A business plan serves as a blueprint for running a business and explains to investors what the business will do and why it will succeed. It has four main sections: business description, marketing, finance, and management. The executive summary is the most important part, followed by a description of the business, product or service, marketing strategy, financials, and management team. An exit strategy can also be included.
A business plan has two very important purposes, and it should be written with both in mind. The first is to establish a blueprint for running the business that the company can follow as it moves forward; it serves as a roadmap for the new venture, allowing managers to keep their eyes on the future and have a constant concept of where the business is going. The second purpose of a business plan is to explain to investors and supporters what the business will do and why it will succeed, build confidence in the new venture, and raise capital investment. A business plan has four main sections, with others added if appropriate. The four main segments of a business plan are: business description, marketing, finance and management.
A business plan starts with the executive summary. This is undoubtedly the most important part of the business plan in its role in attracting potential investors. The executive summary provides a strong overview of the plan as a whole. It should briefly talk about the company, the service or products offered, the 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 it first and drop the entire plan if it doesn’t interest them.
The executive summary should be succinct, full of strong action words, and packed with emotion 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 business if it already exists. This is the place to post any impressive accomplishments your business may have had over the years, discuss what it has done since it started, and provide a quick summary of past earnings and financials. A good company description will end with a sense of leaning towards the future, towards new and exciting projects awaiting funding to be completed.
Then talk about your product or the service you provide or plan to provide. This should be simple enough that a layman can understand what you’re talking about. Venture capitalists are generally smart people, but your product may not be something they know well, and their vocabulary is undoubtedly full of jargon and acronyms that can leave them confused and confused.
The marketing segment of the business plan is where you can really wow your target audience. Start with a market analysis, looking at distribution channels, applicable laws and the available market data you have at hand. A strong showing in this section of the business plan demonstrates to your venture capitalists that you know your potential market well and that they can trust you with their money. Follow the current market analysis with a discussion of how you plan to exploit the market. This should include as much detail as possible and ideally will show a number of strategies should one prove unfeasible.
The financial section of your business plan will rely heavily on numbers; so make sure you have a good head for them or someone on hand to help you with that part. Please feel free to specifically reference the appendices in this section, using charts and flowcharts as appropriate. Financials should include, at a minimum, a projected cost for the next year of operation, including start-up costs if it’s a start-up venture, a profit and loss analysis, projected sales, and any other numbers you can get.
The finance section is the part of your business plan you will be asked the most about if you have a meeting with a venture capitalist. While they may not be completely sure of their knowledge of your product or service, rest assured, they know finance like nothing else. Make sure you know your numbers inside and out so you can be confident when you arrive at a meeting. And if you don’t know the answer to a question they ask you, be honest and offer to find the answer for them; under no circumstances should you try to guess or make something up.
The last crucial part of your business plan is a management segment that showcases your management team. Don’t be afraid to brag about your Harvard MBA or the dotcom that catapulted you to success. Venture capitalists would rather entrust their money to a team of managers with a proven track record and great credentials, but with a somewhat boring business idea than to inexperienced managers with a great idea. If you don’t have credentials, it’s a good idea to try to find someone who can provide details on this section and put them on your board, or simply list them as a ‘consultant’. If you can’t do that, be honest about your lack of experience rather than trying to turn mountains into haystacks when it comes to your credentials.
That’s it; you’ve finished your business plan! If you wish, you can also include an exit strategy for your plan, stating whether you plan to sell the business, go public or acquire more business. This should be directed at the venture capitalist, essentially explaining how you plan to get their money back – plus lots and lots of profit, of course. When you’re done, read your plan as many times as possible, trim it down until it positively radiates professionalism, and then cross your fingers. Good luck!
Asset Smart.
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