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How to Write a Convincing Business Plan for Investors

Noah Parsons

9 min. read

Updated August 1, 2024

Raising money for your business is a major effort. You need lists of investors to reach out to and you need to be prepared for your investor meetings to increase your chances of getting funded . You need to practice your pitch and be ready to intelligently answer any number of questions about your business. A key to making this entire process much easier is to invest a little time and write a business plan . It’s true — not all investors will ask to see your business plan.

But putting together a business plan will ensure that you’ve considered every aspect of your business and are ready to answer any questions that come up during the fundraising process.

• Why do investors want to see a business plan?

The business plan document itself isn’t what’s important to investors. It’s the knowledge that you’ve generated by going through the process that’s important. Having a business plan shows that you’ve done the homework of thinking through how your business will work and what goals you’re trying to achieve.

When you put together a business plan, you have to spend time thinking about things like your target market , your sales, and marketing strategy , the problem you solve for your customers, and who your key competitors are . A business plan provides the structure for thinking through these things and documents your answers so you’re prepared for the inevitable questions investors will ask about your business. 

Even if investors never ask to see your business plan, the work you’ve done to prepare it will ensure that you can intelligently answer the questions you’ll get. And, if an investor does ask for your business plan, then you’re prepared and ready to hand it over. After all, nothing could be worse than arriving at an investor meeting and then getting a request for a business plan and not having one ready.

Beyond understanding your business strategy, investors will also want to understand your financial forecasts. They want to know how your business will function from a financial standpoint — what is typically called your “ business model .” They’ll also want to know what it will take for your business to be profitable and where you anticipate spending money to grow the business. A complete financial plan is part of any business plan, so investing a little time here will serve you well. 

• What do investors want to see in a business plan?

There’s no such thing as a perfect business plan and investors know this. After all, they’ve spent years, and often decades, hearing business pitches, reading business plans, investing in companies, and watching them both succeed and fail. As entrepreneur and investor Steve Blank likes to say, “No business plan survives first contact with a customer.” 

If this is true, then why bother writing a business plan at all? What’s the value of planning and why do investors want them if they know the plan will shortly be outdated?

The secret is that it’s the planning process, not the final plan, that’s valuable. Investors want to know that you’ve thought about your idea, documented your assumptions, and are on track to validate those assumptions so that you can remove risk from your business. 

So what do investors want to see in your business plan? Beyond the typical sections , here are the most important things that investors want to see in your plan.

A vision for the future

Investors, particularly those investing in early-stage startups, want to understand your vision . Where do you see your company going in the future? Who will your customers be and what problems will you solve for them? Your vision may take years to execute — and it’s likely that the vision will change and evolve over time — but investors want to know that you’re thinking beyond tomorrow and into the future.

Product/market fit and traction

Investors want more than just an idea. They want evidence that you are solving a problem for customers. Your customers have to want what you are selling for you to build a successful business and your business plan needs to describe the evidence that you’ve found that proves that you’ll be able to sell your products and services to customers. If you have “traction” in the form of early sales and customers, that’s even better.

Funding needed and use of funds

When you’re pitching investors, you need to know how much you’re asking for. Your financial forecast should help you figure this out. You’ll want to raise enough money to cover planned expenses and cash flow requirements plus some additional funding as a safety net. In addition, you’ll want to specify exactly how you plan on using your investment . In a business plan, this section is often called “sources and uses of investment.”

A strong management team

A good idea is really only a small part of the equation for a successful business. In fact, lots of people have good business ideas — it’s the people that can execute well that generally succeed. Investors will pay a lot of attention to the section of your plan where you talk about your management team because they want to know that you can transform your idea into a successful business. If you have gaps and still need to hire key employees, that’s OK. Communicating that you understand what your needs are is the most important thing.

An exit strategy

When investors give you money to start and grow your business, they are looking to eventually make a return on their investment. This could happen by eventually selling your business to a larger company or even by going public. One way or another, investors will want to know your thoughts about an eventual exit strategy for your business.

• What documents do investors want to see?

Even if investors never ask for a detailed business plan, your business planning process should produce a few key documents that investors will want to see. Here’s what you need to be prepared to pitch investors:

Cover letter

These days, a lot of fundraising outreach is done over email and you’ll need a concise cover letter that sparks investor interest. Your cover letter needs to be very brief, but describe the problem you’re solving for your target market.

Great cover letters are sometimes in a “story” format that hooks readers with a real-world, relatable example of the problems your customers face and how our product or service The goal of the cover letter isn’t to explain every aspect of your business. It’s just to spark interest and get a meeting with an investor where you’ll have more time to actually pitch your business. Keep your cover letter brief, engaging, and to the point.

If you get an investor meeting, you’ll almost certainly need a pitch deck to present your idea in more detail and showcase your business idea. Your pitch deck will cover the problem you’re solving, your solution, your target market, and key market trends.

Further Reading: What to include in your pitch deck

Executive summary and/or one-page plan

You might not get a meeting right away. Your cover letter may generate a request for additional information and this is where a solid executive summary or one-page business plan comes in handy. This document, while still short, is more detailed than your cover letter and explains a bit more about your business in a page or two.

