®
Paradigm21
TM
Strategy • People • Performance
Business Plan Guide
Before begin composing your masterpiece, you must first consider the audience who will review your 40 page plan and boring financial projections. Typically, business plans are offered to the following:
Angel Investors
Wealthy individuals who become personally involved in fledgling ventures, lending their expertise, experience, and money. Often, the angel is someone who has a personal connection with the entrepreneur, but angels can also be outsiders on the lookout for a winning business model that just needs a little push in order to make it fly. If your angel is a relative or someone you have known for twenty years, you have some latitude when it comes to your business plan. If you're shopping around for outside money you have to approach the angel just as you would approach a venture capitalist. The point is, if you know the angel, your business plan may not need to be as perfect as if you were proposing to a stranger.
Venture Capitalists
Venture capitalists, or VCs are large firms that have funds available to invest in attractive, profitable ventures. In exchange for funding they expect a percentage of your company. Their funds range from a few million to billions of dollars invested in a variety of globe-spanning ventures.
Venture capital is all about high-risk, high-return. Remember VCs are strangers, so they must be persuaded by your business plan. The managers of these firms look at hundreds of business plans every year, and they reject almost all of them. So the chances of generating interest are minimal.
What can you do to improve your chances of success? A VC will NOT read the entire business plan unless they are impressed by your executive summary.
Note:
If you don't know the difference between a bedsheet and a spreadsheet, you should engage professional help (contact us). However, even if you're planning to eventually hire a business consultant to write your plan for you, you should still try to write a rough draft on you own.
The first step is to familiarize yourself with the typical components of a hypothetical business plan.
Executive Summary. The executive summary is the most important document of the business plan. It will be the FIRST document of the plan, even before the table of contents.
Table of Contents. Should be well-organized and still correctly numbered after all the changes you've made. Also, strive to squeeze it all into a single page.
Company Description. Here's your chance to dazzle strangers with the history of your company. Most business plans deal with the expansion and improvement of existing businesses rather than with the funding of start-ups. Now's the time to brag (factually) about how you transformed American Watermelon Ltd. from a booth in your garage to a strong local employer that's ripe to burst onto the national scene. Here are some things to include:
- Tell 'em how you got started and how the company has grown.
- Provide a history of sales, profits, and other important numbers.
- Lead up to a description of where you are now, and what plans you have for the future.
Make this an honest account; investors will doubt the credibility of someone who appears never to have run into any problems. Talking about how you had initial challenges and then overcame them with flying colors will make you look all the better.
Product/Service. Describe the thing in jargon free-language. How does it smell? What does it do? What differentiates it from all the other whatchamacallits out there? How does it improve people's lives? What prevents someone else from doing the same thing more cheaply? What kind of equipment do you need? Do you have, or can you get, patent protection? Put yourself in the shoes of the investor and ask yourself what you yourself would want to know before agreeing to part with a large amount of money ("large" being most likely at least tens of thousands of dollars).
Market Analysis. In the next few sections, you're demonstrating that you have indepth business savvy to know all about potential distribution problems, government regs, technological opportunities, and employee relations in your chosen line of work. Market analysis includes your sagacious discussion of industry characteristics and trends, projected growth, customer behavior, complementary products/services, barriers of entry, and so on. To do this effectively, you'll have to do a ton of research.
Angels and VCs love good solid research, so give them what they seek. Talk about how similar products/services have done well in the market, how you're fulfilling an obvious need, and exactly who you expect to purchase your whatchamacallit. Show them that your product / service is the most attractive and competitive on the market.
Marketing Plan. This is your grand strategy of how you intend to establish presence and attract market share from the competition. You have to detail exactly what steps you will take to ensure that customers know about your product / service and prefer it over the competition. Be as detailed and give several different tactics (start off with the cheapest marketing tactic, and proceed to the most expensive).
Operations Plan. The nuts and bolts. You gave them vague assurances in your executive summary that you'd be able to run your business; now they want to understand precisely what's involved in running the show. Location, bricks and mortar, equipment needs, and labor requirements are laid out here in black and white.
Financial Plan. You should spend time understanding the basics of sales forecasts, profit-and-loss statements, cash flow projections, balance sheets, and standard business ratios. Investors will expect you to be completely independent and objective in this important area of knowledge; if they call you saying they'd like to set up a meeting with you, they will as you questions about your financial plan and you will be expected to act intelligently.
Management. The individuals managing and driving the venture forward is probably the most important section of the plan. Its so important, that Investors typically refer to this section next after gaining an understanding of the venture. VCs will take a great management team with a so-so idea over a great business model with mediocre management. If you have somebody in the team (or at least on your board or among your advisors), who's had serious entrepreneurial success, you will impress and enhance the probability of success in the VCs mind.
