Many entrepreneurs and business owners rush to start a business before considering important details. As a result, the businesses they start often flounder or fail to gain traction. A strong business plan can help you anticipate important issues and possible challenges before you start your business.
In fact, studies show that entrepreneurs who take the time to write a business plan are 2.5 times more likely to follow through and get their business off the ground. And, the work that goes into creating a good business plan also helps new entrepreneurs build skills that will be invaluable later. A business plan defines the objectives of your company and then provides specific information that shows how your company will reach those business goals.
Here are 10 tips that will help you write a strong business plan:
Read as many business plans as you can find. You can search on Google using phrases like “business plan pdf” and find examples of real business plans written by other entrepreneurs.
Remember, you’re not reinventing the wheel here. There have been many who did this before you and you can benefit from their experience and expertise. By learning from examples, you can evaluate which plans are more compelling and which fail to get your attention.
And, that should inform how you approach writing your own business plan.
If you expect to be the market leader in 2 years, you need to demonstrate why this is possible and how you’ll meet this goal.
If you say your product will be viral, you have to support this statement with facts and a strong analysis explaining why people will like your product or service and how they’ll help you promote it.
If you say your management team is experienced and qualified to help the business succeed, you have to support that claim with resumes that demonstrate that experience.
It’s easy to lose credibility – and investors – if you’re making claims you can’t fully support.
Investors, lenders, and others know that a market without competitors is typically a tiny and uninteresting market.
And, of course, a healthy, growing market will always attract competition. So, unless you’re creating a new industry or a new market segment, you will have competitors.
And, you’ll need to figure out how to beat them or at least to compete with them.
To understand your competitors and the industry, you’ll need to do market research.
Invest time and effort and do market research correctly. A business can’t succeed if the owners don’t understand their industry, target customers, or the competition.
The table of contents (TOC) is your outline for the business plan.
Take your time with it; make sure you are including all of the relevant topics. Most business plans will have similar tables of contents. But, certain industries might require a different approach.
For example, if you’re launching a new business in a regulated industry, your table of contents should include a section on the regulatory framework and how you intend to work within that framework. Among other topics, you’ll want to consider how regulations will impact your marketing and sales plan and your go-to-market strategy.
At a minimum, your plan should include sections on the company you are forming, your marketing plan, financial information, and your go-to-market and growth strategy.
Look to other business plans for inspiration.
If you plan to share your business plan with potential investors, bankers, or others, require confidentiality.
But, keep in mind that most sophisticated investors, including venture capitalists, will refuse to sign non-disclosure agreements. They get many pitches and creating legal obligations for non-disclosure puts them at risk of future litigation.
Still, don’t leave confidentiality to chance. Get at least a verbal commitment that they will keep your business plan confidential and will not share with anyone else.
And make sure you protect yourself and your new business with a strong disclaimer in your business plan. The last thing you want is for a potential investor or partner to claim that your business plan misrepresented you or your business.
People are busy. Few read 50-page business plans. Even fewer read 100-page business plans.
Most people will read only the executive summary and flip through other sections of your business plan.
This creates both a challenge and an opportunity.
If your executive summary is strong, you increase the prospects to have a further conversation with a potential investor or partner to make your pitch in person.
This is where many inexperienced business owners usually take the easy approach. They just copy and paste a few sentences from every section of the business plan and call it a day.
But, a strong executive summary needs more than copy and paste. Spend some time and craft a crisp, powerful story in your executive summary. That story must convince the reader to spend more time reading the detailed sections of your business plan.
Who will be reading your plan?
Is it written for investors? For potential partners or board members? For a bank to get a small business loan?
Anticipate the kinds of questions those people will want to be answered and answer those questions. For example, if your audience includes bankers, think like a banker and write what they would need to see to fund your business.
And, if you don’t know what information banks need to see in a business plan, ask your banker. Although banks tend to look for similar types of information, there’s no clear rule about this and some banks are more particular about certain sections of the business plan than other banks.
A great business plan will show that you have thought through your business idea clearly and have developed a plan to develop the idea into a sustainable and profitable business.
A great business plan should be compelling, interesting, informative, and exciting.
Make sure that you include detail, but not so much that people are overwhelmed.
Use appendices for the details and anything else (like resumes) that would bog down the body of the plan.
Do a careful edit for spelling, grammar, punctuation, and voice.
Get a second (and third) set of eyes from someone you respect, to give you constructive feedback. This is the best time for you to uncover gaps or weaknesses in your business plan.
And, if you fill those gaps and address those weaknesses before you meet with investors, you’ll give yourself a big competitive advantage.
Do not be stingy with charts, graphics, illustrations, and tables. They are great ways to present detailed information in a digestible form.
People interested in your business plan will want to see projections of your performance, your costs, and your anticipated growth.
But, they are sophisticated enough to recognize when those numbers have been arrived at based on real data compared to when you simply make up the numbers.
So, be conservative in all financial estimates and projections. If you think you’ll get a 25% share of your market in 2 years, hint at those numbers but assume you’ll get only a 5% share for purposes of your financial projections. And, whenever possible, based your projections on concrete real world examples so that you’re not simply inventing projections without some foundational support.
One good approach that can help put investors and lenders at ease is to show the best, worst, and most likely scenarios for sales and growth.
How your business plan looks says a lot about how you organize information.
So, keep your language simple and use readable fonts and a clean layout.
And, let your personality show. If you believe in what you’re writing, your passion will show in the final product.
Remember that most people don’t invest in your business plan. Most people invest in you.