Read more about what goes into a great executive summary and how to build a lone-page business plan.

Financial forecasts

Investors will inevitably want to see your financial forecasts. You’ll need a sales forecast, expense budget , cash flow forecast , profit and loss, and balance sheet . If you have historical results, you should plan on sharing those too as well as any other key metrics about your business. Investors will always look deep under the hood of your business, so be prepared to share all the details of how your business will work from a financial perspective.

• What to include in your investor business plan

When you put together a detailed business plan for investors, you’ll follow a fairly standard format. To get started, I recommend you download our free business plan template . It’s lender-approved and, of course, can be customized to fit your business needs.

Remember: your business plan isn’t about the plan document that you create — it’s about the planning process that helps you think through and develop your business strategy. Here’s what most investor business plans will include:

Executive Summary

Usually written last, your executive summary is an overview of your business. As I mentioned earlier, you might use the executive summary as a stand-alone document to provide investors more detail about your business in a concise form. Read our guide on executive summaries here .

Opportunity

The opportunity section of your plan covers the problem you are solving, what your solution is, and highlights any data you have to prove that people will spend money on what you’re offering. If you have customer validation in any form, this is where you highlight that information.

Market Analysis

Describe what your target market is and key trends that are occurring in this market . Is the market growing? Are buying patterns changing? How is your business positioned to take advantage of these changes? Be sure to spend some time discussing your competition and how your target market solves their problems today and how your solution is superior.

Marketing & Sales Plan 

Most businesses need to figure out how to get the word out and attract customers. Your business plan should include a marketing plan that describes how you’re going to reach your target market and any key marketing initiatives that you’re going to undertake. You should also spend time describing your sales plan, especially if your sales process takes time to close customers.

Milestones / Roadmap

Outline key milestones you hope to achieve and when you plan on achieving them. This section should cover key dates for product development, key partnerships you need to create, and any other important goals you plan on achieving.

Company & Management

Here’s where you describe the nuts and bolts of your business. How is your organization structured? Who is on your team and what are their backgrounds? Are there any important positions that you still need to recruit for?

Financial Plan

As I mentioned, you’ll need to create a profit and loss, cash flow, and balance sheet forecast. Your financial plan should be optimistic, yet realistic. This is a tough balance and your forecast is certain to be wrong, but you need to document your assumptions and plans for the business.

Finally, you can include an appendix for any key additional information you want to share. Product diagrams, additional details on how you deliver your service, or additional research can all be included.

• What comes next?

Writing a business plan for investors is really about preparing you to pitch your business . It’s quite likely that you’ll never get asked for the actual business plan document. But, the process will prepare you better than anything else to answer any questions investors may have.

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

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How to Write a Business Plan for Investors?

Business Plan Template

• June 17, 2024

Need to secure funds for kick starting or growing your business venture?

You’ll require a well-detailed business plan before approaching your investors.

But here’s the thing: Investors go through hundreds and thousands of plans every day. If yours doesn’t capture their attention in one go, you’ll lose the opportunity to win that investor.

To avoid this nightmare, prepare a business plan that checklists everything an investor seeks in a plan.

Wondering how? Read this blog post and learn how to prepare a business plan for investors . Also, understand why investors require a business plan and what they’re looking for.

Ready to dive in? Let’s get started.

Why do investors need a business plan?

While considering an investment opportunity, investors are looking for something other than a fancy business idea.

They’re looking to invest in a business opportunity that demonstrates a clear understanding of the target market and the competition. A business with clearly defined objectives, business strategies, and financials. A business that can prove its viability and financial sustainability in the long run.

That’s everything a business plan does by outlining these aspects in great detail. It answers all the questions an investor might have while considering your funding request, thereby helping them make an informed choice.

What do investors look for in a business plan?

Investors don’t expect a perfect plan. They are mainly interested to see if you have tested the business’s viability, have set goals, and can operate it successfully.

So stop striving for perfection. Simply ensure that a business plan touches on the following key aspects:

Product market fit

Investors want to see if you’re solving a viable problem and if there’s a sizable market of people who want to purchase your products. You can prove this through market share assumptions, competitors and target market analysis, beta testing, as well as traction.

Business vision and milestones

Investors want to know what you aim to achieve with your company through a clear mission and vision statement . They would like insight into the company’s long-term and short-term goals and any milestones you have achieved to date.

People in your organization

An investor wants to know the people who would execute your business idea. They would pay extra attention to this section evaluating the strengths, gaps, and weaknesses in your current team.

Funding demand

A business plan should offer a clear understanding of your funding requirements and offer answers about Return on Investment (ROI). Not only that, you need to justify the funding demands and explain your plans to utilize that funding.

These are the most important things an investor will require an answer to. With that said, let’s understand how to structure such information in your business plan.

How to write a business plan for investors?

An investor plan can be as long as 15-20 pages or as short as 1-2 pages (lean plan). Regardless, here are the key components that your business plan should have.