Exit Strategy. Not all plans have these but should. The exit strategy is for the investor, not the entrepreneur. It's basically a plan for demonstrating how they will recover their investment within a short period of time like 3-5 years. Can take the form of a merger, acquisition or an initial public offering (IPO).
Appendices. Include items to further clarify and strenghten the plan such as résumés, promotional materials, product photos, and independent assessments.
Now that you are clear on the business plan components, let's look at the most important part of your overall plan, the 'executive summary'. - The most importance element of your plan.
Executive Summary - 'Most important' part of plan
The reality is that you spent 3 months writing it, and potential investors will spend 5 minutes reviewing it
Goal: to make an impact quickly as possible
Should be viewed as a 'promotional' piece to develop interest in the venture.
· Best to bind it separately
· In straightforward prose - answer following questions:
· What sort of company is it?
· What's the product/service, and what's special about it?
· Who are the managers?
· How much money? In what stages? How its used?
· Must have punch, panache, passion
· Generate excitement with uniqueness of your idea; not with exaggerated optimism & sales jargon.
· Write the summary first, and, if you do a good job, you'll generate enough enthusiasm to carry yourself through the rest of the plan.
Remember: Investors will only read the summary -- then either toss it or ask for a meeting to learn more.
Executive Summary Elements
Company Overview
· Recap of opportunity
· Brief market summary
· Differentiation (what makes you different)
· Description of products / services
· Management biographies
· Nature and use of proceeds (table)
· Key financials (table or graph)
· Investment details
· Amount seeking
· Percentage of ownership offered
The Company
· Product / Services (can be separate section)
· What is genesis of your business?
· How did management team evolve?
· Funding up to this point?
· How is company structured legally?
· Who are current investors
· What is their share of ownership?
· Industry Analysis
· Industry or Market Analysis
Include:
· market size,
· growth rate, and
· relative stage of development.
Important to describe overall market as well as segment you are targeting
Discuss any significant changes occurring
· Short term and long terms trends,
· Impact of technology,
· Government regulation
· Economy
Competitive Analysis
Competitors already established a position, distribution, market exposure and customer base. Viability of your business depends on your company’s ability to differentiate itself, attract customers, acquire market share away from competitors - or address market segments not currently being addressed.
If you are anticipating taking market share, you need to explain how you’re going to do it.
· Advantages you have over competition?
· Why will customers buy your product/service instead?
· What are competitors strengths and weaknesses?
· Who is the market leader and why are they in that position?
Should include the following:
· Competition overview
· Merger / acquisition activity
· Current competitors
· Analysis of each competitor’s business
· Competitor Strengths / weakness
· Comparative Advantages
· Differentiation Factors
Marketing and Sales Strategy
Sales and Marketing are closely related but two different activities.
· Marketing designed to inform & attract
· Sales about actually selling product to customers
Marketing plan communicates, motivates and attracts customers
Should include:
· Who are customers, where are they, how many?
· Growing or declining and why. Are there geographic concentrations?
· Is your target audience domestic or international?
· How will you reach your market?
· How will customers become aware of your company, brand, image, and products?
Marketing Plan
· Sales / distribution strategy
· Pricing strategy
· Product positioning
· Brand image awareness
· Collateral materials
Product / market exposure strategy
· Advertising and promotional efforts
· Public relations
· Direct marketing
· Trade shows
· Website strategies / plans
· Strategic alliances / partnerships
· Marketing budget (table)
Sales Plan
Identifies how sales will be achieved.
· Direct
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Before begin composing your masterpiece, you must first consider the audience who will review your 40 page plan and boring financial projections. Typically, business plans are offered to the following:
Angel Investors
Wealthy individuals who become personally involved in fledgling ventures, lending their expertise, experience, and money. Often, the angel is someone who has a personal connection with the entrepreneur, but angels can also be outsiders on the lookout for a winning business model that just needs a little push in order to make it fly. If your angel is a relative or someone you have known for twenty years, you have some latitude when it comes to your business plan. If you're shopping around for outside money you have to approach the angel just as you would approach a venture capitalist. The point is, if you know the angel, your business plan may not need to be as perfect as if you were proposing to a stranger.
Venture Capitalists
Venture capitalists, or VCs are large firms that have funds available to invest in attractive, profitable ventures. In exchange for funding they expect a percentage of your company. Their funds range from a few million to billions of dollars invested in a variety of globe-spanning ventures.
Venture capital is all about high-risk, high-return. Remember VCs are strangers, so they must be persuaded by your business plan. The managers of these firms look at hundreds of business plans every year, and they reject almost all of them. So the chances of generating interest are minimal.
What can you do to improve your chances of success? A VC will NOT read the entire business plan unless they are impressed by your executive summary.
Note:
If you don't know the difference between a bedsheet and a spreadsheet, you should engage professional help (contact us). However, even if you're planning to eventually hire a business consultant to write your plan for you, you should still try to write a rough draft on you own.
