Thursday, October 16, 2008
Tips for Effective Business Plan Writing
Hello. If you are thinking about starting your first business, writing a business plan can seem, ...well... overwhelming! If you feel you are not a researcher and writer, you'll likely want to hire someone who "plays" at doing those things. If you are a good researcher and writer, here are some tips that will help you develop a much better business plan. The more thorough and better written the plan, the more likely you'll both greatly increase the speed and amount of sales as well as significantly increase the likelihood that you'll get funded.
Looking for start up capital? Well, lately, just about the only banks giving businesses loans are those that are guaranteed by the Small Business Administration (SBA). Soooo... if you are smart, you'll visit your local SBDC (Small Business Development Center) and get your first draft of a business plan reviewed by trained experts.
Ok. So, here are the tips, written in the order of a typical plan outline. Keep in mind that the executive summary may be placed in the beginning but it is always written in the end, after you've written almost everything else.
Tip #1: What sets your apart from your competition? What is your Unique Selling Proposition (USP)?
Think about the number of business plans your readers must plow through each day (if they are angel investors, venture capitalists, or bankers). An average venture capitalists, for example, usually sees about 1,000 plans a year and likley invests in up about 10! What distinguishes yours from the rest of the stack?
Highlight the qualities that set you apart from all the other businesses early on in your Executive Summary. Put your winning concept up front and make sure your readers get it. Really emphasize that you've done your marketing research and concisely explain why you will dominate your particular market (with sufficient capital to send the message out, of course!).
Tip #2 The eye loves white space. Give your words breathing room.
Separate out your summary into paragraphs that mirror the sections of your business plan, giving at least 1/2 an inch of white space between each topic. It gives the reader's mind a chance to breath. Summaries are best written very dense, with the lease words possible to say the most important things. So, the reader will want to take a moment to soak it in. Give them the white space to take a "mental breath" before taking on the next big gulp of information.
Tip #3 Inc and grow rich.
If you are presenting a business plan to someone other than your friend or relative, be sure to have incorporated already. Have your incorporation information listed in the Company Description section of the website. Telling the reader that you have yet to incorporate could lead them to think that you're not taking your business seriously. When you show that you have at least an LLC (which can later be converted to a C Corp or S Corp), then they see that "you mean business." Now, which state to incorporate in? Did you know that there are good reasons NOT to incorporate in the state in which you currently reside? Talk to a good business attorney and ask about which states give the most protection in court. Also, never sell more than 49% of your stocks unless you are willing to give up all control to other stock holders.
Tip #4 Milestones show maturity.
You'll want to develop a history of your company that makes you look smart. You'll want to list milestones that you've already achieved. For example, show a chronology of the following, providing the dates of when you:
Completed your prototype
Shipped your first product
Secured major accounts / customers
Secured key strategic partnerships
Reached a significant sales level
You'll want to indicate at what phase of development your company is currently. Choose one of the following that best describes where you are:
Seed Company: The business concept is developed, but the product or service is not yet finalized. Not yet making sales.
Start-Up: In the early state of operation. Securing first customers.
Expanding: Established company adding new products, services, or branches. Rapidly increasing sales growth.
Stable: Established company with modest ongoing sales growth.
Retrenchment: Consolidating or repositioning product lines. Little or no sales growth.
Tip #5 Avoid Disclosing Sensitive Information
Be careful about putting highly proprietary or technical details in your plan, even if your reader has signed a non-disclosure agreement. You can present these details at a later stage of discussion.
Tip #5 Research, Research, Research - spot trends before they take you out of the game
Researching industry trends enables you to provide facts supporting your claims for your company's potential success. You'll need to show that your industry is growing instead of dying or flat. Even more convincing are sales figures for similar companies in the industry.
Tip #6 Invest in Yourself
Most lenders and investors want to see that the business owners have already made a significant personal financial investment in their own company. Many loan programs require owners to contribute 20 to 30% towards any funds sought. So, make certain you highlight the amount of money--as well as the time and other resources--you've already committed to your company.
Tip #7 Targeting your Market Shows Exactly How You'll Reach Certain People
A strong target market definition is:
Definable: It identifies the specific characteristics potential customers have in common
Meaningful: These characteristics directly relate to purchasing decisions
Sizable: The number of those potential customers is large enough to sustain your business.
Reachable: You can affordably and effectively market to them and have proven they will respond via cost effective marketing campaigns.
MORE TIPS TO COME... that's it for now, but, I'll post more tips soon... be sure to sign up for my RSS feed