How to Write an Effective Business Plan

So you've got a great business idea but need to raise some money. You will need to prepare a well-thought out business plan to inform lenders and equity investors about the potential of your business and get them excited about giving you money.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• Your business idea
• Word processing program

1. First, spend some time thinking about what makes your business exciting and why someone would want to loan or invest money in it. List out 8-10 "Investment Highlights" (some generic ones that can be made more specific include Significant Growth Prospects, Favorable Industry Dynamics, Proven Management Team with Extensive Expertise, Proprietary Technology Patents, etc.)
   
   Keep your Investment Highlights in mind as you write the business plan - these points are what the rest of the plan should support.

2. Create an Executive Summary Section and save to complete later. This is a 2-3 page brief that will comprise of a Business Overview, Investment Highlights, Growth Strategy, and Financial Summary (which will pull only the most relevant points from the more detailed sections further back in the Plan).

3. Next is the Investment Highlights section - take the list you created in Step 1 and write 1-2 paragraphs describing/supporting each. Do some research and support with facts, industry studies, anything that will help you bolster your points.

4. Third section is the Business Overview. You should assume that the person reading it knows nothing about the business or industry - be clear and concise in describing the opportunity. Keep it positive and upbeat (vs. a boring description) - remember, this is a marketing document!
   
   Some subsections in the Business Overview may include:
   A) Description - what the business will do
   
   B) Products/Services - Highlight in more detail what products and services your business will offer
   
   C) Sales and Marketing Strategy - How you intend to market your product
   
   D) Growth Strategy - how you intend to grow your business

5. Fourth is the Industry Section - Provide a brief background on the industry that you will be competing in. Support with facts /studies on growth opportunities and dynamics which make your business prospects compelling.
   
   Also include a Competition subsection about your potential competitors - make sure to articulate in this subsection why you think your business strategy will fare well in the space.

6. Next is a Management section - this is your chance to sell yourself and any partners directly. YOU are the most important part of why someone would want to invest!

7. The last section is usually the Financial Overview section - this is where you provide a summary of historical (if any) and projected financials. These include a Profit & Loss statement (your estimated sales as well as expenses) and Cash Flow Statement (cash needs such as working capital and capital expenditures on equipment, furniture, etc.). Also note any existing debt or equity investment already in the Company (eg personal loans or friends/family investments).

8. Finally, return to your Executive Summary placeholder:
   
   Company Overview subsection - take the 2-3 best paragraphs from the detailed Company Overview section. You may need to rewrite some sentences so that it flows better as well as making sure it "pops". These opening paragraphs are the most important in grabbing the reader and getting them excited.
   
   Investment Highlights: List them in bullet form
   
   Growth Strategy: List them in bullet form
   
   Financial Summary: A summarized version of the detail profit and loss statement in the back.
   
   This Executive Summary is also frequently used as a standalone document. You can send this short 2-3 page "teaser" out during your prospecting phase to potential lenders/investors.

9. Proofread, grammer check, and spell check. Repeat at least 10 times. If your Business Plan is riddled with grammatical and spelling errors, what would that suggest about the business?

Tips & Warnings

• Get feedback from knowledgeable family, friends, and business associates.
• Graphs and pictures help make the Plan more engaging and convincing.
• Spend a little money on color printing and binding - the more professional the Business Plan looks, the more favorable the initial impression.
• Make a list of questions that people have asked when you described your business idea. Read your Plan to make sure you have answered them.
• Don't make it too long and complicated. Stay away from overly dense descriptions and verbage.

[mansid]

on 10/30/2008 This is a great advice on how to prepare a business plan.