Creating a business plan
Not too long ago, a friend of mine was in the process of starting his own business. His idea was sound, but he needed to raise some money to help get the venture off the ground. Raising money from investors or a bank requires many things, and a sound business plan is one of the most important. He asked for my help and we wrote a pretty good business plan. Subsequently, he pitched the plan to the right audience and they gave him the necessary funds to get the business off the ground.
For start-ups and business ventures without much operating history, a good business plan will include most of the following items:
I. An executive plan
This is a summary of the business plan covering all the key points. This should not exceed one page.
II. The business
a.) Description of the business – Include the name, mission statement, location, legal format, business owners, etc.
b.) Your product or service – Describe the product / service(s) you intend to sell. Include your value proposition, technical information and any pending contracts or orders.
c.) Marketing and sales plan– Describe the market, industry, potential customers, potential alliances, etc. Include market statistics. Describe how you intend to sell to your customer base, i.e. mail order, internet, etc. Describe how customers make their buying decision and how you intend to protect your future customer base. Attach any marketing materials already prepared in the appendix.
d.) Competition – Describe your main competitors in terms of both companies and products.
e.) Management team – The management team is the most likely predictor of the business’ success. Provide an organizational chart with biographies of the key personnel involved. Resumes should be included as an appendix. You will also want to discuss any key advisors involved.
f.) Description of any propriety licenses, patents, etc.
III. Financial information
a.) Financial statements – Include a current income statement and balance sheet.
b.) Forecasted income statement and cash flows– Include projected income statements and cash flows for the next three years.
c.) Assumptions – For forecasted information, include descriptions and analysis of significant assumptions.
d.) Capital requirements – Include the amount and timing of cash infusions needed to fund the business.
e.) Tax returns – Include prior year tax returns for the business (if any).
f.) Current personal financial statements and three years of tax returns for the business owners.
Putting this together will take some time. However, this process will help formulate your business and get all parties on the same page.
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