| The Second Step: Writing the Business Plan
Why is a Business Plan Needed?
A quality business plan is an important key to convincing
investors that the management team has the experience
to build a successful enterprise. The plan also provides
measurable operating and financial objectives for
management and potential investors to measure the
company's progress.
Executive Summary
Business plans should be summarized into a short two to
three page synopsis called the executive summary. The
summary is used to capture the essence of the plan and
generate interest. It is the most important section of the
business plan and should be written last, to ensure that
only vital information is included.
Less than 5% of the hundreds of plans that venture capital
firms received are reviewed beyond the executive
summary. Most often, because the summary is not
written convincingly or clearly enough. The summary must
stand out and be noticed, quality is key. Effort taken in
researching investor preferences and preparing a quality
summary will set the plan apart and assure that it
receives full consideration.
Business Plan DOs & DON'Ts
- Do be brief. Begin with a two to three page executive
summary. Limit the body of the plan to seven to ten
typewritten pages.
- Do let the reader know, early on, what type of business
the company is.
- Do state the company's objectives.
- Do describe strategy and tactics to reach those
objectives.
- Do cite clearly how much money the company will need,
over what period of time and how the funds will be used. -
Do have a clear and logical explanation about the
investor's exit strategy.
- Do be realistic in making estimates and assessing
market potentials.
- Do be specific. Substantiate statements with underlying
data.
- Do summarize and structure properly.
- Do enclose the proposal in an attractive, but not
overdone, cover.
- Do provide extra copies of the plan to speed the review
process.
- Don't make vague or make unsubstantiated statements.
- Don't use highly technical descriptions of products,
processes or operations.
Executive Summary Outline
- Company Overview
- Products & Services
Product description, company profile, market/industry it
serves, brief history, milestones completed, future plans,
vision, profile end users, status of patents, copyrights and
trade secrets, beta product test results.
- Management Team
- Ownership Team
Key members' resumes, emphasize proven track record,
note experience and talents in the key disciplines:
technological development, marketing, sales,
manufacturing and finance, note unfilled positions, list
board of directors/advisors.
- Market Analysis
- Marketing Plan
Be specific, focus on believable verifiable data, and
analyze company's industry and potential customers.
Industry data including growth rates, size of market,
recent advances, government regulations, future trends
and customer research. Sell your company/product,
include pricing, distribution, and promotion.
- Operations
- Competition
Detail location and size of facility. Justify location,
including factors such as: availability of labor,
accessibility of materials, proximity to distribution
channels, and tax considerations. Describe equipment
and facilities. Include plans for financing. Include
prototype production data, including budget and timetable.
Discuss competition, include how and why the company
will beat competition. Anticipate competitive response to
product. Analyze competition based on price, quality, and
warranties.
- Funds Requested and Uses
State the amount of money required and be specific in the
description of the uses of the funds sought. Avoid such
general terms as "working capital".
- Summary of Five Year Financial Projections
Summarize key financial projections through break-even.
Only projected revenues, net income, assets and
liabilities should be listed. Note additional expected
rounds of financing needed.
Go to Step 3
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