Business Plan Specialist

What is a Business Plan?

The following is an excerpt from the book, Golden Entrepreneuring by James B. Arkebauer.

Business plans boil down to operating the company on paper. The aim is to validate an idea and challenge every aspect of the business. A business plan is a written presentation that carefully explains the business, its management team, its products or services, and its goals, together with strategies for reaching the goals.

The entrepreneur or team members who write the plan will find it a painstaking process. But keep in mind, this is the selling tool, and it requires careful consideration of all the multiple facets of a start-up or business expansion. It cannot be written as an afterthought, and it should not be taken lightly.

Check with any professional investor anywhere in the country, and you'll hear horror stories about ill-conceived, poorly written, or sloppily put together business plans. As great as the company's potential may be, it is essentially doomed to rejection, before it can even get a foot in the door, if it has a poorly conceived business plan.

The Primary Purpose of your Business Plan

There are two primary purposes to a business plan. The first has an outside objective--to obtain funding. There's no business without capital. The second serves an inside purpose--to provide a plan for early corporate development: to guide an organization toward meeting its objectives, to keep the entrepreneurial business itself and all its decision makers headed in a predetermined direction, to explain in an engaging way with interesting information how the company will be run for the next 3 to 5 years.

The entrepreneur must put all the "hows" and "needs" together in one neat package. The human and physical resources must effectively interrelate with the marketing, operational, and financial strategies of the company. Unless an entrepreneur has magical powers of persuasion, this is not the time to try to fake it.

The business plan is considered a vital sales tool for approaching and capturing financial sources, be they investors or lenders. They want to know that the plan has been carefully thought out by the entrepreneurial team. They want to be convinced that the team has the skills and expertise needed to actively manage the company and that it is prepared to seize opportunities and solve the problems that arise. That's why the business plan must be well prepared, professional in tone, and persuasive in conveying the company's potential.

It cannot be stressed too strongly that a good business plan is the cornerstone of successful financing. If you want investors' money, you've got to give them good reasons to buy in. The business plan is where you lay out the reasons. It does not have to be unduly lengthy or complicated, but it must be informative and relevant. It needs to maintain logic and order, and show the company as effectively positioned as a good investment.

More important, the business plan should be specifically directed to the funding source and satisfy its particular concerns. For example, you would orient and write the plan differently for presentation to a banker than you would for a venture capitalist, an underwriter, or a private investor. The venture capitalist would want to know what risks are involved, whereas the banker wants more information about how good the security is. These concerns must be individually addressed. There are no hard and fast rules for preparing a business plan--no established, formal format. The key word is ingenuity. Strive for inventiveness; strive to be interesting and captivating.

Incorporate the Nine Guiding Principles into Your Plan

Here are some general guidelines covering the basic elements of a business plan. These should be helpful in writing any business plan, no matter to whom it is directed.

#1 - Make It Easy to Read

There is so much competition for investment dollars today that if you want to get the jump on the next person, your plan will have to be well formatted and easily understood. Your introductory statement summarizing your operation is one of the most important sections; it must capture readers' attention and motivate them to read the balance of your plan. Caution: If they need a dictionary at their side in order to read, they'll stop. Construct a glossary if you have to use a lot of technical words.

#2 - Be Sure Your Approach Is Market Driven

Not product-driven. If you want to obtain money, you must understand that investors are primarily interested in how the product or service will react and be received in the market. Before they buy into your plan, they want to see your research demonstrating and substantiating how the customer will benefit and be motivated to purchase.

#3 - Qualify the Competition

Start by qualifying your product according to cost or time savings and revenue generation. Also show your projections for sales growth, how your product or service is superior to others, and how you intend to exploit the competitive advantage.

#4 - Present Your Distribution Plan

Be specific as to how the company will sell and distribute its product or service. Clearly describe the methods and what it will cost to get the product or service into the ultimate customer's hands.

#5 - Exploit Your Company's Uniqueness

Explain what will give your company a competitive edge in the marketplace--special attributes like a patent, trade secrets, or copyrights.

#6 - Emphasize Management Strength

Show proof that the company is comprised of highly qualified people who can cover all the bases. Indicate the incentives that will keep them together, and how they, the directors, and the advisers possess the necessary credibility.

#7 - Present Attractive Projections

Paint a realistic picture--substantiated by assumptions--of where your company is going with funding. Be detailed and keep it credible. Good validated projections and forecasts are impressive.

#8 - Zero In on Possible Funding Sources

As mentioned earlier, it's different strokes for different folks. Design versions of the plan to fit the idiosyncrasies of each source you plan to approach. A banker's interest lies in stability, security, cashflow coverage, and sound returns, whereas a venture capitalist is more interested in high leverage resulting in outrageous returns. Both want to know how the proceeds are going to be spent.

#9 - Close with a Bang

Drive home the point that you're offering a good deal. Be definite about how investors will get their money back and when. Specify the return rates; state how the risk investor will receive a 30 percent or 50 percent compound annual return, or whatever you're offering. For lenders, show that their funds are adequately secured and that your cashflow more than covers their interest and principal payments.

The Next Step: Obtain Critical Reviews

You're not finished yet. One of the big differences between ordinary plans and good entrepreneurial plans is that they have been critiqued to work. After you have drafted your business plan, solicit feedback on it. Ask a cross section of people whose judgment you respect to review it.

Don't fall in love with your wordsmithing. Make any revisions that are necessary, and then prepare a good oral presentation. In fact, you should have both a 2-minute and a 5-minute oral attention grabber. Follow up with a detailed 15- to 30-minute presentation. All should be modeled on your written business plan.

Learn More:

What is a Business Plan?
Why are Business Plans Important?
Why Does it Pay to Hire a Business Plan Specialist?
Making the Transition from Business Plan to Operating Plan

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GrowthConnection, LLC
Seattle, Washington
(425) 347-4678