The first step is to familiarize yourself with the typical components of a hypothetical business plan.
Executive Summary. The executive summary is the most important document of the business plan. It will be the FIRST document of the plan, even before the table of contents.
Table of Contents. Should be well-organized and still correctly numbered after all the changes you've made. Also, strive to squeeze it all into a single page.
Company Description. Here's your chance to dazzle strangers with the history of your company. Most business plans deal with the expansion and improvement of existing businesses rather than with the funding of start-ups. Now's the time to brag (factually) about how you transformed American Watermelon Ltd. from a booth in your garage to a strong local employer that's ripe to burst onto the national scene. Here are some things to include:
- Tell 'em how you got started and how the company has grown.
- Provide a history of sales, profits, and other important numbers.
- Lead up to a description of where you are now, and what plans you have for the future.
Make this an honest account; investors will doubt the credibility of someone who appears never to have run into any problems. Talking about how you had initial challenges and then overcame them with flying colors will make you look all the better.
Product/Service. Describe the thing in jargon free-language. How does it smell? What does it do? What differentiates it from all the other whatchamacallits out there? How does it improve people's lives? What prevents someone else from doing the same thing more cheaply? What kind of equipment do you need? Do you have, or can you get, patent protection? Put yourself in the shoes of the investor and ask yourself what you yourself would want to know before agreeing to part with a large amount of money ("large" being most likely at least tens of thousands of dollars).
Market Analysis. In the next few sections, you're demonstrating that you have indepth business savvy to know all about potential distribution problems, government regs, technological opportunities, and employee relations in your chosen line of work. Market analysis includes your sagacious discussion of industry characteristics and trends, projected growth, customer behavior, complementary products/services, barriers of entry, and so on. To do this effectively, you'll have to do a ton of research.
Angels and VCs love good solid research, so give them what they seek. Talk about how similar products/services have done well in the market, how you're fulfilling an obvious need, and exactly who you expect to purchase your whatchamacallit. Show them that your product / service is the most attractive and competitive on the market.
Marketing Plan. This is your grand strategy of how you intend to establish presence and attract market share from the competition. You have to detail exactly what steps you will take to ensure that customers know about your product / service and prefer it over the competition. Be as detailed and give several different tactics (start off with the cheapest marketing tactic, and proceed to the most expensive).
Operations Plan. The nuts and bolts. You gave them vague assurances in your executive summary that you'd be able to run your business; now they want to understand precisely what's involved in running the show. Location, bricks and mortar, equipment needs, and labor requirements are laid out here in black and white.
Financial Plan. You should spend time understanding the basics of sales forecasts, profit-and-loss statements, cash flow projections, balance sheets, and standard business ratios. Investors will expect you to be completely independent and objective in this important area of knowledge; if they call you saying they'd like to set up a meeting with you, they will as you questions about your financial plan and you will be expected to act intelligently.
Management. The individuals managing and driving the venture forward is probably the most important section of the plan. Its so important, that Investors typically refer to this section next after gaining an understanding of the venture. VCs will take a great management team with a so-so idea over a great business model with mediocre management. If you have somebody in the team (or at least on your board or among your advisors), who's had serious entrepreneurial success, you will impress and enhance the probability of success in the VCs mind.
Exit Strategy. Not all plans have these but should. The exit strategy is for the investor, not the entrepreneur. It's basically a plan for demonstrating how they will recover their investment within a short period of time like 3-5 years. Can take the form of a merger, acquisition or an initial public offering (IPO).
Appendices. Include items to further clarify and strenghten the plan such as résumés, promotional materials, product photos, and independent assessments.
Now that you are clear on the business plan components, let's look at the most important part of your overall plan, the 'executive summary'. - The most importance element of your plan.
Executive Summary - 'Most important' part of plan
The reality is that you spent 3 months writing it, and potential investors will spend 5 minutes reviewing it
Goal: to make an impact quickly as possible
Should be viewed as a 'promotional' piece to develop interest in the venture.
· Best to bind it separately
· In straightforward prose - answer following questions:
· What sort of company is it?
· What's the product/service, and what's special about it?
· Who are the managers?
· How much money? In what stages? How its used?
· Must have punch, panache, passion
· Generate excitement with uniqueness of your idea; not with exaggerated optimism & sales jargon.
· Write the summary first, and, if you do a good job, you'll generate enough enthusiasm to carry yourself through the rest of the plan.
Remember: Investors will only read the summary -- then either toss it or ask for a meeting to learn more.
Executive Summary Elements
Company Overview
· Recap of opportunity
· Brief market summary
· Differentiation (what makes you different)
· Description of products / services
· Management biographies
· Nature and use of proceeds (table)
· Key financials (table or graph)
· Investment details
· Amount seeking
· Percentage of ownership offered
The Company
· Product / Services (can be separate section)
· What is genesis of your business?