1. Executive summary

This section offers a quick overview of your entire business plan. Most entrepreneurs use it as a standalone document to offer investors a quick rundown of their business idea.

A well-crafted summary summarizes the key elements of a business plan such as the mission statement, products and services, market opportunity, marketing strategy, and financials in a line or two, individually.

You can even draft an executive summary that weaves all this information together into an engaging narrative. However, focus on brevity and remove all the fluff to make this section informative for investors.

2. Opportunity

The opportunity section of your business plan will define the problem you are solving and the solution you have to offer. It introduces your products and services as well as highlights their key features and Unique Selling Propositions (USPs).

In this section, you’ll prove that your company is chasing a viable problem and you have a segment of customers willing to pay for your products and services.

3. Industry and market analysis

Investors require a section on market research and analysis to see if you thoroughly understand the market you’re entering.

This section talks about the size of your industry and the market share you can capture. It outlines the emerging trends within your industry and also highlights the potential challenges you may face.

Investors also need a clear overview of your target customers. Building clear buyer personas or customer profiles at this stage can help them understand your audience better. Moreover, you can use these details to craft your business strategy and product offerings.

4. Competitors overview

Don’t shy away from talking about your competition and competitive advantage.

In this section, introduce your top competitors and conduct a SWOT analysis to identify their strengths and weaknesses.

Compare your competitors based on products, market share, target audience, revenue generation, location, and other related factors. Draw your competitive advantage and show how despite the competition your business can manage to thrive.

5. Revenue model

An investor absolutely needs an answer to how your business will make money. In your one-page business plan, you will quickly outline your revenue sources and your pricing strategies.

Explain how the chosen revenue model is fit for your business and include any additional models you plan to add in the future. Also, compare your pricing to the competitors and justify how charging less or more will be beneficial for your business.

6. Milestones and traction

Investors need to know that your business is more than just an idea. You need to prove its viability, and traction is the best way to do so.

Traction could be anything from a minimum viable product (MVP) to intellectual properties, such as early acquired customers, generated revenue, press mentions, testimonials, acquired key partnerships, or supplier contracts.

Pay extra focus to this section when you write your business plan for investors. It will instill investors’ confidence in your ability to turn ideas into a reality and build a successful business.

7. Team overview

This is your chance to introduce your team and prove how they’re the best fit for your business.

To write this section, introduce the members with a brief bio. The description should offer an overview of their professional experience, skills, and achievements along with the position they take at your company.

Moreover, don’t forget to define the organizational hierarchy as well as highlight if there are any gaps in your team and how you plan to overcome those.

8. Marketing and sales plan

Detail your strategies to acquire and retain the clients in this section.

Outline the marketing efforts you’ll make to reach your target market. This includes an overview of the marketing channels you’ll use, a marketing plan for each channel, your budget, and the metrics to track your marketing efforts.

Investors don’t expect a fool-proof line down of strategies. They just need a realistic overview of strategies that can bring you sales.

9. Company operations

This is your chance to prove that you have the means and capabilities to execute your business idea.

Define your business processes, establish SOPs, outline your hiring plan, detail your quality control processes, and list down all the equipment, technology, and resources you’ll require.

10. Financials

A brilliant business idea needs convincing financials to persuade the investors’ interest in an investment opportunity.

Investors expect a well-detailed financial plan that includes three quintessential financial statements, i.e. cash flow statement, income statement, and balance sheet.

These statements help them assess the financial health of a business as well as calculate essential future growth, profitability, and break-even ratios.

Make sure that you add the future projections for at least 3-5 years and include realistic justification for your assumptions.

11. Funding demand

Lastly, but most importantly, investors want a clear understanding of how much funding you require and your plan to utilize the same in different business activities.

Clarify what an investor will gain by investing in your business. Also, outline your repayment plan and your exit strategy .

12. Appendix

Investors might need additional documents that support the information in your plan.

Here are a few things you can include in your appendix of business plan :

• Intellectual proofs
• Registration and licensing permits
• Product pictures
• Detailed financial statements
• Raw market research
• Competitors research

Although optional, this section is quite useful in offering investors key details and proof related to your organization.

And that’s everything you need to include in your business plan for investors.

Prepare your investors’ plan with Upmetrics

A convincing business plan wins over the investors’ trust in your business and secures you the funding essential to get started.

However, despite the basic understanding, writing a crisp plan that covers all the essential information and makes a professional display takes a lot of work.

What if there was an easier way?

With the Upmetrics , you can create business plans in less than 10 minutes. All you need to do is answer some basic questions and its AI business plan generator will develop investor-ready plans from scratch in no time.

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Frequently Asked Questions

What are investors looking for in a business plan.

An investor looks for a business plan that offers insight into the business vision, mission, product market fit, and management team while clarifying the funding demand.

An overview of competitors and market analysis, business strategies, and your target user are additional details that investors would love to see.

How can I make my business plan stand out to investors?

To make your business plan stand out, ensure that you cover the key elements of your plan and present it in a structured and organized manner. Make your plan concise and crisp, free of non-inessential information.

