What to Include and Not Include in a Successful Business Plan Here's what investors want to see in a business plan (and what you should definitely leave out.)
This is part 2 / 11 of Write Your Business Plan: Section 1: The Foundation of a Business Plan series.
You need to have a business plan to act as your company's North Star—and, let's not forget, get funding from banks and/or investors. Here are some simple tips for writing a business plan that gets you on the right track.
10 Simple Tips for Writing an Impactful Business Plan
1. Know your competition.
You need to name them and point out what makes you different from (and better than) each of them. But do not disparage your competition.
2. Know your audience.
You may need several versions of your business plan. For example, you may need one for bankers or venture capitalists, one for individual investors, and one for companies that may want to do a joint venture with you rather than fund you.
3. Have proof to back up every claim you make.
If you expect to be the leader in your field in six months, you have to say why you think that is. If you say your product will take the market by storm, you have to support this statement with facts. If you say your management team is fully qualified to make the business a success, be sure staff resumes demonstrate their experience.
4. Be conservative in all financial estimates and projections.
If you feel certain you'll capture 50 percent of the market in the first year, you can say why you think so and hint at what those numbers may be. But make your financial projections more conservative. For example, a 10 percent market share is much more credible.
5. Be realistic with time and resources.
If you're working with a big company before you buy a business, you may think things will happen faster than they will once you have to buy the supplies, write the checks, and answer the phones yourself. Being overly optimistic with time and resources is a common error entrepreneurs make. Being realistic is important because it lends credibility to your presentation. Always assume things will take 20 percent longer than you anticipated. Therefore, 20 weeks is now 24 weeks.
6. Be logical.
Think like a banker and write what they would want to see.
Related: How To Write A Business Plan
7. Have a strong management team.
Make sure it has good credentials and expertise. Your team members don't have to have worked in the field. However, you need to draw parallels between what they've done and the skills needed to make your venture succeed. Don't have all the skills you need? Consider adding an advisory board of people skilled in your field and include their resumes.
8. Document why your idea will work.
Have others done something similar that was successful? Have you made a prototype? Include all the variables that can have an impact on the result or outcome of your idea. Show why some of the variables don't apply to your situation or explain how you intend to overcome them or make them better.
9. Describe your facilities and location for performing the work.
That includes equipment you use to create your products and/or services. If you'll need to expand, discuss when, where, and why.
10. Discuss payout options for the investors.
Some investors want a hands-on role. Some want to put associates on your board of directors. Some don't want to be involved in day-to-day activities at all. All investors want to know when they can get their money back and at what rate of return. Most want out within three to five years. Provide a brief description of options for investors, or at least mention that you're ready to discuss options with any serious prospect.
What Not to Include in a Business Plan
Form over substance. If it looks good but doesn't have a solid basis in fact and research, you might as well save your energy.
Empty claims. If you make a statement without supporting it, you may as well leave it out. You need to follow up on what you say in the next sentence with a statistic, fact, or even a quote from a knowledgeable source that supports the claim.
Rumors about the competition. If you know for sure a competitor is going out of business, you can allude to it but avoid listing its weaknesses or hearsay. Stick to facts.
Superlatives and strong adjectives. Words like "major," "incredible," "amazing," "outstanding," "unbelievable," "terrific," "great," "most," "best," and "fabulous" don't have a place in a business plan. Avoid "unique" unless you can demonstrate with facts that the product or service is truly one of a kind. (Hint: Chances are, it isn't.) The same goes for hyperbole. Let the positives of your business speak for themselves.
Long documents. If they want more, they will ask.
Overestimating your financial projections. Sure, you want to look good but resist optimism here. Use half of what you think is reasonable. Better to underestimate than set expectations that aren't fulfilled.
Overly optimistic time frames. Ask around or do research on the internet. If it takes most companies six to twelve months to get up and running, that is what it will take your company. If you think it will take three months to develop your prototype, double it. You will face delays you don't know about yet—ones you can't control. Remember to be conservative in your time predictions.
Gimmicks. Serious investors want facts, not gimmicks. They may eat the chocolate rose that accompanies the business plan for your new florist shop, but it won't make them any more interested in investing in the venture.
Amateurish financial projections. Spend some money and get an accountant to do these for you. They'll help you think through the financial side of your venture, plus put the numbers into a standard business format that a businessperson expects.
Related: How To Build A Business Plan
Remember: Rules Are Meant to Be Broken
While you don't want to go out of your way to go against the grain, sometimes that is just what needs to be done. For example, a business plan for a chain of coffee shops can include photos of the proposed location, mock-ups of menus, and maps of the competition's locations. The graphics make the plan longer, but they add real value. Product shots, location shots, blueprints, floor plans, logos, and screenshots of your website can be useful for any type of retail business even if they make the plan a little longer than the norm.
Related: Why You Need A Business Plan