· How did management team evolve?
· Funding up to this point?
· How is company structured legally?
· Who are current investors
· What is their share of ownership?
· Industry Analysis
· Industry or Market Analysis
Include:
· market size,
· growth rate, and
· relative stage of development.
Important to describe overall market as well as segment you are targeting
Discuss any significant changes occurring
· Short term and long terms trends,
· Impact of technology,
· Government regulation
· Economy
Competitive Analysis
Competitors already established a position, distribution, market exposure and customer base. Viability of your business depends on your company’s ability to differentiate itself, attract customers, acquire market share away from competitors - or address market segments not currently being addressed.
If you are anticipating taking market share, you need to explain how you’re going to do it.
· Advantages you have over competition?
· Why will customers buy your product/service instead?
· What are competitors strengths and weaknesses?
· Who is the market leader and why are they in that position?
Should include the following:
· Competition overview
· Merger / acquisition activity
· Current competitors
· Analysis of each competitor’s business
· Competitor Strengths / weakness
· Comparative Advantages
· Differentiation Factors
Marketing and Sales Strategy
Sales and Marketing are closely related but two different activities.
· Marketing designed to inform & attract
· Sales about actually selling product to customers
Marketing plan communicates, motivates and attracts customers
Should include:
· Who are customers, where are they, how many?
· Growing or declining and why. Are there geographic concentrations?
· Is your target audience domestic or international?
· How will you reach your market?
· How will customers become aware of your company, brand, image, and products?
Marketing Plan
· Sales / distribution strategy
· Pricing strategy
· Product positioning
· Brand image awareness
· Collateral materials
Product / market exposure strategy
· Advertising and promotional efforts
· Public relations
· Direct marketing
· Trade shows
· Website strategies / plans
· Strategic alliances / partnerships
· Marketing budget (table)
Sales Plan
Identifies how sales will be achieved.
· Direct
·
®
Paradigm21
TM
Strategy • People • Performance
Business Plan Guide
Before begin composing your masterpiece, you must first consider the audience who will review your 40 page plan and boring financial projections. Typically, business plans are offered to the following:
Angel Investors
Wealthy individuals who become personally involved in fledgling ventures, lending their expertise, experience, and money. Often, the angel is someone who has a personal connection with the entrepreneur, but angels can also be outsiders on the lookout for a winning business model that just needs a little push in order to make it fly. If your angel is a relative or someone you have known for twenty years, you have some latitude when it comes to your business plan. If you're shopping around for outside money you have to approach the angel just as you would approach a venture capitalist. The point is, if you know the angel, your business plan may not need to be as perfect as if you were proposing to a stranger.
Venture Capitalists
Venture capitalists, or VCs are large firms that have funds available to invest in attractive, profitable ventures. In exchange for funding they expect a percentage of your company. Their funds range from a few million to billions of dollars invested in a variety of globe-spanning ventures.
Venture capital is all about high-risk, high-return. Remember VCs are strangers, so they must be persuaded by your business plan. The managers of these firms look at hundreds of business plans every year, and they reject almost all of them. So the chances of generating interest are minimal.
What can you do to improve your chances of success? A VC will NOT read the entire business plan unless they are impressed by your executive summary.
Note:
If you don't know the difference between a bedsheet and a spreadsheet, you should engage professional help (contact us). However, even if you're planning to eventually hire a business consultant to write your plan for you, you should still try to write a rough draft on you own.
The first step is to familiarize yourself with the typical components of a hypothetical business plan.
Executive Summary. The executive summary is the most important document of the business plan. It will be the FIRST document of the plan, even before the table of contents.
Table of Contents. Should be well-organized and still correctly numbered after all the changes you've made. Also, strive to squeeze it all into a single page.
Company Description. Here's your chance to dazzle strangers with the history of your company. Most business plans deal with the expansion and improvement of existing businesses rather than with the funding of start-ups. Now's the time to brag (factually) about how you transformed American Watermelon Ltd. from a booth in your garage to a strong local employer that's ripe to burst onto the national scene. Here are some things to include:
- Tell 'em how you got started and how the company has grown.
- Provide a history of sales, profits, and other important numbers.
- Lead up to a description of where you are now, and what plans you have for the future.
Make this an honest account; investors will doubt the credibility of someone who appears never to have run into any problems. Talking about how you had initial challenges and then overcame them with flying colors will make you look all the better.
Product/Service. Describe the thing in jargon free-language. How does it smell? What does it do? What differentiates it from all the other whatchamacallits out there? How does it improve people's lives? What prevents someone else from doing the same thing more cheaply? What kind of equipment do you need? Do you have, or can you get, patent protection? Put yourself in the shoes of the investor and ask yourself what you yourself would want to know before agreeing to part with a large amount of money ("large" being most likely at least tens of thousands of dollars).
