It is a given that any business that seeks funding from an outside source will be required to provide a formal business plan. Even if you have a fairy godmother financing your company, however, there are several other reasons for having this important tool.
The very process of writing a business plan will help you define the type of company you are developing, as well as help you focus on the goals that must be achieved if you hope to succeed. It is useful to measure your progress, to strategize a marketing plan, and to hire experts for specific positions within the company. A good business plan does not simply explain who you are and what you do; it is a strategy to design your business’ future. Furthermore, having this document separates the professionals from the amateurs.
As an entrepreneur, you are probably used to endiring stress, taking risks, making decisions based on intuition, and relying on a handshake to seal deals. These are definitely useful skills, but consider a survey by Price-Waterhouse-Coopers which shows that two-thirds of fast-growing organizations rely on business plans. Without a business plan you may do well, but your chances of sustaining ongoing growth are slim. It is essential to plan for your business’ growth.
The bottom line is that a business plan is a way to fully understand all aspects of your business. So here are 10 unbreakable rules for writing a killer business plan:
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1. Keep the content clear when writing a business plan
There are few things more frustrating than trying to read through poorly written material. If you are not a strong wordsmith, hire a professional business writer who can get your plan on paper and make it shine. From the cover page to the appendix, you’ll want to ensure that your plan is clear, concise, and detailed—and no more than about 20 pages long. Future investors, partners or employees who go through your plan will be looking for specific information, so it behooves you to make it easy for them to understand.
2. Hook Them With Your Executive Summary
The executive summary clearly describes what your business does and what you want, and if investors are not impressed with it, they will simply stop reading. It is that important. Investors want to know why your business is unique so you need to give them a reason to believe that it will succeed where others have failed. Make it easy for them to have confidence that your business will thrive, but keep your reasons short and to the point—one page at most. In addition, an executive summary should show your financial projections and how much money you’re looking to raise.
3. Be Specific About Who Your Target Market Is
Provide specific information on size, growth potential, future sales, and trends.
Your target market is not, contrary to what you may secretly believe, everyone. Every business serves a specific demographic, such as new moms, coffee drinkers, certain income bracket, etc. This is where you show off your amazing skills of research and knowledge about your industry. Most market information can be gathered through your chamber of commerce, census data, other business owners, and industry associations. Remember to keep track of your sources so you can back up your claims.
Define the market by providing specific information on size, growth potential, future sales, and trends. This is where you will state your pricing and marketing strategy to show how you plan to profit against competition.
Your market analysis should answer these questions:
- How big is your target market?
- How quickly is that market growing?
- Where are the best opportunities?
- Who are your competitors?
- What do they sell, to whom do they sell it, and how successfully are they selling it?
- Why should customers pick you over the competition?
4. Show Your Business in the Best Light
Whether you call it a “Business Description” or “Company Overview,” use this section to provide a profile of your company, such as when it was formed, where it is located, and which legal business structure you have chosen. This is a good place to describe the success your company has achieved or, if the company is brand new, your or your partners’ previous accomplishments.
The Small Business Administration recommends that you list specific consumers, organizations or other businesses that your company currently serves or will serve. Use this section to highlight any competitive advantages your company may have, such as opening your ice cream shop across the street from a huge sports complex.
5. Don’t Be Afraid To Toot Your Leadership Team’s Horn
Think of this part as an online dating profile!
When it comes right down to it, investors put their money on people, not ideas. This is the section where you sell the people who will be running the business. Provide a profile on each of the founders, business partners or officers and describe their skill set, why they are qualified, and any accomplishments or connections they bring to the organization. Think of this part as an online dating profile: you want the readers to fall in love with these people on first sight. Include individual resumes in the appendix.
6. Show Them An Aggressive Marketing Plan
This is the driving force of your company. You can build the greatest business in the world, but without aggressive marketing you have no customers, and without customers you have no business. This section of your plan includes details of your marketing strategy and the channels you’ll be using to promote your business. For example, will you use direct mail, emails, newspaper ads, or online advertising? Are you going to do the marketing yourself or hire it out to a marketing firm? It is an undeniable fact that it is not always the best businesses that succeed, but the businesses with the best marketing plan.
7. Focus On the Benefits, Not Features, of Your Products and Services
You’ve spent a lot of time describing your business and target audience, but don’t forget to give the details about your product or service. What is it that you are really selling? Besides the obvious tangible product, you are selling a solution. Once you’ve outlined the features, this description needs to focus on the benefits.
What’s in it for the customer?
A feature is a characteristic of the product, what it does. A benefit is the advantage it will give your customer, or the value it will add to their lives. For example, the features of a smartphone may include music player, GPS, and camera. The benefits to the customer are that it is convenient, saves space, and organizes your life. In other words, what’s in it for the customer?
8. Show Them That Your Operation Plan Means Business
This section is the rundown of the capital and expenses needed on a daily basis to operate your business, like location, equipment, inventory, and vendors. It should illustrate what actions you’ve taken so far to get your business ready (demonstrating that you understand precisely how to run this particular business), as well as identify the milestones you expect to reach each year for the next 3-5 years and how you are going to reach them. Laying this all out effectively will show that you are aware of your industry’s standards and regulations.
9. Answer the Important Question
If your business plan is written to lure to potential investors, the primary question they will have is: “How am I going to profit by investing?” You do not need page upon page of reasons why your business will be profitable. Simply list the factors that count, such as: state-of-the-art equipment, exceptional location, cost of doing business is especially low, product is one of a kind, or leadership team has proven track record of making money. As you write the business plan, keep looking at it from the investor’s point of view to anticipate and address all the questions they are sure to ask.
10. Provide Support Through an Appendix
Think of the appendix as the support system for the rest of the business plan. This is where you include anything that backs up what you have said in the plan itself. Provide full financial projections, such as balance sheets, income statements, and cash flow statements. Include the resumes of key players in the organization, any patent information, customer lists, and supplier information.
Write a Business Plan: Shine, Buff, Polish, and Repeat
“What makes this business special and how will it be profitable?”
A good business plan is not static. That is to say, it will grow and change as your business grows and changes. As you hit or miss your targeted goals, you will learn more and amend your business plan. You should update your plan every three months.
Your first draft will likely be lengthy and overly wordy, and that’s ok. Get a second pair of eyes to read it and offer feedback, getting rid of anything that does not directly answer the question: “What makes this business special and how will it be profitable?”
The old adage “you only get one chance to make a first impression” could not be truer when it comes to your completed business plan. Luckily, when creating any written document, you get to go through plenty of drafts before you get to your “first impression”!
We’ve given you some essential tips for writing a killer business plan, but for a step-by-step template, visit the Small Business Administration.
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