How To Write A Business Plan The Bankers And Investors Can’t Resist
How to write a business plan the bankers and investors can’t resist comes up daily in business discussions and business classes. Many budding business people do not know how to write one. many again confuse it with feasibility studies.
Success in business comes as a result of planning. You have to have a detailed, written plan that shows what the ultimate goal is, the reason for the goal, and each milestone that must be passed in order to reach your goal.
A business plan is a written definition of, and operational plan for achieving your goal. You need a complete but success tool in order to define your basic product, income objectives and specific operating procedures.
YOU HAVE TO HAVE A BUSINESS PLAN to attract investors, obtain financing and hold onto the confidence of your creditors, particularly in times of cash flow shortages… in this instance, the amount of money you have on hand compared with the expenses that must be met.
Aside from an overall directional policy for the production, sales effort and profit goals of your product–your basic “travel guide” to business success…the most important purpose your business plan will serve will be the basis or foundation of any financial proposals you submit.
Many entrepreneurs are under the mistaken impression that a business plan is the same as a financial proposal, or that a financial proposal constitutes a business plan. This is just a misunderstanding of the uses of these two separate and different business success aids.
The business plan is a long-range “map” to guide your business to the goal you have set for it. The plan details the what, why, where, how and when, of your business.
Your financial proposal is a request for money based upon your business plan…your business history and objectives.
Understand the differences. They are closely related, but they are not interchangeable.
Writing and putting together a “winning” business plan takes study, research and time, so don’t try to do it all in just one or two days.
The easiest way to start is with a loose-leaf notebook and writing materials. Once you get your mind “in gear” and begin thinking about your business plan, “10,000 thoughts and ideas per minute” will begin racing through your mind…
So, it’s a good idea when you aren’t actually working on your business plan, to carry a pocket notebook and jot down those business ideas as they come to you…ideas for sales promotion, recruiting distributors, and any other thoughts on how to operate and/or build your business.
Later, when you are actually working on your business plan, you can take out this “idea notebook” evaluate your ideas, rework them, refine them, and integrate them into the overall “big picture” of your business plan.
The best business plans for even the smallest businesses run 25 to 30 pages or more, (it could be lesser) so you will need to “title” each page and arrange the different aspects of your business plan into “chapters.” The following format should help.
Statement of Purpose
Table of Contents
Business Description Market Analysis Competition
Current Financial Records
Explanation of Plans For Growth
Projected Profit & Loss/Operating Figures Explanation of Financing for Growth Documentation
Summary of Business & Outlook for The Future
Listing of Business & personal References
This is a logical organization of the information every business plan should cover. I will explain each of these chapters titles in greater detail, but first, let me elaborate on the reasons for proper organization of your business plan.
Having a set of “questions to answer” about your business forces you to take an objective and critical look at your ideas.
Putting it all down on paper allows you to change, erase and refine everything to function in the manner of a smoothly oiled machine.
You will be able to spot weakness and strengthen them before they develop into major problems. Overall, you will be developing an operating manual for your business…a valuable tool which will keep your business on track, and guide you in the profitable management of your business.
Because it is your idea, and your business, it is very important that YOU do the planning. This is YOUR business plan, so YOU develop it, and put it all down on paper just the way YOU want it to read. Seek out the advice of other people; talk with, listen to, and observe, other people running similar businesses; enlist the advice of your accountant and lawyer…but at the bottom line, do not ever forget it has to be YOUR BUSINESS PLAN!
Remember too, that statistics show the greatest causes of business failure to be poor management and lack of planning…without a plan by which to operate, no one can manage; and without a direction in which to aim its efforts, no business can attain any real success.
On the very first page, which is the title page, put down the
name of your business-PETRAGOLD NIGERIA LIMITED–with your business
address underneath. Now, skip a couple of lines, and write it all in
capital letters: PRINCIPAL OWNER–followed by your name if you are the principal owner.
Examples: PETRAGOLD NIGERIA LIMITED
1,PETRAGOLD STREET, LAGOS ISLAND, LAGOS, NIGERIA.
PRINCIPAL OWNER: Your Name
That is all you will have on this page except the page number -1- Following your title page is the page for your statement purpose. This
should be a simple statement of your primary business function, such as: We are a service business engaged in the business of publishing and selling business success magazine.
The title of the page should be in all capital letters across the top of the page, centered on your final draft–skip a few lines and write the statement of purpose. This should be direct, clear and short–not usually more than two or three sentences in length.
Then you should skip a few lines, and from the left hand margin of the paper, write out a sub-heading in all capital letters, such as
EXPLANATION OF PURPOSE.
From, and within this sub-heading you can briefly explain your statement of purpose, such as: Our surveys have found most entrepreneurs to be “sadly” lacking in basic information that will enable them to achieve success.
This market is estimated at more than a 20 million persons, with at least half of these people actively “searching” for sources that provide the kind of information they want, and need.
With our business, advertising and publishing experience, it is our goal to capture at least half of this market of information seekers, with our publication MILLIONAIRE MAGAZINE! Our market research indicates we can achieve this goal and realize a profit of #2,000,000 per year
within the next 5 years…
The above example is generally the way you should write your
“explanation of purpose,” and in subtle definition, why you need an explanation. Point to remember: Keep it short. Very few business purpose
explanations justify more than a half page long.
Next comes your table of contents page. Do not really worry about this until you have the entire plan completed and ready for final typing. It is a good idea though, to list the subject (chapter titles) as I have, and then check off each one as you complete that part of your plan.