Market Analysis. In the next few sections, you're demonstrating that you have indepth business savvy to know all about potential distribution problems, government regs, technological opportunities, and employee relations in your chosen line of work. Market analysis includes your sagacious discussion of industry characteristics and trends, projected growth, customer behavior, complementary products/services, barriers of entry, and so on. To do this effectively, you'll have to do a ton of research.
Angels and VCs love good solid research, so give them what they seek. Talk about how similar products/services have done well in the market, how you're fulfilling an obvious need, and exactly who you expect to purchase your whatchamacallit. Show them that your product / service is the most attractive and competitive on the market.
Marketing Plan. This is your grand strategy of how you intend to establish presence and attract market share from the competition. You have to detail exactly what steps you will take to ensure that customers know about your product / service and prefer it over the competition. Be as detailed and give several different tactics (start off with the cheapest marketing tactic, and proceed to the most expensive).
Operations Plan. The nuts and bolts. You gave them vague assurances in your executive summary that you'd be able to run your business; now they want to understand precisely what's involved in running the show. Location, bricks and mortar, equipment needs, and labor requirements are laid out here in black and white.
Financial Plan. You should spend time understanding the basics of sales forecasts, profit-and-loss statements, cash flow projections, balance sheets, and standard business ratios. Investors will expect you to be completely independent and objective in this important area of knowledge; if they call you saying they'd like to set up a meeting with you, they will as you questions about your financial plan and you will be expected to act intelligently.
Management. The individuals managing and driving the venture forward is probably the most important section of the plan. Its so important, that Investors typically refer to this section next after gaining an understanding of the venture. VCs will take a great management team with a so-so idea over a great business model with mediocre management. If you have somebody in the team (or at least on your board or among your advisors), who's had serious entrepreneurial success, you will impress and enhance the probability of success in the VCs mind.
Exit Strategy. Not all plans have these but should. The exit strategy is for the investor, not the entrepreneur. It's basically a plan for demonstrating how they will recover their investment within a short period of time like 3-5 years. Can take the form of a merger, acquisition or an initial public offering (IPO).
Appendices. Include items to further clarify and strenghten the plan such as résumés, promotional materials, product photos, and independent assessments.
Now that you are clear on the business plan components, let's look at the most important part of your overall plan, the 'executive summary'. - The most importance element of your plan.
Executive Summary - 'Most important' part of plan
The reality is that you spent 3 months writing it, and potential investors will spend 5 minutes reviewing it
Goal: to make an impact quickly as possible
Should be viewed as a 'promotional' piece to develop interest in the venture.
· Best to bind it separately
· In straightforward prose - answer following questions:
· What sort of company is it?
· What's the product/service, and what's special about it?
· Who are the managers?
· How much money? In what stages? How its used?
· Must have punch, panache, passion
· Generate excitement with uniqueness of your idea; not with exaggerated optimism & sales jargon.
· Write the summary first, and, if you do a good job, you'll generate enough enthusiasm to carry yourself through the rest of the plan.
Remember: Investors will only read the summary -- then either toss it or ask for a meeting to learn more.
Executive Summary Elements
Company Overview
· Recap of opportunity
· Brief market summary
· Differentiation (what makes you different)
· Description of products / services
· Management biographies
· Nature and use of proceeds (table)
· Key financials (table or graph)
· Investment details
· Amount seeking
· Percentage of ownership offered
The Company
· Product / Services (can be separate section)
· What is genesis of your business?
· How did management team evolve?
· Funding up to this point?
· How is company structured legally?
· Who are current investors
· What is their share of ownership?
· Industry Analysis
· Industry or Market Analysis
Include:
· market size,
· growth rate, and
· relative stage of development.
Important to describe overall market as well as segment you are targeting
Discuss any significant changes occurring
· Short term and long terms trends,
· Impact of technology,
· Government regulation
· Economy
Competitive Analysis
Competitors already established a position, distribution, market exposure and customer base. Viability of your business depends on your company’s ability to differentiate itself, attract customers, acquire market share away from competitors - or address market segments not currently being addressed.
If you are anticipating taking market share, you need to explain how you’re going to do it.
· Advantages you have over competition?
· Why will customers buy your product/service instead?
· What are competitors strengths and weaknesses?
· Who is the market leader and why are they in that position?
Should include the following:
· Competition overview
· Merger / acquisition activity
· Current competitors
· Analysis of each competitor’s business
· Competitor Strengths / weakness
· Comparative Advantages
· Differentiation Factors
Marketing and Sales Strategy
Sales and Marketing are closely related but two different activities.
