The 10 rules for writing a killer business plan
#1 – Know your reader. Always remember who you are addressing. Financiers are tough capitalists, so they want hard facts and figures and solid details about how their idea will turn a profit.
#2 – Research your potential market. The more you know about your competitors and their customer base, the more you can impress your potential sponsor. Your business plan should provide credible research data on the size of your potential customer base, its needs, and the trends affecting it. You should also show your competitors’ respective strengths and weaknesses, their market share, and how your product or service compares to theirs.
#3 – Follow the format. Business plans are about facts and figures, not creative genius. There are defined rules for building one. A professional business plan will have:
- an executive summary
- An explanation of the business idea.
- A management review
- a marketing strategy
- A release schedule
- A risk assessment
- A financial projection covering cash flow, balance sheet, and profit.
Keep the font size and line spacing generous and the margins wide to make the document easy to read. Use a modern font like Arial, size 10, double spacing. Keep your language simple with minimal technical jargon. No waffles. Get to the point. Use graphics. Financiers are busy people, and a picture or graph can get your message across much more effectively than a long paragraph. Use product photos, flowcharts, and various graphics to drive your point home.
#4 – Drive home the USP. The essence of your business idea is your ‘unique selling proposition’, or USP. Your USP must separate your product or service from the competition; make it unique, something the public will buy because it fills a definite need. Use your USP as a reference point throughout your plan, and have all your research and financial data support this sales proposition.
#5 – Make your executive summary sing. The first thing a financier will read in your business plan is the executive summary. You should, in a couple of pages, describe the entire business plan in a quick and exciting way. You have to capture and retain the interest of the reader. Imagine that you are doing a thirty-second commercial for your entire plan; that limits you to mentioning only the really important elements of each section. Write it with the USP in mind and extract all the important information to highlight your competitive advantage.
#6 – Clear your experience. Let the reader know about your history and skills relevant to the business idea. Also describe the experience of your associates, even if they are outsourced strategic partners. It is common these days for small businesses to use established businesses to handle certain areas of the business, such as accounting and distribution.
#7 – Showcase your marketing knowledge. Venture capitalists will take a very close look at how you intend to bring your product or service to market. Innovative marketing ideas go a long way in influencing finances. Describe in detail how you intend to gain market share, how much and in what period of time. Explain how your competitors reach your market and describe how you intend to outperform them.
#8 – Be realistic in your finances and implementation schedule. There is always the temptation to paint a rosy picture for your potential sponsor, that is, juicy profits in twice as fast time. Be conservative in your predictions of how much and how fast you will sell. Remember, your sponsor will hold you to their promises.
#9 – Know your numbers. Knowing how much to ask for and what type of financing you need is crucial to obtaining the capital you need. Your financial projections and implementation timeline will illustrate your financing requirements, but you should indicate what type of agreement you wish to enter into with your potential sponsor, whether it be a loan (with reimbursable interest) or equity (offering a portion of future earnings) . Declaring exactly what type of financial assistance you need will inspire confidence in your potential sponsor.
#10 – Seek advice. There are a number of organizations in South Africa willing to offer advice and information on critical areas around your plan. Just google “business plan” and a lot of search results will come up.
Don’t forget your bank manager, who is a ready source of sound financial advice. Let him read your plan before handing it over to venture capitalists.
A great business idea and a tight business plan will get you an audience with potential backers. Compile a slide or PowerPoint presentation that reflects your executive summary. Be confident and sell your idea. And, when the critical moment arrives… He asks for the money.