If you are a current business owner or want to start a new business then you will need capital to do this. You can and should use your own money initially, but to really grow your business you will require external investment. Writing a business plan is the vehicle to secure this investment but you need to write it the right way.
For a number of reasons writing a business plan seems to overwhelm a lot of business owners. Some think that it is a waste of time but unless you have rich family or friends that will be willing to invest a serious amount of money into your business just on your say so then you will need to create a business plan.
Writing a business plan is not as difficult as it sounds. Follow these steps to ensure that you create a business plan that will be really effective for you.
Write a Business Plan with your Audience in mind
Investors are usually busy people and they do not have the time to wade through numerous pages to understand what your business is really about. There are so many business plans like this and the creators of these plans are upset that they have failed to raise the money that they need.
When you are writing a business plan get to the point early. Use the first paragraph to explain what your business is about and the market that it serves. You need to keep investors interested right from the start, so don’t waffle on for several pages about what you are doing.
Also bear in mind that a lot of venture capitalists will only be interested in your business plan if you are able to demonstrate that you can generate revenues in excess of $100 million in five years. So make sure that you show that you are aiming to do this in the plan.
Make your Business Plan as Brief as possible
Some people approach writing a business plan by trying to answer every possible question that an investor may ask. Don’t try and do this or your business plan will be far too long. You are never going to think about every question anyway so this is a flawed approach right from the start.
Concentrate on making your business plan interesting for those that will read it. You must cover the main points about your business so that a potential investor understands what you are doing and what you want to achieve. You need to demonstrate that you have really thought the whole thing through.
Your business plan needs to be an effective tool that will get you a meeting with a potential investor. If it is too long and uninteresting then you will not interest investors and there will be no meetings. Once you are at an investment meeting investors will ask you questions and it doesn’t matter if you have not fully covered these in your plan.
Writing a Business Plan that Excites
A business plan is essentially a selling document. You are selling your business to potential investors. It is your job not only to interest investors, but make them excited to find out more. You need to do this in such a way that you do not “oversell”.
Nothing says “hard sell” more than the over use of superlatives. Avoid the temptation to say that your management team is “world class” or that your software products are the “best in class”. Investors will see through this and it can damage the credibility of your business plan. Can you prove that your management team is world class? If not then don’t say it.
There is always Competition
A lot of business owners that come up with new ideas will say that there is no competition to what they are offering in their business plans. This is hardly ever true and you should never state this. It can send the wrong signals to potential investors who may form the opinion that if you have no competition then your market does not exist or it will be very small.
There is almost always indirect competition to what you are offering. Other businesses will be targeting the same customers as you trying to solve their problems with a different solution. You need to take this into account when writing a business plan.
It is far better to identify your competitors in your business plan and explain the reasons why your business can beat them and take some of their market share. Never be disrespectful about a competitor as this will do your credibility no good at all. Instead state that your competitors are succeeding but your business will put a dent into their success.
Explain your Long Term View when Writing a Business Plan
It is important that your business plan includes your long term vision for the next five years or more. A plan for this far out is at best going to be an intelligent guess, so always include a detailed plan for your first year which shows how you will achieve your short term goals as well.
Be specific about your current goals for this year and next. Break your goals down into quarters and show what the impact of the investment will be. Always provide numbers to back this up and use other tools such as Gantt charts to provide a clearer picture if necessary.
Start Writing a Business Plan today
Use the tips for writing a business plan above to create a document that will interest potential investors and demonstrate that you have thought through all of the major areas. Take time to create your plan properly and test it in house first. A good business plan has the potential to raise funding but a bad business plan does not.