A business plan serves two very important purposes, and should be written with both in mind. The first is to lay out a model for running the business that can be followed by the company as it progresses; it serves as a road map for the new venture, allowing managers to keep their eyes turned towards the future and have a steady concept of where the business is headed. The second purpose of a business plan is to explain to investors and backers the function of the business and why it will succeed, to elicit confidence in the new venture and to garner capital investment. A business plan has four main sections, with others added if they are appropriate. The four core segments of a business plan are: description of business, marketing, financials and management.
A business plan starts with the executive summary. This is arguably the most important part of the business plan in its role as a lure for potential investors. The executive summary gives a strong overview of the plan as a whole. It should talk briefly about the company, the service or products offered, key personnel. and how much money will be needed and what it will be used for. An executive summary can make or break a business plan, as most venture capitalists will read this first, and put aside the entire plan if it doesn't interest them.
The executive summary should be succinct, full of strong action words, and packed with excitement and energy about your entire business model. Follow the executive summary with a table of contents. This outlines each section of the business plan and appendices.
Next comes a description of your company. if a company already exists. This is the place to put any impressive achievements your company may have had over the years, to discuss what it has done since it began, and to give a quick rundown of past profits and financial information. A good company description will end with a sense of leaning towards the future, towards new and exciting projects just waiting for funding to be fulfilled.
Next, talk about your product. or the service you provide or plan on providing. This should be simple enough that a layperson can understand what you're talking about. Venture capitalists are usually intelligent people, but your product may not be something they are well acquainted with, and your vocabulary is undoubtedly chock full of jargon and acronyms that may leave them confused and bewildered.
The marketing segment of the business plan is where you can really impress your target audience. Start with an analysis of the market, looking at distribution channels, any applicable laws and any available market data you have on hand. A strong showing in this section of the business plan demonstrates to your venture capitalists that you are well acquainted with your prospective market,
and that they can trust their money to you. Follow the analysis of the current market with a discussion of how you plan to exploit the market. This should include as many details as you can muster, and ideally will show a number of strategies, in case one should prove unviable.
The financial section of your business plan will rely heavily on numbers, so either make sure you have a good head for them, or have someone available to help you with this part. Feel free to reference appendices in this section especially, using graphs and flow-charts as appropriate. The financials should include at a minimum a cost projection for the next year of operation, including startup costs if it is a startup venture, a profit-loss analysis, projected sales and any other numbers you can get your hands on.
The financial section is the part of your business plan you will be most heavily quizzed on, should you get a meeting with a venture capitalist. While they may not entirely be on sure ground when it comes to knowledge of your product or service, be assured, they know financials like nothing else. Make sure you know your numbers inside and out, so that you are confident when you do get a meeting. And if you don't know the answer to a question they pose to you, be honest about it and offer to find the answer for them; under no circumstances should you try to guess or make something up.
The last crucial portion of your business plan is a management segment showcasing your team of managers. Don't be afraid to brag about your Harvard MBA or the dot-com you catapulted to success. Venture capitalists would much rather entrust their money to a team of managers who have a proven track record and great credentials but a slightly boring business idea than to untried managers with a great idea. If you don't have any credentials yourself, it is a good idea to try to find someone who can pump up this section and place them on your board, or simply list them as an 'advisor'. If you can't do that, just be honest about your lack of experience, rather than trying to make mountains out of molehills when it comes to your credentials.
That's it; you're done with your business plan! If you want, you can include an exit strategy for your plan as well, telling whether you plan on selling off the business, going public, or acquiring more businesses. This should be targeted towards your venture capitalist, essentially explaining how you plan on getting them their money back -- plus lots and lots of profit, of course. When you're done, read your plan over as many times as you can, prune it until it positively radiates professionalism, and then cross your fingers. Good luck!
Category: Personal Finance