Whether you’re attempting to borrow a few thousand bucks from Mom and Dad or you want to ask total strangers to pony up several million, you’d better have your ducks in a row before you ask. In other words, you’d better have a business plan.
People have differing views about the import of business plans. I’ve even heard some venture capitalists say they’re not worth the paper they’re written on. Instead, they prefer just an executive summary. Nonetheless, being able to describe your business, the industry you operate in and the potential market for your company is downright vital. And you won’t generally address all of those aspects until you actually sit down and write up a plan.
Here’s a checklist of the minimum information you should have in the plan, along with some nice-to-haves that will increase your chances of getting a “yes” to that dollar request.
- An executive summary: This enables potential investors to quickly determine whether it’s worth their while to read your entire plan. Therefore put as much effort as you can into making it a strong pitch to keep reading.
- Company overview: The main purpose of your company, including products and services as well as any proprietary technology or other unique features. This is also a good place to include information on the company’s history so far.
- Company mission and vision: This is the biggest picture for your company — the “why” behind what you do.
- Investment rationale: Simply, how much you want and what you’re going to do with it.
- Market and competition analysis: This covers the size of your market and who your competitors are for your product or service.
- Marketing plan: This is the four Ps of marketing — product, price, place and promotion. Remember that you’ll want to prove that you know how to generate revenue for your business.
- Organization: The structure and location of your organization are important measures of how well you’ve planned for future growth. This can be a simple organization chart with short explanations of roles, along with the address of your operation.
- Management team: Your expertise and the skills and background of your team members can mean the difference between a yes or no on funding. Even if your experience is limited, talk about anything that makes you and your team — if there is one — uniquely suited to make your company a success.
- Operations: How your organization runs. Consider using a flow chart.
- Project execution: Do certain projects need to be completed before you can generate revenue? List them here with a plan for getting them done.
- Risk analysis and mitigation: This is the section where you show that you are aware of the risks and have thought about how to deal with or eliminate them.
- Financial plan: In this section, you’ll need to layout your funding structure, which tells investors where they fit in the equity of your company. You’ll also need to list your expected start-up costs, along with financial projections for the first five years. It’s helpful if you can offer a realistic estimate of when you will break even and start generating profits.
by Matthew TorenMatthew Toren is an Award Winning Author, Serial Entrepreneur, and Investor. He Co-Founded YoungEntrepreneur.com along with his brother Adam. Matthew is co-author of the newly released book: Small Business, Big Vision: “Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right” and also co-author of Kidpreneurs.