By having a list of the points you want to cover, you will also be able to skip around and work on each phase of your business plan as an idea or the interest in organizing that particular phase, stimulates you.
In other words, you will not have to make your thinking or your planning conform to the chronological order of the “chapters” of your business plan– another reason for the loose-leaf notebook.
In describing your business, it is best to begin where your statement purpose leaves off.
Describe your product, the production process, who has responsibility for what, and most importantly, what makes your product or service unique—what gives it an edge in your market. You can briefly summarize your business beginnings, present position and potential for future success, as well.
Next, describe the buyers you are trying to reach. why they need and want or will buy your product. and the results of any tests or surveys you may have conducted.
Once you have defined your market; go on to explain how you intend to reach that market, how you will entice these prospects to your product or service and induce them to buy.
You might want to break this chapter down into sections such as. publicity and promotions, advertising plans, direct sales force, and dealer/distributor programs. Each section would then be an outline of your plans and policies.
Moving into the next chapter on competition, identify who your competitors are. their weakness and strong points, explain how you intend to capitalize on those weaknesses and match or better the strong points. Talk to as many of your “indirect” competitors as possible, those operating in different cities and states.
One of the easiest ways of gathering a lot of useful information about your competitors is by developing a series of survey questions and sending these questionnaires out to each of them.
Later on, you might want to compile the answers to these questionnaires into some form of directory or report on this type of business.
It is also advisable to contact the trade associations and publications serving your proposed type of business.
The chapter on management should be an elaboration on the people operating the business. Those people that actually run the business, their job, titles, duties, responsibilities and background resumes.
It is important that you “paint” a strong picture of your top management people because the people coming to work for you or investing in your business, will be “investing in these people” as much as your product ideas.
Individual tenacity, mature judgement under fire, and innovative problem-solving have “won over” more people than all the astronomical sales figures put together.
People becoming involved with any new venture want to know that the person in charge. the guy running the business knows what he’s doing, will not lose his cool when problems arise, and has what it takes to make money for all of them.
After showing the “muscle” of this person, go on to outline the other key positions within your business; who the persons are you have selected to handle those jobs and the sources as well as availability of any help you might need.
If you have been in business of any kind, the next chapter is a picture of your financial status, a review of your operating costs and income from the business to date.
Generally, this is a listing of your profit & loss statements for the six months, plus copies of your business income tax records for each of the previous three years the business has been an entity.
The chapter on the explanation of your plans for the future growth of your business is just that an explanation of how you plan to keep your business growing a detailed guide of what you’re going to do, and how you’re going to increase your profits.
These plans should show your goals for the coming year, two years, and three years. By breaking your objectives down into annual plans, your plan will be accepted as more realistic and be more understandable as a part of your ultimate success.
Following this explanation, you will need to itemize the projected cost and income figures of your three-year plan. It will take a lot of research, an undoubtedly a good deal of erasing, but it is very important that you list these figures based upon thorough investigation.
You may have to adjust some of your plans downward, but once you’ve got these two chapters on paper, your whole business plan will fall into line and begin to make sense.
You will have a precise “map” of where you are headed, how much it is going to cost, when you can expect to start making money, and how much.
Now that you know where you are going, how much it is going to cost and how long it is going to be before you begin to recoup your investment, you are ready to talk about how and where you are going to get the money to finance your journey.
Unless you are independently wealthy, you will want to use this chapter to list the possibilities and alternatives.
Make a list of friends you can approach, and perhaps induce to put up some money as silent partners. Make a list of those people you might be able to sell to, as stockholders in your company.
Make a list of relatives and friends that might help you with an outright loan to furnish money for the development of your business.
Then search out and make a list of venture capital organizations, pick up the loan application papers they have.
Read them, study them, and even fill them out on a preliminary basis. and finally, check the costs, determine which business publications would be the best to advertise in, and write an ad you would want to use if you did decide to advertise for monetary help.
With listing of all the options available to your needs, all that’s left is the arranging of these options in the order you would want to use them when the time comes to ask for money.
When you are researching these money sources, you will save time by noting the “contact” deal with when you want money, and whenever possible, by developing a working relationship with these people.
In your documentation section, you should have a credit report on yourself. When you get your credit report, look it over and take whatever steps are necessary to eliminate any negative comments.
Once these have been taken care of, ask for a revised copy of your report and include a copy of that in your business plan.
If you own any patents or copyrights, include copies of these. Any licenses to use someone else’s patent or copyright should also be included.
If you own the distribution, wholesale or exclusive sales rights to a product, include copies of this documentation. You should also include copies of any leases, special agreements or other legal papers that might be pertinent to your business.
Conclusion. In conclusion, write out a brief, overall summary of your business- when the business was started, the purpose of the business, what makes your business different, how you’re going to gain a profitable share of the market, and your expected success during the coming 5 years.
The last page of your business plan is a “courtesy page” listing the names, addresses and phone numbers of personal and business references,
persons who have known you closely for the past five years or longer, and companies or firms you’ve had business or credit dealings with during the past five years.
And, that is it, your complete business plan. Before you send it out for formal typing; read it over once a day for a week or ten days.
Take care of any changes or corrections, and then have it reviewed by a Lawyer and then, an accountant. It would also be a good idea to have it reviewed by a business consultant serving the business community to which your business will be related.
After these reviews, and any last-minute changes you want to make, it will be ready for formal typing.
Congratulations, and my best wishes for the complete fulfilment of all your dreams of success!!!
(This article on business plan was written by Emmanuel K. Olorunfemi
Esq of MoneyIQ, e mail– money_iq@yahoo.