A well-conceived business plan does much more than merely describe what will become your business. Your business plan must sell you first and foremost, along with the products or services you’ll offer, the business model you will follow, the marketplace in which you’ll compete, plus reasonable estimates of start-up and monthly operating expenses. If outside funding is required, then the plan must convince lenders or investors that you are prepared and qualified to build a significantly profitable enterprise. A good business plan will do the following:
- Define the business mission
- Describe the products and services
- Identify target customers
- Identify and evaluate major competitors
- Describe the business environment
- Detail the business model
- Describe the business strategy
- Detail the marketing plan
- Demonstrate how a profit will be made
- Provide an exit strategy
Here are business plan options for three scenarios:
The Executive Summary
An Executive Summary is a condensed version of a full-dress business plan and often runs to about 5-10 pages in length. When written well, the Executive Summary nevertheless functions as effectively as a traditional business plan.
It is a useful tool for Freelancers who will open a consultancy and will have relatively modest start-up costs and monthly operating expenses and are savvy enough to appreciate the value of a road map to launch their venture. It is not a business plan option for those who will approach lending institutions or investors.
The Executive Summary states the business mission, describes the products/services, describes the primary clients and competitors and details the business strategy, business model, marketing plan and relevant financial data. To be useful, the document must fully integrate that information and demonstrate how the business will become profitable.
The Operational Business Plan
An Operational Business Plan is produced by an existing business with several years’ performance history, usually with a goal to either apply for business expansion capital or prepare for the sale of the company. Operational Business Plans may also be used to upgrade and streamline how a business runs, functioning as a guide for the management team.
The Operational Business Plan delves into great detail about production, customers, competitors, the marketplace and business environment, sales distribution channels, management and staffing. Historical data are available and five years of financial statements are typically included, along with financial projections that forecast the company’s expected performance over the next three years.
The business plan to attract investors
When outside investment is sought, it goes without saying that the potential for strong profits must be demonstrated. The more money that is requested, the bigger the promised profits must be and the more quickly realized. The break-even statement, which shows at what point in time the business will go into the black, along with credible financial assumptions and projections, are critical in this scenario.
If the business is an existing one, the financial projections must appear to be attainable, based on the five year financial history given. Make sure that your business and personal credit scores are 700+, or you won’t see a dime from a bank.
Venture capitalists and angel investors may be somewhat more forgiving of a less than perfect credit rating if your business concept and model are extraordinary. Beta test the product/service and business model with target customers to verify demand for what you intend to sell and your ability to efficiently deliver the goods to the marketplace.
For VCs, the potential for big profits is king. They are in it for the pot of gold that comes when the company goes public and stock is offered. Angels are not totally dissimilar to VCs, but they are drawn to an entrepreneur’s vision and passion in addition to the pay-off. That’s why they’re called angels!
Thanks for reading,