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Intro:
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| Access to a good business library with industry magazines and newsletters A personal computer Accounting and word processing software that lets you make charts and graphs The names of potential investors, including banks as well as individuals and venture capital firms Past financial documents, plus other evidence of good credit Optional:
An accountant A business lawyer
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| Two to eight weeks, depending on your business and the amount of financing you're seeking
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| Venture capitalist: Equity: Ownership in a business Exit plan: Partnership: A non-incorporated company with shared ownership LLC (Limited Liability Corp.): Similar to a corporation, but with significant tax advantages Cash flow statement: The amount of money flowing into and out of your business accounts, with the balance at the end of each earnings period.
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| Bios should be brief, emphasizing past success or experience that will make a manager a valuable asset to this particular venture. Graphs and charts can sum up a complicated set of data in an easily understandable way. For example, you could create a pie chart that divides expenses into categories, or create a graph of projected sales for the next three to five years. It's important to spell-check your work, but don't rely completely on the computer. It won't catch words that might be spelled correctly, but are completely out of place or that change the meaning of a sentence. Read over everything completely, and ask your business partner(s) to do the same.
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Plan your way to profit You've figured out how to build a widget that's better than every other widget on the market. You know who needs it and why. You even know how to reach customers and convince them to purchase your product. Now all you need is the capital to put your dream to the test. It's time to hit up investors. But before they part with their money, you'll have to win their trust. In other words, you must commit your ideas to writing and convince them your venture will be a success. Not only is a business plan essential for raising capital, it also will provide you with a guide for leading your business into the future. We'll reveal the secrets to a clear, concise, and convincing business plan, whether you're expanding an established company or striking out on your own for the first time.
Writing a business plan can take weeks, even months, of intense research and writing. Is it worth all the work? You bet. Even if you don't get all you want from investors, you're certain to benefit from the process. First, you'll have a better understanding of your own business as well as the industry as a whole. More important, you'll have a set of clearly articulated goals. This will help you organize and manage your business and give you a benchmark against which you can measure future performance. If you're having trouble getting started, do the easy stuff first. Start with the things you know, such as listing the management team, the products or services you will offer, your target market, and a description of the current state of your business (even if it's only in the developmental stages). If you get hung up on a particular part of the plan, skip it. You can come back and fill it in later, perhaps with the help of an outside professional.
All writers must begin by asking who's going to read their work. This is especially true for people writing business plans, because they have the added task of persuading readers to part with their money. Be sure your plan targets your readers' specific concerns. Your audience will include: Yourself. Experts say you should write a separate business plan for your eyes only. It should probably be the most conservative in terms of projecting future profits, so you don't overestimate your business's potential and end up with angry creditors down the road. Banks and other lending institutions. Bankers are generally the most conservative of investors. They're looking for a more or less foolproof plan, plus collateral (equipment, buildings, vehicles, etc.). In addition, you should be prepared to show them that you and your team are trustworthy. They're going to want to see a detailed credit history, plus as much evidence of past entrepreneurial success as possible. Be prepared to provide a good explanation if you've had credit trouble in the past. Individual investors. While individuals may be willing to take more risks with their own money, they're also going to expect more in return. A profit of 10 percent per year probably won't tempt them, since they can easily make the same amount by investing in larger, more established companies. Without being unrealistic, you want to emphasize that your venture could be highly profitable. Just don't make promises you can't keep. It's best to consult a good business lawyer before reaching any agreements, since individual investors might try to sue if they aren't happy with the way things are going. Venture capitalists. Competition for venture capital money is fierce, so you have to make a case that your company is not just going to be profitable, but will grow rapidly over a period of five to seven years. A personal introduction will help enormously, since venture capital firms get many more proposals than they can read. Relatives. If you borrow from relatives, keep things as professional as possible. This way, you can still spend holidays under the same roof. Don't expect them to sign on out of a sense of duty. Show them your venture can be genuinely profitable, and make sure any agreement you reach is committed to writing. Employee investors. You can make your employees partners by promising them a share in the ownership of the business. In return, they may be willing to work for a below-average salary and even kick in some of their own capital. But again, make sure you have written agreements and consult a good business attorney for potential problems. For example, you need to be able to take action if your partner suddenly stops showing up to work.
Before you can start writing any of the plan's sections, you'll need to start gathering evidence. Since every claim your plan makes should be backed up, the research process will take time. You'll find many answers through trade associations, magazines, newsletters, and annual reports. Subjects that require active research include:
After you've done your research, it will be time to fill in the outline with pertinent facts and crystal-clear prose. You definitely want to capture your enthusiasm for the project, but your audience is trained to see through hype and sales-speak. Strive instead for clarity, simplicity, and thoroughness. Here are some guidelines:
Consider outside help You should complete as much of the plan as possible yourself. This way, you'll be able to answer questions when investors grill you. Further, a full-service consultant may charge anywhere between $10,000 and $20,000 (U.S.)--a lot of money if you're just getting on your feet. If you can afford the service, consult a local Better Business Bureau for recommendations, and make sure you ask plenty of questions before you write any checks. No matter how confident you are, however, you should seek help at some point along the way. Professional input can both improve your chances of success and help avoid potential legal trouble down the line. At the very least, get several trusted, experienced businesspeople to give your plan a serious look. Also consider hiring an accountant to help you prepare the financial plan, and a business lawyer to look into regulatory issues and potential liabilities.