· Marketing designed to inform & attract
· Sales about actually selling product to customers
Marketing plan communicates, motivates and attracts customers
Should include:
· Who are customers, where are they, how many?
· Growing or declining and why. Are there geographic concentrations?
· Is your target audience domestic or international?
· How will you reach your market?
· How will customers become aware of your company, brand, image, and products?
Marketing Plan
· Sales / distribution strategy
· Pricing strategy
· Product positioning
· Brand image awareness
· Collateral materials
Product / market exposure strategy
· Advertising and promotional efforts
· Public relations
· Direct marketing
· Trade shows
· Website strategies / plans
· Strategic alliances / partnerships
· Marketing budget (table)
Sales Plan
Identifies how sales will be achieved.
· Direct
· Use agents
· Telephone
· Internet
· Level of results you expect from sales personnel
· Helps in developing sales forecasts
Operations
Should include:
· Legal structure of the business
· Licenses and permits required by the venture
· Management details (who they are)
· Organisational structure and staffing
· Operations and Production
· Professional advisers -
· Insurance and security issues
· Business premises
· Plant and equipment required
· Production processes to be used
· Critical risks (and contingency plans to cover these)
Risks and Opportunities
Identify potential risks company might encounter
Analyse each risk and offset with explanation of why its not critical or how you can balance it
Risk examples
· Legal environment
· Political legislation
· Market changes
· Competitive risks
· Technology risks
· Product risks
Management
Stress relevant experience and previous success.
This section of the plan should include:
· Biographic summary of key management
· Organizational charts (current & future)
· Manpower table
· Board of advisors
· Board of directors
Exit Strategies and Future of Venture
‘Active’ investors directly involved in business and usually long term
‘Passive’ investors are short term 2-5 yrs and want to know
· How their investment will grow
· How they will get their money back
Both types of investors look for return by:
· Profitability sharing
· Merger or sale of company
· Public offering
Financial Projections
Use of Funds Breakdown
Financial Risk Analysis
· Breakeven forecast
· ROI (outlines financial returns and risk)
· 3 year revenue projections below: (create 3 scenarios; pessimistic, probable and optimistic to maintain credibility)
· Income Statement by month:
· Estimated Monthly revenues
· Cost of Goods
· Operational costs
· Pretax profit
· Cash Flow Forecast
· Balance Sheet Statement
Possible Appendices
· Brochures
· Product photos
· Competitor’s promotional material
· Maps of site
· Floor plan of premises
· Lease Agreements
· Reference sources and key statistics collected during the market research process.
Top "Do's"
· Prepare a complete business plan for any business you are considering.
· Package your business plan in an attractive kit as a selling tool.
· Submit your business plan to experts for their advice.
· Spell out your strategies on how you intend to handle adversities.
· Include a monthly one-year cash flow projection.
· Freely and frequently modify your business plans to account for changing conditions.
Top "Don't's"
· Don't be optimistic (on the high side) in estimating future sales.
· Don't be optimistic (on the low side) in estimating future costs.
· Don't disregard or discount weaknesses in your plan. Spell them out.
· Don't stress long-term projections. Better to focus on projections for your first year.
· Don't depend entirely on the uniqueness of your business or the success of an invention.
· Don't project yourself as someone you're not. Be brutally realistic.
· Don't be everything to everybody. Highly focused specialists usually do best.
· Don't proceed without adequate financial and accounting know-how.
Never, never, never skip the step of preparing a business plan before starting your venture!
Need help with your Marketing or Business Plan? Please contact us for information on how we can help:
Before begin composing your masterpiece, you must first consider the audience who will review your 40 page plan and boring financial projections. Typically, business plans are offered to the following:
Angel Investors
Wealthy individuals who become personally involved in fledgling ventures, lending their expertise, experience, and money. Often, the angel is someone who has a personal connection with the entrepreneur, but angels can also be outsiders on the lookout for a winning business model that just needs a little push in order to make it fly. If your angel is a relative or someone you have known for twenty years, you have some latitude when it comes to your business plan. If you're shopping around for outside money you have to approach the angel just as you would approach a venture capitalist. The point is, if you know the angel, your business plan may not need to be as perfect as if you were proposing to a stranger.
Venture Capitalists
Venture capitalists, or VCs are large firms that have funds available to invest in attractive, profitable ventures. In exchange for funding they expect a percentage of your company. Their funds range from a few million to billions of dollars invested in a variety of globe-spanning ventures.
Venture capital is all about high-risk, high-return. Remember VCs are strangers, so they must be persuaded by your business plan. The managers of these firms look at hundreds of business plans every year, and they reject almost all of them. So the chances of generating interest are minimal.
What can you do to improve your chances of success? A VC will NOT read the entire business plan unless they are impressed by your executive summary.
Note:
If you don't know the difference between a bedsheet and a spreadsheet, you should engage professional help (contact us). However, even if you're planning to eventually hire a business consultant to write your plan for you, you should still try to write a rough draft on you own.
