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To write an effective business plan, here are some things you should know and do to improve your content and presentation:
Content
Know your competition. Be prepared to name them and tell what makes you different (and better) than each of them.
Know your audience. You'll probably want several versions of your business plan--one for bankers or venture capitalists, one for individual investors, one for companies that may want to do a joint venture with you rather than fund you, etc.
Have proof to back up every claim you make. If you expect to be the leader in your field in six months, you have to say why you think so. If you say your product will sweep the market by storm, you have to support it with facts. If you say your management team is fully qualified to make the business a success, be sure their resumes demonstrate the experience needed.
Be conservative in all financial estimates and projections. If you feel certain you will capture 50% of the market in the first year, then you can say why you think so and hint at what those numbers may be. But make your financial projections more conservative...for example, 10% market share is much more credible.
Be realistic with time and resources available. If you are working with a big company now you may think things will happen faster than they will once you have to buy the supplies and drive to the post office and write the checks and answer the phones yourself. Over-optimism with time and resources is a common error entrepreneurs make. Being realistic is important because it lends credibility to your presentation.
Be logical. Think like a banker and write what he/she would want to see, in an order that makes it easy to find the information.
Have a strong management team. Make sure they have good credentials and expertise. They don't have to have worked in the field, but you do need to draw parallels between what they have done and the skills needed to make your venture succeed. Don't have all the skills you need? Then consider adding an advisory board of people skilled in your field and use their resumes. Or discuss the short-comings factually in the business plan, showing how and when you will address getting the right people on board to fill in the gaps in your management team.
Document why your idea will work. Have others done something similar that was successful? Have you made a prototype? Include all the variables that can have an impact on the result or outcome of your idea. Show why they don't apply to your situation or explain how you intend to overcome them or make them better.
Describe your facilities and location for performing the work. If you will need to expand, discuss when, where and why.
Discuss payout options for the investors. Some investors want a hands-on role, some want to put associates on your Board of Directors, some don't want to be involved in the day-to-day. All investors want to know when they can get their money back and at what rate of return. Most want out within three to five years. Provide a brief description of options for investors, or at least mention that you are ready to discuss options with any serious prospect.
Presentation
Appearance counts. If you are in a technology business, don't use a typewriter. If you are pushing an artistic or imaginative idea, show some creativity (but not at the cost of keeping the document easy to skim and find facts).
Use informative headings in the document. Use lots of subtitles and let them sell your idea. Think of USA Today. Short paragraphs, headlines that convey information even if you don't read the article. Make it easy for your readers to find what they want to know. They won't read it from start to finish.
Answer the five W's. Good journalists tell who, what, where, when, why and how in their articles. Be sure your business plan does the same.
Keep it short. No matter how complex your technology or how abstract your concept, you need to get all the information the investor needs into 20-25 pages or less--including the financial projections.
Package it nicely. Two column documents are easier to read than full pages of text. Use charts or tables or graphics or illustrations to break up long passages of words. Add a spot of color on the pages if you have the option...a colored line on the pages or a colored logo or other ``spot" color. Readability studies say that adding a second color increases retention of the information.
Want some tips on what to avoid in a business plan? Try these. Got an unusual situation or concern and want a suggestion? Send me a message (kvivian@cloud9.net).
If you want to reprint this article, you may if you include the following attribution statement: ``Copyright 1998 by Kaye Vivian (kvivian@cloud9.net). All rights reserved."
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