A business launch is exciting. You have “all of your ducks in a row;” you have a partner and/or a team that is ready to go and excited; you have taken all of the steps for production of your product or service and for promoting it all over the place; you have a budget and reserve cash to live on during this launch phase. And, most important, you have set short and long-term goals that everyone has committed to.
Fast Forward Two Years
Your business is now bringing in a small profit. You are ready to take it to the next level, but you can’t without an infusion of cash. You know you will have to seek outside investors. To do this, you have to have a business plan – a well-written one, not the one you roughly put together when you started. And there are certain elements in a business plan that are required if you are going to get any positive response. Here are those elements and what should be included in each of them. Use this as your guide, and you will have what you need.
The Executive Summary
This is your opening “statement.” It needs to answer the following questions:
- What is your mission?
- What need are you filling? How does your business solve a problem for your typical customer?
- How much funding do you need and what will it be used for?
- What type of investor are you looking for? (equity partner, remote investor to share in the profits or to whom investment returns will be paid, etc.). If the investment is to be paid back, what is the timeline?
Show enthusiasm in this introduction – no one wants to invest if they perceive only moderate energy and commitment.
Management of the Business
Are you a company of one owner/manager? Do you have a partner? If so, how are the responsibilities divided between the two of you? Do you have a team in place or will this expansion mean that you will add a team? This will be a short section if it is just you and a partner. However, if you have a team in place, provide the background and expertise of each member.
Detailed Explanation of the Product/Service
Here is what must be included:
- Justify the need for your product or service and explain how it is unique or better than the competition
- If a product, how is it produced? Will expansion change this process?
- If a service, how is it delivered to customers and who delivers it?
- Are there liability issues? What steps have you taken to protect the company, employees, and any investors from liability? For example, if you make a food product, what measures are in place to guarantee product safety? You need to show that you have consulted with a reputable attorney and have liability issues addressed.
Your goal here is to show that your product/service meets a real need, is appropriately produced and that it competes well on the market.
Description of the Industry Niche
- You need the data here. Is this industry niche growing?
- What are your sales data since launch?
- Do experts forecast continued growth in your niche?
- What are your profit margins? Will they improve if funding can make production and marketing more efficient and effective?
- What outside factors may impact your business growth? For example, if your product is a luxury item, how will a downturn in the economy affect sales? Be honest, and have the data.
This part requires research. Do not scrimp on it, and don’t slough off the risks. You will only look uninformed. You are proving that there is a future business success in your niche.
Your Marketing Plan
- Define the demographic of your target market
- Include all of the methods you will use to reach that market and the costs involved (at least general costs). Will you contract out some of your marketing services? Will you hire a content marketer?
- Where is your target customer and how will you reach him/her where s/he is?
- What is your pricing? Justify it in terms of profit margin and relative to what your competitors are charging
- Where will sales occur? Do you have a physical location plus an online “store,” or will you be online only? And how do these “locations” meet the customer where s/he is.
- Summarize the successful marketing strategies you already use and new strategies you will implement once you have funding.
The Financial History and Plan for the Next Step
Any investor will spend the most time on this section, so it needs to be right. If you do not have accounting expertise, then contract with an accountant who does for this section. You need:
- An income statement showing gross sales, productions costs and profit – 6 months is usually sufficient
- A Balance Sheet: What are your assets (if any) minus your liabilities? You may not know what counts as an asset – get an accountant.
- Cash flow Statement: What comes in during a given month and what goes out? Show several months.
If you are just launching, you won’t have these. Use your nearest competitor as a model.
Conclusion – Key Points
Your business plan tells who you are, what your mission is, describes your product/service relative to consumer need and competition, demonstrates a solid marketing plan, and shows that you have a handle on finances. Traditional investors (banks, etc.) will want a very formal business plan template; more progressive investors will be fine with an informal plan as long as it addresses each of the elements above.
Writing a business plan is not something you do overnight, obviously. It takes a lot of planning, research, usually some outside expertise, and absolutely impeccable writing. If you are committed to doing this on your own, then you should pull up a few samples of good ones and read through them. This will give you an idea of style, tone, and wording. And do not put that plan in a binder until an English expert has proofread every. Single. Page.