Additionally demonstrate a strong understanding of the target market, competitors, product, and your business financials to win over the investors’ trust.

Should I seek professional help when creating a business plan for investors?

Yes, if you don’t have any experience in writing a business plan. The professional help can be in the form of plan writing service providers or business planning tools like Upmetrics . Generally, it’s much more affordable and reliable to use business planning software than hiring an agency or a human writer.

Can I use a template for my business plan for investors?

Yes, absolutely. A business plan template offers structure to write a cohesively flowing business plan. Instead of preparing your plan from scratch, a template makes the task much easier. All you have to do is fill in the blanks with the information you have already collected.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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Business Planning: Ultimate Guide to Writing a Business Plan for Investors

If you are planning to start, grow or sell a business, it is almost essential you have a plan of attack.

A traditional business plan is much more than a general list of things that you need to do.

An effective plan focuses on short-term and long-term business goals, with information that outlines how you intend to reach them.

A formal business plan will be one of the most valuable tools that you will use in raising capital from investors and for building and growing your business.

Like the businesses themselves, business plans come in many types and forms.

Oftentimes even established business owners and managers underestimate the effectiveness of a qualified business plan.

Some mistakenly think business plans are only used in the venture capital world of start-up finance.

This simply is not true. Enterprise planning is often required for anything from SBA lending and debt financing to internal planning and partnership qualification.

Many find they regularly refer to a previously-written business plan to ensure they stay on track and under budget.

A business plan can also help you establish a framework for your dream business, including structure and planning goals.

In addition, business planning is often a fluid process and a living document, with changes occurring mid-stream which means those best prepared have already done their homework and are prepared to pivot.

Crafting Your Business Plan(s)

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You will essentially create two plans. The first is known as the  internal or initial start-up business plan . This plan includes your company’s mission statement, product/service description, marketing strategy plan and initial start-up goals. Most importantly, the initial plan will also include a market analysis. Performing research on the market helps both internal managers understand whether the business concept or business idea is viable and worth pursuing and to attract investors.

If it is, the initial plan will morph into something suitable for angel investors, venture capitalists and private equity groups. Typically, your final secondary plan will incorporate the details in your initial start-up plan into a more finalized version ready for publication. InvestmentBank.com assists throughout this entire process.

How you go about your business plan process is dependent on the audience for which it will be created.

For example, if you will be seeking a business loan, you need to create  business plan for bank loans . Conversely, if you are seeking investment capital in equity financing, you’ll most likely need a  venture capital business plan . Regardless of the audience any typical business plan will generally include the following:

• A company description, including a description of your business and the products and/or services offered
• A detailed description of the target market and how they will best be served
• Information regarding the management team and key employees within the company
• Detailed information about cash flow and financial analysis, budget and market penetration
• An  Executive Summary  for a snapshot 30,000 foot view of all aspects of the business and how it will be successful

Discovering a business idea is the first step towards creating a business model hypothesis. Specifically, a business idea worth investigating further is a “proto-business model” – the embryo of a viable business model. The business idea is essentially your best guess that describes your Value Proposition (the thing you want to sell) and your Customer Segment(s) (the target customers you want to sell to). This is your initial pass at creating a viable Value Proposition – Customer Segment “fit”.

At a minimum, a business idea worth investigating further should have one or more Customer Segments and a corresponding Value Proposition to match each Customer Segment. Completing the following steps will validate that your business idea is worth investigating further.

• Identify Value Proposition – Customer Segment pairings.  This step involves pinpointing the type and number of Customer Segment(s) your business is going to serve and what your business’s Value Proposition will be for each of those Customer Segments. This will create one or more Value Proposition – Customer Segment pairings.
• What your Customer Segment is trying to do (i.e. eat dinner, find a date, get in shape…). What are your Customer Segment’s problems (they are hungry and don’t want to cook, they can’t find a suitable boyfriend/girlfriend, they are out of shape…). What does your Customer Segment expect to gain from accomplishing whatever they want to do (eat a tasty meal, find a pleasant date, loose a few pounds and feel better)?
• What your company can offer your Customer Segment (i.e. a good quick meal, a matchmaking service, a place to work out…). How will your offer solve your Customer Segment’s problems? What benefits will your offer create for your Customer Segment? The best business solves real-world problems.

Business Plan Outline

A business plan may contain many types of information depending on the nature, size, and financing needs of the company. One general business plan template can be developed with the help of our JDs, MBAs and expert business planning professionals. While various institutions like the Small Business Administration (SBA) help provide guidelines, it is often best to get your detailed business plan drafted by professionals who know what it takes to get funded and what investors are looking for when they sift through thousands of plans.

This is the title or cover page. This page will contain the information of the names and addresses of business enterprise and entrepreneurs, a paragraph describing the nature of business, and the vision and mission statement of the company.

An executive summary of the comprehensive business plan report should be presented within four pages, summarizing the whole report and emphasizing on business purpose, industry analysis, market opportunity, key elements of the business, revenue, and planning.

