Whether you’re testing the waters on your business idea, looking for funding, or attracting equity investors, the quality of your business plan – and the soundness of your financials – is key.
“You have to have a pretty good handle on the financials,” says Arlene Anderson, president of Insights Marketing & Communications, “in order to move forward confidently.” Most of the hundreds of business owners she and her team have written business plans for are weakest with the financials.
Whether you write your own business plan or hire expert help, the finished product should reflect the following 10 qualities.
Behaves Like a Roadmap
Your business plan should include all the milestones, targets and steps you’ll need to take as your business moves through its startup and growth phases.
The number of business owners whose plans claim there’s no risk is equal to the number of businesses that live in a fantasy world. No business venture is without risk, and your potential investors, supporters and partners know it.
Every successful business has competitors. Some are direct competitors, doing or selling the same thing as you. Others are indirect competitors, on the periphery of the space in which you’re planning to be, but still an option for potential customers. Even if you are first-mover, you’ll be revealing the market space that – so far – no one else has tapped. All you’ve got is a head start. Your business plan must address the competition today and in the future.
Grammatical and spelling mistakes won’t engender confidence. Aim for a writing style that investors and supporters will enthusiastically want to support: confident, authoritative and formal. Avoid writing in a style that is too casual, arrogant, or sloppy.
Your confident and authoritative writing style won’t be absorbed if your spacing is off, your headings inconsistent, your graphics elementary and page numbers missing or incomplete. Sell your great content with flawless presentation.
Your plan should answer all the questions your reader may have. Address proprietary or highly confidential material by keeping it out of the executive summary. Place it in an appendix that you can share once you gauge the interest and intent of your prospective partner. You can request they sign a non-disclosure agreement (NDA) before you share proprietary info, but know that many will refuse.
… But Not Too Complete
Don’t let the technical facts get in the way of a clear story. Technical specifications, drawings and data can be included in an appendix.
Every new business starts out with more assumptions than data: Purchasing behaviour, market demand, and commercialization time are examples. Reasonable assumptions can be supported by checking and citing industry standards and credible research. Be careful not to mislead the reader by burying your assumptions in a list of facts.
You cannot over-research the details in your business plan. You should know everything about every competitor including their size and market share. Every assumption about your market, products, services, pricing and financial projections should be reached after thorough research that potential partners can reference.
Startup expenses, supplies, location, equipment, marketing and advertising, legal and insurance and administration costs, should all be represented in detail with a projection out three to five years. Too quick a path to profitability will stand out as a red flag.
Arlene Anderson says Business Advice has helped many would-be entrepreneurs complete a business plan only to have them abandon the initiative. The financials helped them discover they didn’t have the stomach for the two to three years they have to support themselves before the business passes the break-even point and starts to become profitable.
“The business plan has saved them years and thousands of dollars in not going ahead,” reflects Anderson.
Even if this happens to you, suddenly you’re more qualified to write your next business plan. And you’re more qualified, and more ready, for your next business idea.
Between them, Boni and John Wagner-Stafford have five decades of experience as entrepreneurs and/or providing consulting services to other small businesses across Canada. Boni and Joni are the authors of Rock Your Business: 26 Essential Lessons to Plan, Run, and Grow Your New Business From the Ground Up.