Please raise your hand if you've ever been frustrated about what to
put in a business plan? What will convince an investor to give you
money? We've all been there. And it seems like the answer keeps changing
depending on who you talk to.
The problem, or rather the truth,
is that there is no "one fit all" solution. So the bad news is: even a
step by step guide to writing a business plan won't really make your
plan "good". The good news is, you really don't need a step by step
guide to make your plan compelling enough to close investment.
There
are many different formats and there really isn't a "universal" length
for a perfect business plan. Depending on your product or industry, it
can range anywhere between 10-100, and sometimes more, pages.
The
question you should ask yourself is: what stage is my company at? If you
are already generating revenue and are looking for a second or third
round of financing to expand, the business plan can get much more
elaborate and detailed, especially on the financial analysis and
projections side of things.
But if you are just starting a
business, don't have established revenue yet and are simply looking to
attract investors to get started making money with your products or
services, keep on reading.
Most important to understand in this case is that it all comes down to one simple thing:
telling a great story!
This
does not mean you shouldn't present accurate facts, be transparent, and
most importantly tell the truth; but it means that you need to package
all those facts into an interesting, exciting, and fascinating story so
your readers (potential investors) keep on reading and don't get bored
by page 25. It's a lot to ask someone to read an entire business plan,
so the least you can do is make it fun and interesting.
I have had
the pleasure to be on both sides of the table (both writing and reading
business plans), and here are the 7 things that are often forgotten or
done wrong:
1. Get To The Point Quickly
We
all get excited at the prospect of starting a new business... so going
on and on about one or more aspects that really cause you to be
enthusiastic is great when you sit over a cup of coffee with your
friends or colleagues.
But when it comes to reading something on a
digital device or piece of paper, without your enthusiastic voice,
endless chatter can get old very quickly.
Think of your potential
readers as the most impatient individuals you will ever meet. How would
you structure your sentences when talking or writing an e-mail to them?
Now add just a hint of enthusiasm and relevant information to that, and
you should be close to getting their attention.
2. Move Most Compelling Facts To The Top
In
addition to keeping things "snappy", prioritizing information and
structuring the business plan around the importance of each element can
help move the reader along.
The format that I have found to be effective is:
1- Brief Executive Summary
2- Company Description
3- Market Analysis
4- Product and/or Services
5- Marketing Strategy
6- Sales Strategy
7- Company Goals & Objectives
8- Management and Operations
9- Competitive Analysis
10- Financial Projections
Some
entrepreneurs include a request for funding at the end, and some create
a separate document (mostly with their attorneys) called "Private
Placement Memorandum" (PPM). The advantage of not including a funding
request in the business plan, is that you can stay flexible in terms of
who you are sharing this business plan with and how much money you end
up asking for. It's easier to change the short PPM rather than going
back into the business plan every time you talk to a different investor.
The
main thought behind the structure I suggested above is that every
section sets the stage and builds up to the section right after. Again,
there are many different formats, and you can really change this format
up to whatever suits the story you are telling. You might for example
have a big name on your team that has significant weight in your
industry, so moving the "management" section up (maybe even to the top)
can make sense in some cases. It's all about getting the reader excited,
and the prospect of working with a celebrity might just get that job
done for you.
3. Create Transitions
This is
a mistake I see happening time and time again. Creating transitions
between the different sections of the business plan is a really simple
trick that makes the overall experience more pleasant, while "tricking"
the reader into continuing to read.
Many business plan authors
think it's enough to just "compile" all the information relevant to
their business in form of one continuous document - no matter how.
The problem, however, becomes that sometimes jumping thoughts can be jarring and confusing.
Go
back to thinking about your business plan as a story you would tell
around a campfire. You wouldn't reveal the big twist right in your first
sentence, would you? And the way that you would go from one character
and plot-point to the next, is how you should think of every segment in
your business plan.
Don't shy away from creating cliff-hangers at
the end of some sections. For example, if your market analysis concludes
that one specific age group and gender has an urgent need that no
product in the market is currently satisfying, you can end this section
with a question like: So how doesaddress this
urgent need and turn it into profit? And then go right into your
products and services presentation.
4. Don't Be Too Flashy
In
my experience, there is a huge difference between sounding
professionally enthusiastic and self-promotional. Using too many flashy
buzz-words and too much promotional language throughout the business
plan can get irritating to read and mostly comes across as insincere. It
also raises the question if the authors of the plan are hiding the fact
that they might not have figured "it" out yet.
Trying to be
flashy simply distracts from the real, hard facts and dilutes the value
of your presentation. The old saying, "when in doubt, keep it simple",
truly applies here.
5. Use images And Graphic Examples
This
speaks to the "making it fun to read" - part. No, no... making it fun
doesn't mean making it flashy. It simply means you should also not try
to achieve the opposite of flashy - which I believe to be "boring".
Images
and graphic examples should be relevant to the information you are
presenting. The goal is to give the reader's eyes a break here and there
to keep the flow going. Think of it like visual potato chips... but the
good, organic kind that is fun to eat, while still staying relevant to
your healthy diet. This can include images of your product(s), website
screenshots, industry statistics, charts, etc.
6. Attachments
Sometimes
there are amazing articles or entire studies on specific industry
developments that support your case. Instead of copy-pasting and quoting
the entire article, though, attach it to your business plan as a
separate document labeled "Exhibit a)", b), c), etc. (one for each
document) and reference the exhibit with a short quote or summary inside
the business plan. That way you are giving the reader the choice to
check out the attachment or to continue going through your presentation.
The
goal here is to avoid unnecessary "inflation". More pages is not always
better! Sometimes 10 pages that knock it out of the park are better
than 100 pages that are overwhelming with too many industry stats and
lengthy paragraphs that you didn't even write yourself.
7. Try Putting Yourself Into The investor's Shoes
It's
hard, but when reading through your finished business plan, try to
distance yourself and read it from the perspective of an investor. Ask
yourself very honestly and harshly: would I put money into this? Imagine
putting everything on the line; your car, your house, your life's
savings.
You would be surprised how many times you will cringe and
realize that it's simply not good enough yet; that some of the language
you don't even buy into yourself; that you might have to do a lot more
research and planning before taking it to an investor. In the end of the
day, you are not just putting their money on the line, but also your
own time and resources, which could be devastating.
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