Whether you are just starting out and need a startup investment or looking to grow your business and raise capital, a business plan is a must. Indeed, a business plan is not only essential if you want to get people to invest in your idea, it can help you articulate what you hope to accomplish with your business – your mission, your goals and your values - and to chart the company’s growth trajectory.
However, to be successful, a business plan cannot simply be a bulleted list of an entrepreneur’s thoughts and reflections, hopes and dreams. It must be a serious business document with the following six elements.
“A summary is the ‘elevator pitch’ of your business plan,” says David Mercer, founder of SME Pals, a blog dedicated to helping entrepreneurs. “Most often, to attract a new investor, you have to hook it with an excellent pitch. Without getting their attention, your business plan, no matter how well researched and presented, may not stand out enough.
The executive summary should, in short, describe the “problem you are going to solve and why this problem needs to be solved now,” says Peter Arvai, CEO of Presentation Software Prezi. “If you can’t communicate this deeper purpose to others, you’ll have a hard time convincing investors to fund your idea and people to join your team. ”
Point: Write the summary last, after you’ve done all your research and put everything on paper.
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2. Description and biographies of your leadership / leadership team
“The entrepreneur must clearly demonstrate what he brings to this business: the idea, the technical ability or the passion,” says Hossein Rahnama, Founder and CEO of Flybits. “Investors want to understand how you’re going to perform using your personal strength. “
You should also “talk about the leadership team,” says Andrew Witkin, CEO of StickerYou. “If the management team has already proven itself in the creation and the realization of companies, this must be underlined. Business plans have several goals, but one of them is to build trust, and the team is as important as the product to potential investors and partners. “
“Investors bet on jockeys, not horses, and knowing who will execute an idea is essential for an investor to make an investment decision,” said Richard J. Foster, president of Foster Management & Holdings. “Very often I see multiple companies with the same idea, but the one to invest in is one whose team has the experience and credentials to be successful. Having the best idea with the wrong team is a recipe for failure, but proving that your team is the best [right] one to run [your idea] can make all the difference.
3. Description of your product (s) or service (s)
“When developing a business plan, it is crucial to clearly [explain] the need your product or service is trying to meet, ”says Elena Filimonova, senior vice president, global marketing and strategy, CGS. “Your business plan should highlight how the product or service will meet the need, what is unique about your offering, and why it would be difficult to replicate. To do this, you need to describe the key differentiators, characteristics and why the product or service is something that stands out in the market.
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4. Market / competitive analysis
“Every business plan should have a section that defines the target sales market – who you are selling to,” says Victor Clarke, owner of Clarke Inc. “This is the part that requires considerable research in areas such as Industry sales data related to the service or product you are selling and trends within the industry. You should look at the competitors and see who they are targeting, look at your current customer base, and create a profile of an ideal customer or customer for your product.
“For a business plan to be effective and attractive to investors and partners, you must be able to provide tangible data and information that supports the idea that your demographics are strong and growing, and that Market trends support the continued need for your service or product offering, ”says Brock Murray, co-founder and COO, seoplus +.
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“Sequoia Capital has a great framework that every business plan should use: separate your total addressable market (anyone who probably needs your product category), usable addressable market (anyone who needs your product, or specific service, limited by factors such as where you can do business) and Serviceable Obtainable Market (the part of the market that you can realistically capture), ”says Christopher S. Penn, vice president, Marketing Technology , SHIFT Communications. “For example, many companies say that everyone is a customer, and although it could be a TAM, if the company has only one salesperson, their SOM is significantly smaller. Most importantly, VCs and investors want to understand what is realistically achievable, and divide your addressable markets… show them you’re not just presenting pipe dreams.
Also be sure to “include a competitive analysis section,” says Bryan Robertson, Founder and Chief Revenue Officer, Mindyra. “Every business has competition, so it’s a good idea to find businesses in your industry that are fighting for the same customers. You should include specific details about their strengths and weaknesses. This requires you to familiarize yourself with your market. It also encourages you to think about ways to differentiate your business. [from] the competition.”
5. Finances (how much money do you need and when you will pay it back)
“Make sure the plan gives specific details on how much start-up capital will be needed, where it will come from and how it will be repaid,” said Bruce Stetar, executive director, Graduate Business Programs, SNHU. “Equal importance should be given to how you [plan to] repay the capital as you have acquired it. Investors want to know when they will see a return. Not adequately planning for the acquisition and repayment of capital is one of the main reasons new businesses fail. ”
“Whether you are hoping to receive funding to build a physical store or a tech company, you have to have your numbers right,” says Erica Swallow, founder and CEO of Southern Swallow. “For tech entrepreneurs, I’m a big fan of the startup financial model model developed by startup investor David Teten, working with a few colleagues. Based on an almost fully automated Excel spreadsheet, it allows start-up entrepreneurs to map out their financial plan, without being too overwhelming. It’s the best startup financial model I’ve come across in the past five years.
6. Marketing plan
“It is essential to have a plan [for] how you’re going to spend your marketing dollars, ”says Deborah Sweeney, CEO of MyCorporation. “Evaluate the different options (paid research, salespeople, flyers, [social media], etc.) and the return on investment associated with each. “
“The plan should cover both sales and advertising strategies and costs,” says Stetar, as well as customer acquisition costs. “Be careful here because you’ll look great if you overshoot, but it will cost you investor confidence if you don’t.”
A successful business plan is one that is easy to read and follow.
You need to make your business plan easy to read and follow. “There is nothing more intimidating than receiving a 30-page all-text business plan,” says Swallow. “Keep your potential investors engaged by including photos of products and users, team portraits, colorful headlines, financial charts, charts, tables, anything that makes reading more enjoyable. Even the fleas help.
Indeed, “don’t underestimate the importance of visuals,” says Arvai. “Researchers have found that presentations that use visual aids are, on average, 43% more persuasive than those that do not. “
Finally, before going public with your plan, “get yourself reviewed by trusted mentors and expert peers.” [and give you] their comments, ”says Sam Lundin, CEO of Vimbly. “Having [someone] review your business plan [before you present it to investors] is crucial.