This segment of a viable business plan will show the present conditions of the industry, in which the entrepreneur desires to enter. This section should include present and future outlook and demographic developments, analysis of competitors, market segmentation, and industry financial forecasts.

In this segment of the business plan a detailed picture of the venture should be outlined with particular reference to products, services, office equipment, machinery, personnel, size of business, and background of entrepreneurs.

This portion of the business plan is indeed an operational plan. The operational activities of manufacturing, trading and service business are different. So the operational plans of different types of enterprises will be different. For example operational plan of a manufacturing business may cover unique aspects such as manufacturing process,equipment, names of the providers of the raw materials and other inputs of the production process, and so on.

It includes market condition, market strategy, and future market prospect. The pricing, promotion, distribution, product forecasts, and controls should be evaluated carefully for the business plan.

This section includes forms of the ownership, identification of partners or major shareholders, the authority of the managers, management-team background, and the duties and responsibilities of members of the organization.

It is very important for any business plan to assess all the possible risks that may affect the enterprise, prior to starting the business. Assessment of risk must include evaluation of the weaknesses of the enterprise, latest technologies, and contingency plans.

This section shows financial viability of the business plan, in which the entrepreneur must prepare forecasted income statement, cash flow estimates, forecasted balance sheet, break-even analysis, and sources and usages of funds. This section will be scrutinized to determine the profitability and sustainability of the enterprise by the investors, such as the bankers or venture capitalists.

It contains all the backup materials such as legal documents, market research data, lease contracts, and price forecasts from suppliers.

These are the general contents of a business plan that are suggested by the experts, but these contents may vary from business to business. A good business plan should be comprehensive enough to provide a complete picture and understanding of the venture regarding its present status and future growth potential to the prospective investors and other interest groups.

Business Plan Types

Traditional business plans come in many types. They include strategic plans, expansion plans, investment plans, growth plans, operational plans, internal plans, annual plans, feasibility plans, product plans, and many more.

The various types of business plans will always matche the specific business situation. For instance, it is not necessary to add all the background information that is known already, while preparing a plan to use internally and not circulating it to financial institutions or investors. Investors always look for information on the description of the management team, while bankers always look for financial background or history of the company.

The various types of business plans are due to the specific case differences:

Start-up plan is the most standard plan that explains the steps for a developing new business. Start-up plans often include standard topics such as the organization, product or service offering, market place, business forecasts, strategy, management team, implementation milestones, and financial analysis. Sales forecast, profit and loss statement, cash flow statements, balance sheet, and probably a few other tables are included in the financial analysis.

First year monthly projections are shown in the start-up plan, which usually begins with an abstract and ends with appendix.

Click on the following link to learn more about how we approach startup investing .

Business plans that are not usually intended for external investors, financial institutions, or any other third parties are called Internal plans. A detailed description of the organization or the management team may not be included in it. Detailed financial projections like budgets and forecasts may or may not get included in Internal plans. Instead of presenting the whole business plan in the form of paragraph text, Internal plans display the main points in the form of bullet points in slides.

Operations plan can be referred to as Internal plan, which is also known as an annual plan. More detailed information on specific dates, implementation milestones, deadlines, and teams and managers responsibilities are given in Operations plan.

Strategic planning usually does not focus on specific responsibilities and detailed dates, rather it focuses on setting high priorities and high-level options and is also referred to as an internal plan. Unlike most other internal plans, it includes data in the form of bullet points in slides. Organization or management team descriptions are not included in it. Also, some of the financial information is not explained in detail and left while preparing strategic plans.

Some business plans focuses on specific areas of the business or a subcategory of the business, and these plans are referred to as a growth plan or an expansion plan or a new product plan. Depending on whether these business plans are linked to new investments or loan applications, they could be classified as internal plans or not. For instance, like a start-up plan developed for investors, an expansion plan that requires new investment would also have detailed description of the company and its management teams background data. These details will also be required for loan applications. But, these descriptions are skipped in an internal business plan, which is used to design the steps for growth or expansion that is funded internally within the organisation. Although, detailed financial projections might not be given, forecast of the sales as well as the expenses for the new business venture is at least included in more detail.

A very simple start-up plan is the feasibility plan, which include an abstract, mission statement, market analysis, keys to long-term success, and initial cost analysis, pricing, and projected expenses. Feasibility plans helps to analyze whether it is good to continue with a plan or not, to find if the business plan is worth continuing.

Writing a business plan is a highly collaborative affair between the entrepreneur(s) and the business plan writer. The more complex the plan is, the more both the entrepreneur(s) and the business plan writer will need to communicate and collaborate in order to produce a professional, marketable business plan. The business plans we write fall into six general categories. We will discuss each in detail below.

These are business plans for new companies that are 1) trying to raise startup capital to launch the business and 2) the business will serve a clearly defined target market with a service or product that already exists. These business plans are usually the least complex to write because the business models

The hourly fee for work over the project’s estimated number of hours is $20 per hour.

