Whether you’re just starting out and need a seed investment or looking to grow your business and raise capital, a business plan is essential. 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, goals and values - and 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 musings, hopes and dreams. It should be a serious business document with the following six elements.
“An executive summary is the ‘elevating pitch’ of your business plan,” says David Mercer, founder of SME Pals, a blog dedicated to helping entrepreneurs. “A lot of times, attracting a new investor is about hooking them with a good elevator pitch. Without getting their attention, your business plan, no matter how well researched and presented, may not stand out enough.
The summary should, in short, describe the “problem you’re going to solve and why that problem needs to be solved now,” by you, says Peter Arvai, CEO of presentation software Prezi. “If you’re not able to communicate this deeper purpose to others, you’ll have a very hard time convincing investors to fund your idea and people to join your team.”
Point: Write the executive summary last, after you’ve done all your research and put everything on paper.
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2. Description and biography of your leadership/management team
“The entrepreneur must clearly demonstrate what they bring 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 will execute using your personal strength.”
You should also “talk about the management team,” says Andrew Witkin, CEO of StickerYou. “If the management team has a proven track record in building and delivering businesses, this should be highlighted. Business plans have several purposes, 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 critical to an investor making an investment decision,” said Richard J. Foster, president of Foster Management & Holdings. “Very often I see several companies with the same idea, but the one to invest in is one whose team has the experience and credentials to succeed. Having the best idea with the wrong team is a recipe for failure, but proving your team is the [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 [explain] the need your product or service is trying to fill,” 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 should outline key differentiators, features and why the product or service is something that stands out in the market.
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4. Market/competition 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 competitors and see who they are targeting, look at your current customer base and create a profile of a customer or an ideal 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,” 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 (everyone who possibly needs your product category), your usable addressable market (everyone who needs your product or service limited by factors such as where you can do business) and Serviceable Obtainable Market (the part of the market you can realistically capture),” said Christopher S. Penn, vice president, Marketing Technology, SHIFT Communications.” For example, many companies say that everyone is a customer, and while that may be a TAM, if the company has only one salesperson, their SOM is considerably larger. small. VCs and investors mostly want to understand what’s realistically achievable, and dividing up your addressable markets…shows them that you’re not just presenting pipe dreams.
Also, be sure to “include a competitive analysis section,” says Bryan Robertson, founder and chief revenue officer of Mindyra. “Every business has competition, so it’s a good idea to research businesses in your industry that are competing for the same customers. You should include specific details about their strengths and weaknesses. your market. It also encourages you to think about ways to differentiate your business [from] the competition.”
5. Financial data (how much money do you need and when will you pay it back)
“Make sure the plan accurately details how much start-up capital will be needed, where it will come from, and how it will be repaid,” says Bruce Stetar, executive director, Graduate Business Programs, SNHU. “Equal importance should be given to how you [plan to] repay the capital as you acquired it. Investors want to know when they will see a return. Failure to properly plan the acquisition and repayment of capital is one of the main reasons new businesses fail. »
“Whether you want to receive funding to build a brick-and-mortar store or a technology company, you need to get the numbers right,” says Erica Swallow, founder and CEO of Southern Swallow. “For tech entrepreneurs, I’m a big fan of the startup financial model template developed by startup investor David Teten, in collaboration with a few colleagues. Based on an almost fully automated Excel spreadsheet, it allows entrepreneurs in startup to develop their financial plan, without being too overwhelming.This is the best startup financial model I have 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 different options (paid search, sellers, flyers, [social media]etc.) and the return on investment associated with each. »
“The plan should cover both sales and advertising strategies and costs,” Stetar says, as well as customer acquisition costs. “Be careful here because you’ll look good if you exceed targets, but it’ll cost you investor confidence if you don’t pass.”
A successful business plan is easy to read and follow
You need to make your business plan easy to read and follow. “There’s nothing more intimidating than receiving a 30-page, all-text business plan,” says Swallow. “Keep your potential investors engaged by including product and user photos, team photos, colorful headlines, financial charts, graphs, charts, anything that makes reading more enjoyable. Even fleas help.
Indeed, “don’t underestimate the importance of visuals,” says Arvai. “Researchers found that presentations using visual aids are, on average, 43% more persuasive than those without.”
Finally, before you go public with your plan, “ask trusted mentors and expert peers to review it. [and give you] feedback,” says Sam Lundin, CEO of Vimbly. “Having [someone] review your business plan [before you present it to investors] is crucial.