Creating an effective and attractive business plan is one of the biggest challenges any entrepreneur or business-owner faces. A business plan is useful when preparing to start a business as well as when you’re in the middle of one trying to figure out where to go next. It needs to be both effective and attractive because you are not necessarily going to be the only one viewing it…many people are starting businesses hoping to get funding from banks or other investors. These people want to see something they can believe in, and preferably something that sparks their interest. Here are some fundamentals when getting started.
First: Seriously consider hiring professional help. There is no such thing as a ’simple’ business plan if you want it to work. If you are not an experienced business plan writer, a successful investor, or a successful business owner, chances are the money invested in hiring someone who has some or all of these qualities will be well spent. But whether you’re doing it yourself or evaluating one that was created for you, the following points should be covered.
Overview/Summary: Attractive business plans will have this in the beginning, so that anyone other than yourself who looks at it can quickly ascertain why you’ve created the plan in the first place. Whether its to attract investors, improve cashflow, or develop exit strategies, your business idea should be outlined here along with your goals.
Principals: This is primarily for investors that don’t know you, but it can be a wake-up call to yourself as well. List everyone involved in your business here. Include their primary role in your business, and summarize their related education and experience (accomplishments are ok here, but what’s most important is what is relevant). Sometimes in the creation of a business plan existing roles are revised as we realize people are better geared in other directions than the one that was initally chosen.
Demographics, Psychographics & Marketing Data: The important word to describe this section is need. Show the people who are going to purchase your product or service, and be as detailed as possible. Target ages, gender, ethnicity, family status, household income, political affiliation…these are only a few of the many qualifiers that you may need to identify your preferred customers. Some businesses are broad-based, some are not, but remember you’re identifying the people most likely to buy. Now show why they’re already needing this product/service. If you can, use marketing data that shows their purchases of similar products/services to yours…if you can’t do this because nothing like what you have is currently on the market, you’ll need to get your own data by doing surveys and/or providing samples.
Competition: Show who’s already providing your product/service, or the closest thing to it. Explain how you can co-exist (referring back to market data) and how your business will stand out from the competition in terms of your product/service, management, or other advantages. Talk about customer retention here, how often the target customers are likely to switch from one company to another, and for what reasons. The purpose of this section is to show your awareness of similar products/services out there, and with that awareness why you feel your business will be successful anyway.
Logistics: Now that you’ve shown your business is needed, show how you’re going to get your product/service to those that want it. Outline product creation, necessary training, advertising, marketing, sales, demonstration, distribution, protection (patenting, loss-prevention, etc.), employment, etc. Everything that takes place from the customer saying I want it! to I’ve got it! Do not mention money here. Only talk about what needs to be done and how quickly it can be up and running, not what it will cost.
Revenue/Income: Now you can talk about money, and starting with the positive end is the best way to go. It’s important to stay realistic here, don’t believe you can go from nothing to taking over the world overnight. A respectable business plan starts with the lower end of revenue projections and then shows more optimistic ones (along with explanations of why to be optimistic). Make it clear by referring to your marketing data that you are not making these numbers up…more than one business has crashed and burned by assuming a high rate of sales when no evidence was shown to support this. Clearly make the distinction between your gross sales amounts and your net income after all other expenses have been paid. If possible, try to show more than one revenue stream, such as growing equity in commercial property or equipment
Investment/Expenses: This is still positive. Here you matter-of-factly state the cost of starting up and running your business operations, and how much you are looking for of these amounts from outside investment. Show what investments/loans have already been secured (including your own money). Detail exactly how the investor/bank’s money will be spent, and how it will be returned, over what period of time, with what incentives (interest, stock, profit-sharing, etc.). Explain any security or guarantees (collateral, credit ratings, outside income that can be used to support) you will be offering. Remember it needs to sound attractive and understandable to someone outside your company who does not know you personally.
Call To Action: Remind whoever is reading this of your original intention, and why you feel your business is destined for success! Get them excited about the idea of investing with you, and outline the next step needed for them to start this process. Let them know that any additional questions they may have (hopefully few if you’ve done your job here) will be answered.
That’s it…simple, right? No. This bears repeating; Seriously consider hiring professional help. If all this detail wasn’t enough to frighten you into worrying that you’ll forget something, I’ll add this: Certain investments will require the oversight and regulation of the SEC (Securities and Exchange Commission), which means that if your business plan is not as comprehensive as it should be to your investors, you can go to jail. For most businesses, this is not a real concern…instead of going to jail, you can just go broke. If you want to save money, write up the business plan yourself, and have it edited by a professional. Don’t try this at home :)