Type 1 and Type 2 business plans are written in five distinct units. Each unit reflects a progressive step in putting the business plan together. Before we can begin writing each unit, we must receive feedback to specific questions that we will send you concerning the topics covered in each specific unit.  After we complete each of the first four units, we will send you a draft of that unit in a Microsoft Word document. You will then have the opportunity to review unit draft and critique or clarify it.

We will make any necessary changes needed for each unit draft. The fifth and final unit will be integrating the information in each of the previous four units into a final, complete business plan. You will then have the opportunity to review and critique that completed business plan draft. We will then correct any and all discrepancies in that final complete draft.

The entire business planning process of writing a Type 1 or Type 2 business plan depends upon our general workload and the speed with which you respond to our requests for information about your business. We estimate that either a Type 1 or Type 2 business plan will take generally 10 to 15 work days to complete (two to three weeks).

These are business plans for existing companies that are 1) trying to raise capital for a new business project or idea and 2) the business project is serving a clearly defined market with a service or product that already exists.

Type 3 and Type 4 business plans are written in six distinct units. Each unit reflects a progressive step in putting the business plan together. Before we can begin writing each unit, we must receive feedback to specific questions that we will send you concerning the topics covered in each specific unit.  After we complete each of the first five units, we will send you a draft of that unit in a Microsoft Word document. You will then have the opportunity to review the draft of each unit and critique or clarify it. We will change or modify any discrepancies you have with the drafts of each unit. The final unit will be integrating the information in each of the five units into a final, complete business plan. You will then have the opportunity to review and critique that completed business plan draft. We will then correct any and all discrepancies in that final complete draft.

The entire process of writing a Type 3 or Type 4 business plan depends upon our general workload and the speed with which you respond to our requests for information about your business. We estimate that either a Type 3 or Type 4 business plan will take generally 15 to 20 work days to complete (three to four weeks).

These are business plans for classic startup companies that are trying to create new products or services to serve new or reimagined markets. These companies are usually looking to raise equity capital from angel investors and venture capital firms. These business plans are far more difficult to write because their business models are largely unproven.

Type 5 business plans are written in five distinct units. Each unit reflects a progressive step in putting the business plan together. Before we can begin writing each unit, we must receive feedback to specific questions that we will send you concerning the topics covered in each specific unit.  After we complete each of the first four units, we will send you a draft of that unit in a Microsoft Word document. You will then have the opportunity to review unit draft and critique or clarify it. We will make any necessary changes needed for each unit draft. The fifth and final unit will be integrating the information in each of the previous four units into a final, complete business plan. You will then have the opportunity to review and critique that completed business plan draft. We will then correct any and all discrepancies in that final complete draft.

The entire process of writing a Type 5 business plan depends upon our general workload and the speed with which you respond to our requests for information about your business. Also, the novelty and newness of the industry you are entering and the market you will be serving are real wild card variables in terms of how much time the business plan will take to complete. We estimate that a Type 5 business plan will take generally 25 to 40 work days to complete (five to eight weeks).

These are business plans for existing companies that are attempting to create new products or services to serve new or reimagined markets. The markets these companies are trying to serve with their new products and services are either undefined or completely new. Usually these companies are seeking financing to raise equity capital (because these business projects are usually risky), but sometimes raising debt capital may be an options for them. These business plans are as difficult to write as Type 5 plans.

Type 6 business plans are written in six distinct units. Each unit reflects a progressive step in putting the business plan together. Before we can begin writing each unit, we must receive feedback to specific questions that we will send you concerning the topics covered in each specific unit.  After we complete each of the first five units, we will send you a draft of that unit in a Microsoft Word document. You will then have the opportunity to review the draft of each unit and critique or clarify it. We will change or modify any discrepancies you have with the drafts of each unit. The final unit will be integrating the information in each of the five units into a final, complete business plan. You will then have the opportunity to review and critique that completed business plan draft. We will then correct any and all discrepancies in that final complete draft.

The entire process of writing a Type 6 business plan depends upon our general workload and the speed with which you respond to our requests for information about your business. Also, the novelty and newness of the industry you are entering and the target market you will be serving are real wild card variables (in terms of how much time the business plan will take to complete). We estimate that a Type 6 business plan will take generally 25 to 40 work days to complete (five to eight weeks).

Running a Business Is Tough, Especially Without a Business Plan

If you are running a business, it’s very important to have a business plan made up and it’s just as important to stick to your business plan once you create it. When you have a business plan you are setting objectives for yourself and you are establishing the priorities you have for your business. It also makes it much easier to reach the goals that you set for yourself as well which is always crucial in a business.

Think of your business plan as a map for your business, without this map you and the way you run your business are traveling blindly which is very dangerous. You want to have a clear idea of where your business is headed and where you want it to go and a business plan outlines what will steer you in the right direction.

Looking for a Loan?

If you are looking to get a loan for your business, you’re going to need a definite business plan. Most banks won’t even consider giving you a loan until they see a business plan. If you don’t have a business plan they’ll think of you as a risk since you don’t truly know where you want your business to go. When you present your business plan to a bank to get the loan you desire be sure that you go over what your business is all about and why you started it. You will also want to list for them what you see in the future of your business as well.

