One of the services I offer is professional business plan writing. In the current financial market and economic climate where competition for investment capital and lender dollars is so fierce, it is absolute imperative that entrepreneurs looking for funding have a professionally-written business plan. Whether you have a startup, early stage business, or a well-established company and are looking to expand, if you are looking for investment dollars or a loan, you need a quality business plan; period.
In this week’s column, I will discuss some of the essential elements of a quality business plan that should be included, regardless of the type of funding sought. While this information can help those attempting to write their own plan, I strongly suggest contracting with a professional business plan writer who can help present your business in the best possible light to maximize your chances of successfully attracting investment capital.
First, the “voice” of the business plan should be that of the principal entrepreneurs. Your passion, personality, point of view, style, etc., should come-through loud and clear throughout the plan. This can be tricky for a professional writer, since obviously the entrepreneur is not the actual writer. The way I deal with this important issue is by working directly with the principals of the company in a consultative role, involving the entrepreneur(s) in the entire process, from start to finish.
I provide detailed questionnaires for the principals to complete, which are formatted in such a way as to pull enough information out of the entrepreneur(s) to give me a sense of their voice. I say “pull” because many entrepreneurs are not natural writers, which can make my job extremely challenging in terms of getting the information necessary for writing a detailed plan. Sometimes I walk my clients through each question, and sometimes I just have a conversation with them to get what I need to complete their plan.
Entrepreneurs should be wary of business plan writing companies that claim to write plans with little or no input from the principals, since using this approach makes it impossible for the entrepreneur’s voice to come through in the final plan. Also, some business plan writing companies use a team approach, with several different writers working on pieces of the plan. I would not recommend this approach either, since it would be very difficult to maintain a consistent voice throughout the plan (of the entrepreneur or anyone else).
In terms of the structure of the plan, all plans, even the most basic, need certain fundamental sections that investors and lenders require. The first is an Executive Summary. This should be the first section of a plan, and should contain a detailed description of the business, a summary of each of the other main sections contained within the body of the plan, and finally “the ask,” meaning at the end of the Executive Summary the amount of money requested, along with the format of the anticipated financing should be included. Keep in mind that many readers will never read past the Executive Summary, so you must tell a complete story of your business within this first section.
The ask should sum-up what the entrepreneur is looking to do with the money received through financing (the go-to-market strategy), along with the amount sought, the time-frame within which funding is expected, and the structure of the financing—loan with terms; equity financing with structure (preferred shares, equity percentage ownership, assumed valuation, usually at year five, etc.) and the exit strategy.
The following sections should be included, although there is room for variation, depending on the type of business, the amount of money sought, etc. There should be a detailed product/service section, which explains what the company will sell, for how much, what the costs per unit/hour, etc, will be, what makes the product or service unique, who the main competitors are, etc, etc. For those entrepreneurs looking for angel financing, this section is critical because most angels only invest in businesses within industries that they hold specific experience within, so it is very important to fully explain why your product or service will find a market, since these investors are experts on their respective industries.
You should have a Market Research and Analysis section, with a detailed discussion of the market, the key competitors, the products and services they offer, how they are priced, the total market and how your business will fit into that market, etc. You must show investors/lenders that you fully understand your market, and how you will gain market-share, or how you will create a new market niche for your product. Those who have the money and desire to explore this aspect of their business fully can conduct one or more market feasibility studies to determine what the actual market for their product or service is and what it will take to penetrate that market.
There should be a section on your Facilities and Operations Plan, which provides a detailed discussion of any facilities, offices, production equipment, distribution networks, labor requirements, etc, that you will need. A summary of costs should be included in this section, with the full detail of these costs contained in the Financial Analysis section of the plan. Estimates of costs should be based on actual research. For example, if a production location is required, the actual cost of a building (to rent or buy) of the necessary size in the desired physical location should be used in the financial model to make cost estimates as realistic as possible. The reader should get a strong sense that the entrepreneur has done their homework and is serious about moving forward with the business.
A Sales and Marketing Strategy section should include all relevant detail on the promotion, marketing, and sales of the company’s products/services. If there will be Internet sales, there should be a detailed discussion of all Internet marketing operations, including SEO (Search Engine Optimization), pay-per-click advertisements, banner ads on specific websites, expected partnering/strategic alliances and other relationships with complimentary companies/organizations, a listing of companies that will provide website development and marketing services, fulfillment services, etc, and anything else related to Internet marketing. Each business has its own unique requirements when it comes to promotion, marketing, and sales, and entrepreneurs need to demonstrate to readers that they understand what it will take to sell their products and/or services.
In the Management and Personnel section, the entrepreneur(s) have an opportunity to present their unique and valuable personal contribution to the success of the business. For angel investors, the backgrounds of the principals of the business are probably of secondary importance only to the business concept itself. Angels simply will not invest in companies where the key individuals do not have direct and meaningful experience and success. I typically include detailed narrative biographies in this section, with full CV’s to be included at the end of the plan in an appendix.
Last but not least, the Financial Analysis section must contain, at minimum, three years of the three basic financial statements—income statement, cash flow statement, and balance sheet—with at least the first year broken-down by month. I provide five years of data, with the first two years displayed by month, and the following three years by quarter. Additional financial tables should be provided depending on the type of business. These supplementary tables could include revenue and cost-of-goods-sold detail, employee cost detail, loan amortization table (if a loan is sought), marketing plan cost break-down, etc. Basically, any information that can help the reader understand the business and that showcases the business in a positive light, (which will help motivate the reader to fund the business) should be included.
Some other sections that can be added are a SWOT Analysis section—Strengths, Weaknesses, Opportunities, and Threats; an Objectives section, and a Keys to Success section. While there is no set format for the “perfect” business plan, I have found that the above-mentioned sections are universally recognized by investors and lenders as indispensable to an effective business plan. This is an extremely challenging environment for entrepreneurs looking to raise capital, so having a strong business plan is vital. I hope this article was helpful and I wish you great success with your business!