Nothing lays the foundation for success like a well-written business plan. In addition to helping you attract investors and strategic partners, creating one also clarifies your goals and signals potential challenges.
A business plan typically has seven sections:
- Company Description
- Market analysis
- Description of the product or service
- Commercial and marketing strategy
- Organizational and management structure
- Financial projections
To get you started, we asked business experts to share their ideas on creating a compelling business plan. Here are their top six strategies.
1. Start with the basics
Take your plan in small steps to make it manageable, says Tim Berry, founder and president of Palo Alto Software, which provides startup and management tools for small businesses. You can write bullet points first and develop them later.
Start with the basics: your business strategy, the tactics you’ll use to execute it, and key milestones like launch dates. List the start-up costs, such as equipment, inventory, and permits, and calculate your best estimates for sales in the first few months. Analyzing your financial data will help you determine how much financing you will need.
2. Consider your audience
If you intend to introduce investors, your plan should demonstrate that you have a superior product or service that solves a difficult problem for a large target market, says Akira Hirai, Founder and CEO of Cayenne Consulting, a business plan consulting company. If you hope to win a strategic partner, your plan, which usually accompanies a partnership proposal, should outline your vision and your ability to help the partner achieve their strategic goals.
No matter who you write your plan for, Hirai adds, make the point that your founding team has the experience and skills to build a successful business. The description of your organizational and management structure should include a brief biography of the founders detailing their professional background, education, and background related to your business.
4. Demonstrate strong cash flow
The financial section of your business plan should detail your projected income and expenses, as well as expected cash flow. Not planning the timing of cash inflows and outflows will leave your business vulnerable to failure, no matter how strong your idea is. “You can’t suddenly run out of money,” says Berry. “If you don’t plan and manage the cash flow, you are putting yourself in danger.”
Make sure you estimate your business expenses and income as accurately as possible. Some expenses, such as merchant service fees and certain types of insurance, can be easy to ignore. If you are using a cash flow model to project your expenses, be sure to include all of your expense categories.
5. Keep it clean
“Aesthetics matter,” says Hirai. “An attractive, well-formatted plan is more likely to be read than a disorganized plan.”
Investors tend to favor brevity, with executive summaries of one to three pages and full plans of 20 to 25 pages. Plans containing spelling or grammatical errors, or those filled with technical details or scientific jargon, may be rejected.
6. Review and revise your plan
Some entrepreneurs complete a business plan to put it aside and never see it again. Revise your plan every month, suggests Berry, to compare your projections with reality and to make sure you’re on track to meet key milestones. “This whole review creates real management and real accountability,” he says. It also allows you to change course quickly if sales, market conditions, or other factors deviate from expectations.