Contrary to what some so-called "experts" are advising these days, every business looking for investors has to have a written business plan. If you have one, it's time to update your projections of revenue and profits, fine tune your market strategy and remove the resumes of any management team members who have flown the coop. If you don't have a plan already written, you need to write one, and if you're not a writer, it's best to seek professional help.
Where best to seek that help than from the guy who has probably written more business plans than anyone in America? Dan McGilvery heads up the Business Planning Services division of vFinance, an investment banking firm with 22 offices providing funding sources and professional help to startup and early stage companies. By his own estimate, McGilvery has written more than 250 plans from scratch, and many more if you include tune-ups of plans people have attempted to write themselves.
McGilvery warns against taking a "cookbook" approach to writing a business plan-a trap that's very easy to fall into when using one of the popular "business plan template" software programs on the market. "Over the past couple of years, the business plan has become much, much more of a sales document," McGilvery points out, "with the goal of selling the investor rather than just providing information about your company." McGilvery stresses that you have to do everything-and he means everything-possible to stand out from the crowd.
Here are some of McGilvery's tips for the novice business plan writer:
- Use lots of graphics. "People's attention spans are getting shorter by the day, and investors are accustomed to the high-end graphic tools used in PowerPoint presentations," McGilvery explains, recommending that you sprinkle color graphs and charts, pull quotes, text boxes and other visual aids liberally throughout your plan, "punching" and breaking up the text as much as possible.
- Highlight the plan's executive summary section> "Sometimes we spend as much time writing the executive summary as we do the entire rest of the plan," McGilvery says, explaining that most investors will not read beyond a poorly-drafted executive summary that doesn't grab them.
- Focus on the section of the plan that describes your market strategy. "Of the many factors that will determine your chances of success, your marketing strategy is very high on the list. It's also one of the weakest components of most business plans."
- Eliminate the risk factors section altogether. "Investors will conduct a very thorough risk assessment on their own-the only exception would be if there are risks that the investor would not normally uncover in their due diligence."
- Make sure the "pro forma" financial information in the plan is tailored to your business. For example, if you're a manufacturer, you don't want to use the same pro formas that a clothing retailer would, because you have production, inventory and capital expenses that they don't.
- Fine tune and polish your management's resumes, and be sure to include information about your professional advisors. "When investors see a responsible law firm or accounting firm name, it enhances your credibility," explains McGilvery.
- Request funding in stages. Where years ago you would ask for $3 million up front, you're much better off asking for $1 million at a time in three stages, because, McGilvery says, "Investors want to see you producing a revenue stream with the smallest possible investment."
- Don't forget to spellcheck. Typographical errors in a business plan are the kiss of death.
So where do you find someone to help you write your business plan? Sadly, I'm not aware of any professional association of business plan writers. There are thousands of people out there writing business plans, and they vary widely in quality. Fees can range from $5,000 to $15,000, depending on the size and complexity of your plan. A number of business plan writing firms (for example, www.mybusinessanalyst.com) have a network of MBA students on call who will write a plan tailored to your business, and they're usually (but not always) less expensive. An interesting new wrinkle in the business plan writing game is www.bizmoonlighter.com, where you post your company description (a draft version of your executive summary will do the job) and business plan writers from around the country bid for your business.
If you absolutely must write a business plan yourself, you should subscribe to an online database of sample plans for particular businesses-the largest of these, with more than 2,600 plans available for download on 24 hours' notice, is the British site www.rightstyleplan.co.uk.
Cliff Ennico is host of the PBS TV series MoneyHunt and a leading expert on managing growing companies. His advice for small businesses regularly appears on the "Protecting Your Business" channel on Small Business Television Network. E-mail him at firstname.lastname@example.org. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. Copyright 2003 Clifford R. Ennico. Distributed by Creators Syndicate Inc.