No matter what your racket, a standard business plan includes the following 11 sections:
Begin your plan with a brief, one- to two-page summary, devoting a short paragraph to each section of the entire plan. This executive summary helps potential investors quickly decide whether they want to study your ideas further--so make it enticing. Emphasize your strengths as an organization, the ways you differ from the competition, and how you can realistically reach a potentially large, untapped market. Include contact information here so investors can reach you if they're interested.
Now it's time to spell out exactly what you need from your investors, and what you can give them in return. You can use highlights from your financial plan to back up your claims. The essentials include:
Your business plan needs to include a company/product analysis, a risk analysis, and an industry analysis. Here's where you'll display your knowledge of your venture, the risks involved, and the industry. Company/product analysis. First, describe what exactly your company is going to sell, and explain why you think people are going to buy it. Is your product superior in quality? Is it significantly cheaper? Does it come in a full-service package? Is it new or unique? Now explain why your company is especially suited to create and market this product or service. Explain your overall strategy, as well as the way your company will be organized. Is it going to be a partnership, an LLC, a privately held corporation, or something else? Industry analysis. Once you've established your overall strategy, you have to provide evidence that no one else is doing the same thing. You need to show your thorough understanding of the industry as a whole, as well as your company's special niche. Be sure to answer the following questions:
Risk analysis. Success in business is as much about avoiding problems as creating solutions. In addition to the other sections, many business plans include a risk analysis section to show investors the potential vulnerabilities of an enterprise. Having a lawyer-approved list of risks can also protect you from potential liabilities, as investors may have the right to sue if they prove they weren't informed of potential problems. As you prepare this section, contemplate all the potential pitfalls and uncertainties that your business faces, including those things you may not be able to control. Basically, you want to list the potential problems and follow each with a paragraph of explanation. For example:
The market analysis will describe who exactly is going to buy your product. Here are the questions to address:
You've shown who needs your product; now it's time to prove you can actually get them to buy it. That's where your marketing plan comes in. And the more creative it is, the better. Just make sure it answers these basic questions:
Your development plan explains how your business will run. Think of it as a series of deadlines. Begin by explaining the parts of your business that are already in place (the management team, a product template, etc.). Then provide a timeline for future goals (when hiring will be complete, when your product will reach the market, when the first radio ads air, and so on), and briefly outline the steps you'll take to reach these goals. Keep these things in mind:
Maybe you know how to make a single widget, but can you make a million? Investors want to know whether or not production can meet consumer demand. Anticipate their concerns by including a manufacturing/operations plan that answers the following questions:
People are your most important asset. It may sound like a feel-good ad, but it's true. The more complete your management team, the better. Demonstrate that you have a well-rounded team in which each person has a well-defined function. Most important, show that, as a team, you're capable of meeting the goals outlined in your business plan. The management team section should include:
Unless you're an accountant, the financial plan is probably going to be the most difficult part of the overall business plan. It must include detailed spreadsheets, as well as text that summarizes and explains the numbers (for example, any assumptions you make about business projections). You should definitely consider seeking help from a professional accountant or business consultant when preparing your financial plan. Don't overestimate income or underestimate costs, and be ready to provide verbal explanations for every number, even if you received help from a third party. Finally, develop an accounting system to ensure accurate financial reporting to both you and the lender. Required elements include:
If possible, make three versions of each of these plans: best-case, expected-case, and worst-case scenarios. It's also important to show what these numbers mean for the investor, so provide analysis that explains the following:
The appendices are made up of documents that support specific claims you've made in the body of your business plan. Items might include:
People who read business plans say they see the same mistakes over and over again. Here are some problems to avoid:
After all the work you've invested, make sure you don't shoot yourself in the foot with bad spelling or grammar. And double-check your numbers one last time. A single typo could throw off a whole spreadsheet. The final version should be printed on 8.5 by 11-inch paper, with single-spaced, 12-point, professional-looking type. Leave fairly wide margins so investors can take notes. The overall look should be inexpensive (otherwise you may seem like a spendthrift) yet professional. Once you get funding and start to achieve your goals, you'll realize all the effort you put into your plan was well worth it. There's nothing like making your dreams into reality. -end- 
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Understand your audience
Prepare to research and write
Outline the essentials
Detail the investment opportunity
Analyze the company and industry
Address the market
Explain how your business will run
Introduce the management team
Prepare a financial plan
Provide source materials
Avoid common pitfalls
Proofread your work
