A comprehensive, carefully laid out business plan is vital to the success of an enterprise in raising start-up or additional capital
A good business plan helps the entrepreneur as a guide on how to structure, run, and grow the enterprise. It can be for a start-up or an existing business. It helps to get funding and investors/business partners.
It is a tool to use in convince this set of people to come into partnership with your business. So this ‘marketing’ tool for funding for your business must have the right ingredients for it to perform its functions.
Investors, interested in funding a business, whether an existing one or a new one are interested in earning some returns for their investments as well as an assurance that the business would survive
Hence, business people looking for funding must know how to write convincing and winning business plans, though they could employ professionals to do this for them.
A well-written business plan must detail the venture’s present status and needs, and expected future status and expectations. The plans must present these particulars in plain facts and figures in areas of resource requirements, marketing strategies/ plans, financial projections, production demands, and personnel needs.
The business plan must be written to show the market viability of the venture: marketability of its products/ services; its financial viability—ability to break even and earns profits and returns for all stakeholders of the venture.
The business plan must convincingly demonstrate why potential customers would buy the services or how investors would make an adequate return (or when and how they could cash out).
- Show your product/service market strengths: Let your business plan shows the viability and potential of the product/service in the marketplace. Clearly show sales projections, market shares and profitability. You must show evidence of customers’ needs and preferences for the product or service. If a start-up, it would be beneficial if a prototype product or experimental service has been tested with a select group of the target market. You can also include in the Business plan letters of support and commendations from these potential customers.
- Show the User’s Benefit: Any user of the plan must be able to see the benefits to him or her as a potential stakeholder in the venture. What he/she will gain from the venture and how it will come to him/her.
- Present data, facts and figures to back your claims: Present the necessary data and figures to back your products’ claims in the marketplace. Good research and surveys are needed for this. Users should be able to verify any claims or figure presented in the business plan. The plan must be based on realistic and verifiable data and figures, not mere assumptions. Your marketing research data must show the rate of acceptance for the product or service, credible sales projection, production plans and management/personnel plans.
- Make sound projections: A five-year forecast of profitability must be included in the Business Plan. This will enable the investors to see at a glance the returns on their investments and be able to make informed decisions. The financials should be comprehensive, reliable and realistic not ambitious figures. All important expenses and costs should be taken into consideration and the financials should be based on realistic marketing data and the operating environment.
- Clearly show rates of returns: Your financial projections should help investors make informed decisions on their proposed investments. It should help them determine whether they would invest or not, how to invest and at what cost. Note that investors usually are looking for short-term investments and want to cash out very early.
- Critical Issues: Investors will like to invest in ventures in which the founder has a magnificent track record, has an accepted product in a proven market and has a competent and fully staffed management team.
- Note that there is usually no standard way of writing or presenting a Business Plan. Businesses are in different sectors of the economy. Hence, there are differences in their marketing, production, and financial plans and strategies. These must be reflected in Business Plans.
However, these critical parts must be incorporated into your Business Plan.
- Executive summary: Brief of what your venture is and the reasons for its success. Include your mission statement, your product or service, and basic information about your company’s management team/ employees, and location. Give a brief of the financial and growth projections.
- Company description: Detailed information about your company. Your cutting-edge, list of consumers you intend to serve, your competitive advantages in terms of products, services, expertise, location and strengths in the marketplace.
- Market analysis: Industry outlook and target market analysis with research data to show your and competitors’ strengths/ weaknesses, industry trends and outlook. And your position in the industry viz-a-viz all these.
- Organization and management: Legal nature of your business, how you are structured, the organizational chart, with key personnel qualifications and experience. You may include resumes and CVs of key members of your team.
- Service or product line: Describe your key offerings, benefits to customers, and the product lifecycle. If appropriate state plans for intellectual property and copyright, research and development plans and strategy.
- Marketing and sales: State your strategy and approach on how to attract and retain customers. Your unique approach to winning customers over competitors. Give a comprehensive description of these marketing and sales strategies.
- Funds required: Carefully outline your funding requirements, how much funding you need over the next five years and what it would be used for. Specify if you want debt or equity financing, terms and length of time of such. Include a future strategic financial plan, stating how you will pay off debts and other similar things.
- Financial projections: Show realistic financial projections of the venture. Provide a financial outlook for the next five years, including forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. The first-year projections should be detailed and broken down into monthly and quarterly projections. Explain your projections, and match them to your funding requests. You use graphs and charts to illustrate your projections.
- Appendix: This will include supporting documents and other materials like resumes, product pictures, letters of commendation, licenses, permits, patents, legal documents, and other contracts.
The length of your business plan fully depends on the purpose the document intends to serve. If it is for internal consumption and management purposes, it can be limited to 3-10 pages. For external purposes, it can be between 15 – 35 pages depending on the critical information to be included.