Looking for a Business Investment?

Having a business plan doesn’t mean that you will surely get the investment you desire but not having a business plan will surely mean you will not get the investment you desire. Investors need to know what exactly they are investing in and they will look to your business plan to understand what the idea of the business is, your businesses track records, the technology behind your business and of course yourself. You will absolutely not get a business investment without having a business plan because the investors won’t have anything to help them understand what your business is all about.

Have Business Partners?

A business plan is what defines your agreements that you have made with your business partners which means you’ll have a lot of issues if you don’t have a business plan if you are in this business with more than just yourself. A business plan is the only way to keep everything between you and your partners fair and it ensures that everyone knows what the ground rules are for the business and where each and every one of you stand.

Communicating with a Management Team Won’t Work Without a Business Plan

How can you and your management team effectively run your business without being able to see where you all want it to go? The answer is, you can’t. You can’t steer your business down the right path if nobody knows exactly where it should be going and your management team will feel the exact same way. There will be a lot of different problems that will come up during the day-to-day work and it will be very challenging for you to face them and communicate all of these problems when you or your management team don’t truly know where the problem falls under in the business plan.

Do you need a business valuation?

Whether you need to place a value on your business to sell it or for taxes, a business plan is an essential part in this. It’s always important to know what your business is worth even if you don’t plan on selling it at all, you may need to know what it’s worth when it comes to planning an estate or an unexpected divorce could come up. You always should know what your business is worth an a business plan will help you understand that and keep track of it.

When it comes to developing a business plan, many people believe that it’s too difficult or it’s just too time consuming to do but what those people don’t realize is that putting together a business plan will save you in many ways and you it will help your business in more ways than you can imagine.

Developing a business plan is not that much of a challenge and it will very valuable to you in the future. Nobody should ever try to do something big without planning it first and this includes running a business. You have all these business plans in your head so just lay those plan out on paper so you have tangible evidence of your business and what you want to do with it.

A business plan a very crucial part in creating and owning a business so take the time and effort in creating one and you will benefit from it much more than you think and you’re business will run much more smoothly.

A business plan’s executive summary section provides a round-up of the main points of your business plan. Although the summary will appear at the top of the final printed piece, the majority of business plan developers do not write the executive summary until the last moment. The summary forms the gateway to the remainder of the plan. If you do not write a business plan executive summary it well, your target audience will not read beyond the executive summary.

What should be included in an executive summary?

When a regular business plan is being written, the following should usually be incorporated into the opening paragraph of the executive summary:

• The name of the business • The location of the business • The service or product being offered • The aim of the plan

A further paragraph should underline significant points, for example projected profits and sales, profitability, unit sales, and keys to success. Give the details you need everyone to notice. This is also a sensible point at which to include a highlights chart, a bar chart depicting gross margin, profits before taxes and interest, and sales for the three years to come. These numbers must be explained and cited in the text.

Different summaries are required for different plans

Internal plans, for example annual or strategic plans, or operations plans, do not need such formal executive summaries. With such a plan, make its purpose obvious, and be certain that all the highlights are mentioned, but other details – such as the description of your service or product, and location – may not need to be repeated.

Be concise with your summary

If investment is what you are seeking, mention this in your executive summary, specifying the amount of investment required and the level of equity ownership that will be provided in return. It is also a good idea to include some highlights regarding your competitive advantage and your management team.

If it is a loan that you are looking for, say so in the executive summary, specifying the sum required. Do not include details of the loan.

What is the right length for an executive summary? There are differing views from experts about the ideal length of an executive summary. Some recommend taking only one or two pages, while others suggest a more in-depth approach, with the summary lasting for anything up to ten pages and including sufficient information to be used instead of the full plan. Although it was once common to write business plans of 50 or more pages, today’s lenders and investors expect a more focused, concise plan.

A single page is the perfect length for an executive summary. Keep everything brief, emphasizing the major aspects of your plan. You are not trying to explain every last detail, simply piquing your readers’ interest about the rest of the plan and encouraging them to read further.

Be careful not to confuse a summary memo with an executive summary. The executive summary is the opening section of a business plan, while a summary memo is a distinct publication, usually running to no more than five or ten pages; this is intended as a substitute for the full plan for the benefit of those who are not yet in a position to read the full plan.

In general, a financial plan is a set of steps or goals put together for the business which is intended to help attain and accomplish a final financial goal. It shows the future and current financial state of a business by using known variables to forecast future cash flows, asset values and withdrawal plans. The plan shows financial viability of the business plan, in which the entrepreneur must prepare forecasted income statement, cash flow estimates, forecasted balance sheet, break-even analysis, and sources and usages of funds.

Why is a financial plan important? Investors and bankers must have an incentive to invest in your business. Profitability gives them an incentive to invest.  If your plan is weak and unorganized it will portray your business as unsustainable. Investors and banks will see you only as a risk and be unlikely to give the kind of capital needed for your business. For this reason you need to create a solid financial plan which will convince investors that your business is worth investing in.

