Nine Principles of a Highly Successful Business Plan—PART II
In Part 1 of Nine Principles of a Highly Successful Business Plan, I discussed a recent conversation between two entrepreneurs and their viewpoint on writing a business plan. Their problem, like most people, was thinking more about the “pain” rather than the “gain.” In crafting your business plan for your next project, focus on the REWARDS. Sure it will take a while to come up with a great plan, but think of the excitement and exhilaration of launching your business idea. Think of the freedom…the success…the journey, and the funding that you will receive.
Be creative in how to appeal to your audience. You don’t need to be cutesy in loading your plan full of graphics on every page. Charts and tables are a definite plus as they provide a quick view of the numbers that you include in your plan. However, don’t be consumed by showing fancy pictures or clip art on every page. That kind of artistic overload is a nuisance and doesn’t impress investors. Be prudent regarding how you use graphics. Tables, financial charts, and pictures of your products are really all you need to make your plan stand out.
Become an artist for a little while and create that masterpiece. Create the type of plan that gets the results you are seeking. By the way, not all business plans are used for raising capital. Some are used to gain a better focus internally. Others are used to show a history of the business for selling it to a qualified buyer. Most of the business plans, as you know, are used for raising funds…from loans to private placements.
There are a lot of issues you will be faced with as you research, write, create spreadsheets, and compile your plan. If you feel you just don’t know how to tackle all the issues in developing a solid business plan, then ask for help. This is a highly important step in the overall plans for your business. Don’t skimp on details, and don’t rely solely on your own abilities—however talented and experienced you may be. Get help with your research. Quote sources that are credible. Have your CPA review your numbers. Work with a professional who has loads of experience in writing business plans. But by all means keep control of the entire process. And, most importantly, have FUN.
Let’s continue with the list of the nine key principles in developing a business plan that gets funded.
Principle 6 – The top four things funding sources will look at first are simple to recognize:
1) The Management Team. Very simply put, if your management team is not capable of driving the business to success, then the other three things won’t matter. Make certain you have all the right players in management positions, or hire outside professionals to assist you.
2) The Financials. Provide past history if you have any; and projections for the future of the business as you see it, if funding becomes a reality. You will also need to provide information on how will you use the proceeds, and what you expect the new funding to do for your business. This area of discussion will focus on of a minimum of your Sales Forecast (including direct costs), your Personnel Plan, your Profit and Loss Statement, a Pro Forma Balance Sheet and a Break-Even Analysis.
3) Your Marketing Plan. In this section, you will provide three important things: First, you must give a good overview of the industry: how large it is in terms of annual revenue, how many people make up the market you are penetrating, and the market growth and trends that have been established.
4) Your Product or Service. Provide a good overview of what your products and/or services actually are. Help the reader to clearly understand how your products/services are unique and why they will drive revenue. If you have multiple products or services, describe each one individually. Also provide any information on future products that will be forthcoming, either as a result of funding or from a natural evolution of the business.
Principle 7 – Know where to begin.
This may sound a little funny, but when it comes to writing a great business plan, a person can become completely overwhelmed trying to figure out where to start. After doing this for 21 years, I encourage you to take a few words of advice: Don’t write your Executive Summary first (it is “summary” of all the sections of the plan); research your market/industry up front to see if your idea will actually be accepted; and try developing a few scenarios of a sales forecast—including direct costs, to see if the revenue will be there to support such an idea.
The rest of the plan will come together if you can identify that there is a need for your product or service and that you have the right team and all the right resources in place to make this idea become a successful reality.
Principle 8 – Develop a Solid Unique Selling Advantage (USA).
What makes your product or service unique? Why does it stand out from all the other products or services already in the market? Why will someone take their hard-earned money and give it to you first, over your competition? These are some very important questions that you will need to answer in a succinct way in order to convince the potential funding source to do business with you…not to mention convincing customers to buy from you.
Identify uniqueness by explaining what problems you solve. What benefits do you provide that no one else does? What qualities/traits/skills/talents., etc., do you possess that others don’t? What things are notable about you, your company, your products, etc., that makes you more memorable than anyone else? Take a few minutes and write down the answers to these questions. You will begin to see that even something as simple as staying open an extra hour, or having strategic locations for customers to visit you, is a great way to illustrate why you are unique and why customers will buy from you.
Principle 9 – Answer the most important question.
Every source of funding wants to know one thing. They are risking their capital in a venture that may succeed or fail. Therefore, when you are researching and eventually writing your plan, keep this question in your mind, because it will definitely be on the minds of your funding sources: “When will I get a return on my investment?” This is the silent question investors or lenders will ask after every section they read.
Sounds almost too simple, but make no mistake, if you can put a plan together that illustrates how you have thought this through in a thorough manner, you can raise the capital you need.
As you write your plan, try to answer this question as many times as possible. When you describe your goals and objectives, show how you are going to provide a good return on investment. As you explain your management team, illustrate how this team is highly qualified to look out for the bottom line. When you craft your marketing plan, explain by example how sales will occur as a result of your market analysis and marketing strategies. When you develop your financial projections, identify that you have clearly thought through the numbers presented.
However, since nothing is a sure thing, don’t make promises that you can’t keep. Don’t over-forecast. Use the best conservative numbers that you can develop. Provide enough backup data from many sources that validate your idea or business concept. And, by all means, keep a careful watch on all the data written in your plan. Don’t even allow partners to provide you with too much fluff. Validate every claim you make in your plan. Excitement for your idea is one thing, but deception is never a good strategy.
These last four principles of the nine overall principles are highly effective for raising the amount of capital you need to launch your idea, sell your business or fund your next venture. Do all this, and you will be granted a high approval rating. After all, the best flattery an investor can give is to part with their money and invest in your venture.