The first step is to familiarize yourself with the typical components of a hypothetical business plan.
Executive Summary. The executive summary is the most important document of the business plan. It will be the FIRST document of the plan, even before the table of contents.
Table of Contents. Should be well-organized and still correctly numbered after all the changes you've made. Also, strive to squeeze it all into a single page.
Company Description. Here's your chance to dazzle strangers with the history of your company. Most business plans deal with the expansion and improvement of existing businesses rather than with the funding of start-ups. Now's the time to brag (factually) about how you transformed American Watermelon Ltd. from a booth in your garage to a strong local employer that's ripe to burst onto the national scene. Here are some things to include:
- Tell 'em how you got started and how the company has grown.
- Provide a history of sales, profits, and other important numbers.
- Lead up to a description of where you are now, and what plans you have for the future.
Make this an honest account; investors will doubt the credibility of someone who appears never to have run into any problems. Talking about how you had initial challenges and then overcame them with flying colors will make you look all the better.
Product/Service. Describe the thing in jargon free-language. How does it smell? What does it do? What differentiates it from all the other whatchamacallits out there? How does it improve people's lives? What prevents someone else from doing the same thing more cheaply? What kind of equipment do you need? Do you have, or can you get, patent protection? Put yourself in the shoes of the investor and ask yourself what you yourself would want to know before agreeing to part with a large amount of money ("large" being most likely at least tens of thousands of dollars).
Market Analysis. In the next few sections, you're demonstrating that you have indepth business savvy to know all about potential distribution problems, government regs, technological opportunities, and employee relations in your chosen line of work. Market analysis includes your sagacious discussion of industry characteristics and trends, projected growth, customer behavior, complementary products/services, barriers of entry, and so on. To do this effectively, you'll have to do a ton of research.
Angels and VCs love good solid research, so give them what they seek. Talk about how similar products/services have done well in the market, how you're fulfilling an obvious need, and exactly who you expect to purchase your whatchamacallit. Show them that your product / service is the most attractive and competitive on the market.
Marketing Plan. This is your grand strategy of how you intend to establish presence and attract market share from the competition. You have to detail exactly what steps you will take to ensure that customers know about your product / service and prefer it over the competition. Be as detailed and give several different tactics (start off with the cheapest marketing tactic, and proceed to the most expensive).
Operations Plan. The nuts and bolts. You gave them vague assurances in your executive summary that you'd be able to run your business; now they want to understand precisely what's involved in running the show. Location, bricks and mortar, equipment needs, and labor requirements are laid out here in black and white.
Financial Plan. You should spend time understanding the basics of sales forecasts, profit-and-loss statements, cash flow projections, balance sheets, and standard business ratios. Investors will expect you to be completely independent and objective in this important area of knowledge; if they call you saying they'd like to set up a meeting with you, they will as you questions about your financial plan and you will be expected to act intelligently.
Management. The individuals managing and driving the venture forward is probably the most important section of the plan. Its so important, that Investors typically refer to this section next after gaining an understanding of the venture. VCs will take a great management team with a so-so idea over a great business model with mediocre management. If you have somebody in the team (or at least on your board or among your advisors), who's had serious entrepreneurial success, you will impress and enhance the probability of success in the VCs mind.
Exit Strategy. Not all plans have these but should. The exit strategy is for the investor, not the entrepreneur. It's basically a plan for demonstrating how they will recover their investment within a short period of time like 3-5 years. Can take the form of a merger, acquisition or an initial public offering (IPO).
Appendices. Include items to further clarify and strenghten the plan such as résumés, promotional materials, product photos, and independent assessments.
Now that you are clear on the business plan components, let's look at the most important part of your overall plan, the 'executive summary'. - The most importance element of your plan.
Executive Summary - 'Most important' part of plan
The reality is that you spent 3 months writing it, and potential investors will spend 5 minutes reviewing it
Goal: to make an impact quickly as possible
Should be viewed as a 'promotional' piece to develop interest in the venture.
· Best to bind it separately
· In straightforward prose - answer following questions:
· What sort of company is it?
· What's the product/service, and what's special about it?
· Who are the managers?
· How much money? In what stages? How its used?
· Must have punch, panache, passion
· Generate excitement with uniqueness of your idea; not with exaggerated optimism & sales jargon.
· Write the summary first, and, if you do a good job, you'll generate enough enthusiasm to carry yourself through the rest of the plan.
Remember: Investors will only read the summary -- then either toss it or ask for a meeting to learn more.
Executive Summary Elements
Company Overview
· Recap of opportunity
· Brief market summary
· Differentiation (what makes you different)
· Description of products / services
· Management biographies
· Nature and use of proceeds (table)
· Key financials (table or graph)
· Investment details
· Amount seeking
· Percentage of ownership offered
The Company
· Product / Services (can be separate section)
· What is genesis of your business?
