Whatever funding platform you’re looking to for investment – be it your bank, venture capitalists, crowdfunding websites or grants from the government: those you’re pitching to will expect to see a carefully thought-out business plan before they’ll agree to fund or invest in your business.
Research has shown companies with a business plan raise twice as much capital as those without one in the first twelve months, so that should leave you in no doubt as to the importance of getting it right.
In addition, it encourages you to look long and hard at your concept and product – does it really have legs? Do the figures stack up? How are you actually going to implement it? Once completed, it will give you an excellent overview about the feasibility of your big idea – information not only vital to yourself but also potential investors.
So here is some advice on the key points you should cover to ensure that you have a clear and well-structured business plan, one that gives you the best chance of walking out with that much sought-after ‘I’m in’ vote.
Don’t underestimate the importance of the executive summary
The executive summary forms the first part of a business plan and if not adequately presented, could also be the last part your potential investor reads. This section helps them to decide whether or not to continue reading – first impressions count so it pays to get this part right first time, literally.
Outline your business proposal by including a business description, a description of the product(s)/service(s) you are offering and details about the investment you are seeking. Ensure it is detailed, complete and accurately describes your business.
Be realistic about your financial projections
Although these numbers are estimates, they need to be realistic and you need to be able to defend them to potential investors. Projections you must include in your proposal include employee salaries and overhead costs, revenue and sales, the percentage of return you expect from your product/service and your break-even point.
On that note, the break-even point refers to the time it will take before you can recover your initial investment in the business. To establish your business’ break-even point you need to calculate when your business will produce enough revenue to cover all of your fixed and variable operating costs – i.e. the point at which gains will equal losses.
Be thorough about your target markets
This section is important because it demonstrates to potential investors your business’ chances for success. Be clear about what markets you’re trying to target and how you’ll do this. Specifically, think about what areas within the market you’ll focus on to increase exposure and sales.
Knowing your customers is key to any successful business. Impress potential investors by showing them how much you know about customer spending in your target market. Also, don’t try to hide your competition, this will catch up with you in the end: instead, show potential investors why customers will buy from you over your competitors.
Being proactive about tackling any potential issues can also work to your advantage as it will demonstrate that you have a sound grasp of your business and its market and more importantly, how you will overcome it.
Make sure you cover the above in each of the main sections of your business plan: the executive summary, a business outline, a marketing plan and strategy, operations and logistics information, a financial plan and a SWOT analysis. The SWOT analysis is an optional part of a business plan but can prove to be most a valuable addition as it demonstrates the deep understanding you have of your business, the industry it operates in and an awareness of your competitors so you know what you’re up against. As mentioned, being proactive will work in your favour.
To ensure you don’t leave out any essential information and that it is suitably comprehensive, a guided business plan, one that takes you through all the steps with additional advice and examples provided at every opportunity, could prove extremely helpful.
All businesses needing planning, whatever stage they’re at, but for new business ventures, it is even more important to set clear objectives and a have strategy in place from the start, and a strong business plan will help you do just that, as well as holding the key to unlocking the finance that will help to get your business off the ground.
Mark Edwards is general manager at Rocket Lawyer, an online legal service providing start-ups and small businesses with easy-to-use professional, legal documents and affordable help from specialist lawyers.
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