Guest post by Seth Avergon, President at Avergon Marketing Group
The business plan serves many functions and multiple audiences. For you it is a consolidation of your thoughts and dreams for a new business. For your team it is an agreement on how you want to pursue that vision and a blueprint for action. For the potential investor, it is the single most important document on which he or she will judge the soundness and validity of your venture. The business plan is, in fact, a sales piece. In creating your plan it plan should be thoughtful, well-informed, reasonable in expectation, and most importantly convincing. Below are five tips to help you create a convincing business plan:
- Get to the Point: the Executive Summary is the first section of your business plan and the first thing any prospective investor will read. It is here that you will either catch their attention or convince them that they don’t need to read any further. Be concise, be direct, and lay out clearly what your business plan is and the value proposition. Be specific about what is unique about your product or service and why you believe people would want it (i.e. – the need that is being met). The Executive Summary should touch on the highlights from your other sections so the reader has a solid understanding of your plan (it is also usually the last section written). This section is a “hook” that should explain your business and entice your reader into wanting to know more.
- Know Your Market: Your Market Analysis section should demonstrate that you have done your homework. Don’t just quote some national statistics on your industry. Go deeper and discuss your direct competitors, indirect competitors, and other potential threats. Convince your reader that you REALLY know the industry and the players and more importantly how to offer something unique or advantageous in this arena. If you have gone out into the market and talked with potential customers, then this is the section to share that information. Demonstrate to your reader that there is a need in the market and you are in a position to fill that need.
- Do the Math: Particularly on their first read, potential investors will focus on two sections of the business plan; the Executive Summary and the Financials. The logic is straightforward; the Executive Summary gives them an understanding of what the business is and the Financials let them know how much money you will need, how well you planned and projected, and whether or not it is a financially sound model. A word of caution: Plan realistically. The history of dot-coms in is filled with start-up businesses that had elaborate financials that did not make sound business sense and inevitably failed. Once you have finished your financial projections, sit back and “gut check” them. Is the plan reasonable? Do you have enough cash to cover operating costs if sales don’t meet expectations? How long can you operate in the red? These are tough questions, but don’t be fooled: potential investors will be asking the same thing.
- Have Real World Expectations Every new business has barriers to entry to overcome; capital requirements, legal regulations, customer acquisition, market dynamics, etc. Identify those and other potential challenges upfront and explain how your team will use their skills and experience to overcome these hurdles. This is an important part of your plan and speaks not only towards the capabilities of your team but also to your thoroughness in planning. No savvy business investor expects a new business to launch without challenges. The big question is have you thought about those challenges and how you can address them?
- Be Bold: You are creating a business because you want to do something unique; build a better mousetrap, show the world service excellence in an existing industry, do something truly you. Make sure your business plan carries your passion. It should be well written, but it doesn’t need to be stiff. If you have mission statement (which is always a good idea) put it in your plan. Make sure the reader walks away understanding your vision for the business.
Seth Avergon is the President of Avergon Marketing Group a full-service marketing consulting group based in Southern California. www.AvergonMarketing.com.