· How did management team evolve?
· Funding up to this point?
· How is company structured legally?
· Who are current investors
· What is their share of ownership?
· Industry Analysis
· Industry or Market Analysis
Include:
· market size,
· growth rate, and
· relative stage of development.
Important to describe overall market as well as segment you are targeting
Discuss any significant changes occurring
· Short term and long terms trends,
· Impact of technology,
· Government regulation
· Economy
Competitive Analysis
Competitors already established a position, distribution, market exposure and customer base. Viability of your business depends on your company’s ability to differentiate itself, attract customers, acquire market share away from competitors - or address market segments not currently being addressed.
If you are anticipating taking market share, you need to explain how you’re going to do it.
· Advantages you have over competition?
· Why will customers buy your product/service instead?
· What are competitors strengths and weaknesses?
· Who is the market leader and why are they in that position?
Should include the following:
· Competition overview
· Merger / acquisition activity
· Current competitors
· Analysis of each competitor’s business
· Competitor Strengths / weakness
· Comparative Advantages
· Differentiation Factors
Marketing and Sales Strategy
Sales and Marketing are closely related but two different activities.
· Marketing designed to inform & attract
· Sales about actually selling product to customers
Marketing plan communicates, motivates and attracts customers
Should include:
· Who are customers, where are they, how many?
· Growing or declining and why. Are there geographic concentrations?
· Is your target audience domestic or international?
· How will you reach your market?
· How will customers become aware of your company, brand, image, and products?
Marketing Plan
· Sales / distribution strategy
· Pricing strategy
· Product positioning
· Brand image awareness
· Collateral materials
Product / market exposure strategy
· Advertising and promotional efforts
· Public relations
· Direct marketing
· Trade shows
· Website strategies / plans
· Strategic alliances / partnerships
· Marketing budget (table)
Sales Plan
Identifies how sales will be achieved.
· Direct
· Use agents
· Telephone
· Internet
· Level of results you expect from sales personnel
· Helps in developing sales forecasts
Operations
Should include:
· Legal structure of the business
· Licenses and permits required by the venture
· Management details (who they are)
· Organisational structure and staffing
· Operations and Production
· Professional advisers -
· Insurance and security issues
· Business premises
· Plant and equipment required
· Production processes to be used
· Critical risks (and contingency plans to cover these)
Risks and Opportunities
Identify potential risks company might encounter
Analyse each risk and offset with explanation of why its not critical or how you can balance it
Risk examples
· Legal environment
· Political legislation
· Market changes
· Competitive risks
· Technology risks
· Product risks
Management
Stress relevant experience and previous success.
This section of the plan should include:
· Biographic summary of key management
· Organizational charts (current & future)
· Manpower table
· Board of advisors
· Board of directors
Exit Strategies and Future of Venture
‘Active’ investors directly involved in business and usually long term
‘Passive’ investors are short term 2-5 yrs and want to know
· How their investment will grow
· How they will get their money back
Both types of investors look for return by:
· Profitability sharing
· Merger or sale of company
· Public offering
Financial Projections
Use of Funds Breakdown
Financial Risk Analysis
· Breakeven forecast
· ROI (outlines financial returns and risk)
· 3 year revenue projections below: (create 3 scenarios; pessimistic, probable and optimistic to maintain credibility)
· Income Statement by month:
· Estimated Monthly revenues
· Cost of Goods
· Operational costs
· Pretax profit
· Cash Flow Forecast
· Balance Sheet Statement
Possible Appendices
· Brochures
· Product photos
· Competitor’s promotional material
· Maps of site
· Floor plan of premises
· Lease Agreements
· Reference sources and key statistics collected during the market research process.
Top "Do's"
· Prepare a complete business plan for any business you are considering.
· Package your business plan in an attractive kit as a selling tool.
· Submit your business plan to experts for their advice.
· Spell out your strategies on how you intend to handle adversities.
· Include a monthly one-year cash flow projection.
· Freely and frequently modify your business plans to account for changing conditions.
Top "Don't's"
· Don't be optimistic (on the high side) in estimating future sales.
· Don't be optimistic (on the low side) in estimating future costs.
· Don't disregard or discount weaknesses in your plan. Spell them out.
· Don't stress long-term projections. Better to focus on projections for your first year.
· Don't depend entirely on the uniqueness of your business or the success of an invention.
· Don't project yourself as someone you're not. Be brutally realistic.
· Don't be everything to everybody. Highly focused specialists usually do best.
· Don't proceed without adequate financial and accounting know-how.
Never, never, never skip the step of preparing a business plan before starting your venture!
Need help with your Marketing or Business Plan? Please contact us for information on how we can help:
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