A Business Plan To Entice Backers

Gather the information first

A business plan includes many elements, most of which will require careful research. Depending on the country or region you live in, you will have access to a combination of libraries, government databases open to the public, lawyers or accountants, and personal contacts. Interviews with potential customers and suppliers give your plan credibility and will probably improve your business idea and strategy.

Collect the information before writing the plan.

European Venture Capital Association suggests this list:

* Resumes of founders and key managers;

* Statistics relating to sales and markets;

* Names of potential customers and anticipated demand;

 

* Names of and information about your competitors and your assessment of them;

* Financial information required to support your project;

* Research and development information;

* Production process and sources of supply;

* Information on requirements for factory and plant;

* Magazine and newspaper articles about your business and industry;

* Regulations and laws that could affect your business product and process protection (patents, copyrights, trademarks).

Be clear and lively

Who will read your plan? Is it potential investors or customers? Think about what questions they will have and what aspects of the business are important to them. When you write the sections and design the layout, imagine you are speaking to your audience.

Business plans are useful for existing businesses, too. If you intend to turn round a business or start a new phase of growth for your existing business, a business plan is a great tool to articulate your ideas while convincing investors and other people to support your project.

Communicate your passion. Whatever your concept, you must explain the idea in a clear and lively fashion. Let others catch your enthusiasm. In fact, the very process of researching and writing the business plan will help to clarify your ideas.

Most important, do not bore your audience: be interesting and concise.

Make it look good

The business plan speaks for you. The better it looks and the clearer the ideas in it, the more effective it will be. A clean professional look means the plan will be read seriously. If you do not have the computer skills to prepare the plan, hire a service that does.

A business plan is not a novel - try to keep it within 20-40 pages, including a three to five page summary.

Obviously, a sophisticated high-technology manufacturing business may require extra pages to cover the details. Include sufficient detail to demonstrate you have done your homework and you understand the market and the business. Remember, if your audience is venture capitalists, you just need to convince them to invest.

Begin the business plan with the executive summary, which should give the essential elements to entice the reader into looking at the full plan.

Investors have to handle lots of proposals - so they will not read for long if you fail to intrigue them.

Place the information in logical and clear sections.

Appendices at the end of the business plan are the best place for the full resumes of personnel, detailed financial analysis and other useful information. In the main part of the plan stay focused on the important highlights.

Critical aspects

Use the business plan to help readers "see" your business in the future. By including all the critical elements (which are here organised in three main sections) the business plan should answer your readers unspoken questions about how your business will work. These sections are summarised from Evca research, which asked venture capitalists what they wanted to see in a business plan.

* Management and organisation information- who are the people?

Like potential employers, potential investors need to be convinced that you and others in the venture team have experience, skills, talents and integrity. A synopsis of each persons background, with special attention to any successes in managing high-growth projects, should be included.

You should also address what specific skills are missing in the management team. Acknowledge the gaps and show you understand what kind of people the business needs to succeed. In fact, your readers might be able to help you find that key person.

How will you structure the organisation? What kind of directors do you need or want? In terms of employees, describe your vision of reporting relationships, incentives and recruiting.

* Product information- what is the product or service?

Describe the features and benefits to the customer of the product. Insert a photograph or artists impression. Relate your product or service to existing products and technology and clarify the distinctions. If you have a technological idea, explain the product and its uses in plain language.

Is more R&D required? Write up a research plan, including specific development objectives, a budget and schedule. What are the risks in the technology? How likely is it that another company is working on similar ideas? Can this R&D be leveraged into a range of products? What about patents?

How will you deliver the product? A detailed analysis and plan for producing the product should be generated. Do not just include the factory or shop but also describe how and where you will get your raw materials and notice whether any problems might occur (for example, delay in overseas delivery). What will be the production costs? How will you control quality?

Review government regulations for your product (national and at least regional) and be sure to identify required approvals or environmental restrictions. What plan do you have for obtaining approvals or permits?

* Marketing your product - the bottom line for any business is converting an idea into a product that people will buy. Is there a market for your product? Do you understand the market forces that will affect your business? Do you have the ability and resources to sell and distribute your product?

The market: The first priority is to specify clearly the target market segments, explain why your product is suitable and what advantages it offers over existing products.

How will you position your product for the target segments? Discuss all the relevant factors - your proposed marketing policy for the price, quality and design of the product, the type, style and content of advertising and public relations, the sales force, service and so on.

Estimate both the size of the market, and the cost in people and finances for reaching it. The marketing strategy and customer benefits should work together. For example, your pricing strategy should be based on the value of the product to the customer, not on your manufacturing costs.

The competition: The business plan must describe who your (potential) competitors are, including companies overseas. You should also prepare a defensive strategy based on the probable reactions of your future competitors. Beware of competitors with lots of money - they have the resources to fight hard and long if they decide you threaten their future.

Sales and distribution: The first decision is whether to work with outside agents or to have your own sales force and distribution system. Both have advantages and disadvantages.

Think about ease of reaching customers, size of orders, number of customers and need for customer support. If you are to depend on only a few customers for most of your sales, you must plan how you will manage that relationship profitably.

Consider export sales separately - the costs and benefits of outsourcing distribution may be very different. Many private companies and public services can help your business expand internationally at a reasonable cost.

Advertising and public relations: Many products require advertising to create sales. Explain your advertising philosophy, budget and plan, making sure to link the advertising to your overall market positioning strategy.

Your options include using public media for "free" advertising. An agency can help create a winning strategy but select an advertising or PR agency carefully - check the work they have done in your industry.

Financing the business

The amount of financial information in the business plan depends on how much money you are seeking and the stage of your financing.

The plan should include three elements:

* The funding request: State how much money you need, why you need it and what you will do with the funds. Do not try to keep the amount as small as possible - allow enough for contingencies.

* Financial statements: If your company is already operating, include the latest audited accounts and comment on trends and fluctuations.

* Forecasts: Use the information you have gathered on the market, product and costs and make realistic assumptions to build a scenario of the next few years for your business. The financial forecasts should include profit and loss statements, cash flow and pro forma balance sheets for up to five years and break-even analysis. The level of detail (monthly, quarterly or annual) should depend on the type of business. Seasonal businesses usually have high financing needs for specific periods, for example, just before the snow for ski businesses. Your forecasts should show the peaks and troughs of your business.