Incorporate the Nine Guiding Principles into Your Plan
June 26, 2008
Here are some general guidelines covering the basic elements of a business plan. These should be helpful in writing any business plan, no matter to whom it is directed.
#1 - Make It Easy to Read
There is so much competition for investment dollars today that if you want to get the jump on the next person, your plan will have to be well formatted and easily understood. Your introductory statement summarizing your operation is one of the most important sections; it must capture readers’ attention and motivate them to read the balance of your plan. Caution: If they need a dictionary at their side in order to read, they’ll stop. Construct a glossary if you have to use a lot of technical words.
#2 - Be Sure Your Approach Is Market Driven
Not product-driven. If you want to obtain money, you must understand that investors are primarily interested in how the product or service will react and be received in the market. Before they buy into your plan, they want to see your research demonstrating and substantiating how the customer will benefit and be motivated to purchase.
#3 - Qualify the Competition Start by qualifying your product according to cost or time savings and revenue generation. Also show your projections for sales growth, how your product or service is superior to others, and how you intend to exploit the competitive advantage.
#4 - Present Your Distribution Plan
Be specific as to how the company will sell and distribute its product or service. Clearly describe the methods and what it will cost to get the product or service into the ultimate customer’s hands.
#5 - Exploit Your Company’s Uniqueness
Explain what will give your company a competitive edge in the marketplace–special attributes like a patent, trade secrets, or copyrights.
#6 - Emphasize Management Strength
Show proof that the company is comprised of highly qualified people who can cover all the bases. Indicate the incentives that will keep them together, and how they, the directors, and the advisers possess the necessary credibility.
#7 - Present Attractive Projections
Paint a realistic picture–substantiated by assumptions–of where your company is going with funding. Be detailed and keep it credible. Good validated projections and forecasts are impressive.
#8 - Zero In on Possible Funding Sources
As mentioned earlier, it’s different strokes for different folks. Design versions of the plan to fit the idiosyncrasies of each source you plan to approach. A banker’s interest lies in stability, security, cashflow coverage, and sound returns, whereas a venture capitalist is more interested in high leverage resulting in outrageous returns. Both want to know how the proceeds are going to be spent.
#9 - Close with a Bang
Drive home the point that you’re offering a good deal. Be definite about how investors will get their money back and when. Specify the return rates; state how the risk investor will receive a 30 percent or 50 percent compound annual return, or whatever you’re offering. For lenders, show that their funds are adequately secured and that your cashflow more than covers their interest and principal payments.
