Whether you are just starting out and need startup investment or are looking to expand your business and raise capital, a business plan is a must. Indeed, a business plan is not only essential if you want to get people to invest in your idea, it can help you articulate what it is you hope to accomplish with your business – your mission, goal(s) and values – and plot the company’s growth trajectory.
However, to be successful, a business plan cannot just be a bulleted list of an entrepreneur’s thoughts and musings, hopes and dreams. It needs to be a serious business document with the following six elements.
1. Executive summary
“An executive summary is the ‘elevator pitch’ of your business plan,” explains David Mercer, founder, SME Pals, a blog dedicated to helping entrepreneurs. “More often than not, landing a new investor relies on hooking them with a great elevator pitch. Without grabbing their attention, your business plan, no matter how well researched and presented, may not stand out enough.”
The executive summary should, in brief, describe the “problem you are going to solve, and why that problem needs to be solved right now,” by you, says Peter Arvai, CEO, Prezi presentation software. “If you aren’t able to communicate that deeper purpose to others, you will have a very hard time convincing investors to fund your idea and people to join your team.”
Tip: Write the Executive Summary last, after you’ve done all your research and put everything down on paper.
[ Related: 12 tips for creating a must-read business blog ]
2. Description and bios of your leadership/executive team
“The entrepreneur should clearly demonstrate what they are bringing to this venture – the idea, the technical ability or the passion,” says Hossein Rahnama, founder & CEO, Flybits. “Investors want to understand how you will execute using your personal strength.”
You should also “talk about the leadership team,” says Andrew Witkin, CEO, StickerYou. “If the leadership team has a previous track record of building and delivering businesses, this should be highlighted. Business plans serve multiple purposes, but one of them is to build trust, and the team is as important as the product to potential investors and partners.”
“Investors bet on jockeys, not horses, and knowing about who will execute on an idea is key to an investor making an investment decision,” says Richard J. Foster, president, Foster Management & Holdings. “Very frequently I’ll see multiple companies with the same idea, but the one to invest in is the one with the team who has the experience and the credentials to succeed. Having the best idea with the wrong team is a recipe for failure, but proving that your team is the [right] one to execute [your idea] can make all of the difference.”
3. Description of your product(s) or service(s)
“When developing a business plan, it’s crucial to clearly [explain] the need your product or service is trying to address,” says Elena Filimonova, senior vice president, global marketing and strategy, CGS. “Your business plan should highlight how the product or service will address the need, what is unique about your offering and why it would be difficult to replicate. To do this, you should outline key differentiators, features and why the product or service is something that stands out in the market.”
[ Related: 11 ways to build your online brand ]
4. Market/competitive analysis
“Every business plan should have a section that defines the target sales market – who you are selling to,” says Victor Clarke, owner, Clarke Inc. “This is the part that requires considerable research into areas such as industry sales data related to the service or product you are selling and trends within the industry. You should look at competitors and see who they are targeting, look at your current customer base and create a profile of an ideal customer or client for your product.”