This is based on my basic understanding of securities law.

      Best wishes with your start-up!

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