No matter what industry you’re in, you need a business plan if you want to obtain funding — and you might also have to provide one when applying for patents, copyrights and even permits.
An effective business plan helps potential investors gain an understanding of your business idea and its prospects for delivering returns on their investments.
While you can easily find someone to write a business plan for you, it costs an arm and a leg if the writer has any kind of track record of getting companies funded. The ones who seem cheap — well, you’re better off writing it yourself.
Go Easy on the Eyes
Keep in mind that the investors you are most interested in are swamped with other business plans and thus might only have time to skim your or only read the first page before deciding whether to read it in full.
Assume they might have a limited attention span by beginning with an executive summary that the most important details about your company as an investment. You might even want to format the executive summary as a miniature business plan, as long as you keep it to a single page that’s easy to read.
Speaking of easy to read, your business plan will become easier to populate with information if you start out by writing an outline; toward the end of the project, you’ll be able to use that outline as the starting point for a table of contents.
Business Plan Sections
Financial forecasts are the most important part of successful business plans — at least where investors are concerned. Ultimately this section conveys how soon after launch your company will break even and eventually become profitable.
To complete this section, create a five-year forecast of revenues and expenditures, starting with a bird’s eye view and then getting down to line-item detail on everything you expect to spend on inventory, operations, marketing, facilities, and salaries.
Provide estimates of your ability to pay for daily expenditures, starting with what you know right off the top of your head. Research the rest, and then when you’re done, run it all past your accountant.
Business Plan Do’s and Don’ts
- Do read sample business plans available online but don’t copy and paste any of the content into your own document — this dramatically increases the likelihood that you will make mistakes that put you at risk of being rejected by prospective investors.
- Don’t let your urgent need for funding result in a rush job on writing the business plan.
- Do continue to run your business while you write the business plan — don’t turn any customers away during this time.
- Don’t assume that the reader is already an expert in your industry or product.
- Do explain everything in layman’s terms in the main body of the business plan, and then get more technical in the appendices.
- Don’t assert that your company is completely unique — there could be competitors operating in stealth mode that you simply don’t know about yet.
- Do speak candidly about potential risks as well as any current problems.
- Don’t overlook the possibility that the economy might change directions — how will that change your marketing and finances?
- Do make the main body of the business plan easier to read by moving supporting documentation to the appendices of the business plan.
- Do include in the appendices: detailed market research, analysis of the competition, survey results, assessments of customer demand and prospects, copies of marketing collateral, ad copy (even advertisements that haven’t run yet), and articles about the company.
- Do polish the proposal by first editing it to make sure it the organization flows logically, and then circle back to edit the style, grammar, punctuation and spelling.
- Don’t forget to double check all financial data you include in the document.
- Do make sure you use consistent numbers throughout the document.
Target Your Audience
Ideally, you would create a general version of your business plan to begin with and from there create tailored versions for each prospective reader of the document. Although that adds to your workload, individually targeting your audience increases your chance of success.
You might not succeed right away, but you can turn initial denials into opportunities to further refine your business plan: Ask anyone who declines your proposal why they decided that way so you can get helpful feedback; do everything you can to revise your document to reflect their suggestions. If you do enough of this work, you may be able to resubmit your new and improved business plan to people who initially said no.
Fellow entrepeneurs, have you written your business plan yet? What was the biggest challenge in doing so?