Here at InvestmentBank.com we will design for you a financial plan intended to demonstrate to the bank and your investors that your business is sustainable and profitable.  We cannot guarantee you the investments you are hoping for, but we can guarantee that if you don’t have a plan, you will also not receive your hopeful investments. Let us guide you in the planning process.

One core component of market analysis is market forecasting and proforma financial statement drafting. The future trends, characteristics, and numbers in your target market are projected in market analysis. In a standard analysis process, the projected number of potential customers is divided into segments.

Generally, market size is not the only factor that is determined, but the market value is also very important. For instance, small business customers spend around 4 times as much as the home office customer, even though they are 2.5 times smaller than their high-end home segment in terms of customer size. So, in terms of dollar value, the small business market is often considered very important.

Market value is calculated through simple mathematics. The number of potential customers in the market is multiplied by the average purchase per customer. Market value is calculated by taking the average number of customers in each segment over a period of time and then multiplied that figure by the average purchase per customer. In market analysis table, the other items are only subjective qualities that help with marketing. These points are allotted to people who are assigned in preparing marketing information.

Reality Checks Reality checks are always important for market forecast. Finding a way to check reality, while performing a forecast is essential. If you are able to estimate your total market value, then you would relate that figure to the estimate sales of all their competitors to check if the 2 figures relate to each other. The import and export value and production values are checked in an international market to find whether the annual shipments estimates appear to be somewhere in the same range as the estimated figures. To check your results with the forecast, you might also check for some given years with the vendors, who sold products to this market. Macroeconomic data can also be overlooked to confirm the size of this market compared to other markets with same characteristics.

Target Focus Review

Market analysis should help in the development of strategic market focus, which means selecting the key target markets. This is considered the critical foundation of strategy. We speak on this as market positioning and segmentation.

Company will not try to address the needs of all market segments under normal circumstances. While selecting target market segments, understand the inherent market differences, competitive advantage, keys to success, and strengths and weaknesses (SWOT analysis) of your organization. Everyone wants to focus on the best market segment, but the market segment with the maximum growth or the largest market segments, might not be necessarily the best one to address. The best market segment to address would be the one that matches your own company profile.

It is not a good idea to use page count as a gauge to determine the length of a business plan. A business plan with 20 pages of text alone can be considered to be longer than a 35-page plan which is well laid out with bullet points, helpful images of products or locations and charts that highlight vital projections.

In fact, a plan should be measured by its readability as well as the summary provided. If the business plan is prepared keeping these aspects in mind, the reader will be able to get an overall idea in about 15 minutes by quickly browsing through the key points.

Illustrations, headings, format and white space contribute to improving the appeal of the business plan. The summary section is a very important aspect of any business plan. The salient points of the business plan must be clearly visible to the reader as it is done in a presentation.

It is unfortunate that many people still tend to measure the worth of a business plan by the number of pages in it. In this connection, some of the key aspects to be kept in mind are as follows:

• Practical business plans prepared for internal use only can have five to ten pages
• Business plans of large companies may have hundreds of pages

A standard expansion or start-up plan prepared for presentation to outsiders can have 20 to 40 pages. However, it should be easy to read with text well spaced and have bullet point formatting, illustrations in the form of business charts and financial tables in the condensed form. The details of financial aspects can be organized in appendices.

However, the  length of the business plan  is decided by its nature and the purpose for which it is prepared. Some of the questions that can be considered when drafting out a business plan in order to decide on its length are:

• Should descriptions about the company as well as the management team be included as outsiders are likely to read the business plan?
• Should a standalone executive summary be provided for the business plan?Is there a need to incorporate plans, blueprints, drawings and detailed research?Is it an investment proposal?
• Should it be worded in such a way as to clear legal scrutiny?

The form of the business plan is actually decided by the requirement for which it is to be prepared.

Often, venture contests specify a limit of 30 pages or 40 pages at times, but rarely 50 pages, including the appendices that contain detailed financial statements, for a business plan. Some contestants make very bad options because of page restrictions and cram the content using thick texts and bold typefaces, making it worse and not better.

Most often,  good plans have as many as 30 to 40 pages . The plans have 20 to 30 pages of text, excluding graphics to illustrate locations, menus, designs, etc. and appendices consisting of team leaders’ resumes, monthly financial projections, etc. Some pages may have to be included for standard financials. This calls for tables for sales, income and cash flow statement, balance sheet and personnel on a monthly basis. In the body of the plan, annual numbers may also have to be included.

It is not prudent to reduce the length of the plan by cutting down on helpful graphics. Readability is more important than the length. Making use of business charts to illustrate numbers makes it easier to understand. Make use of drawings and photographs to depict locations, sample menus and products. It is important to use as much illustration as possible. Finally, extra graphics such as clip art that are not relevant to the matter at hand may better be avoided.

Business Plan Market Forecast

Proper market forecasting helps provide budgetary allocation for coming market trends, innovative shifts and internal financial allocation. It is a key component of proforma financial statements and  professional market research . Intelligent estimates are best backed by quality, time-intensive research. That’s where we come in. Rather than producing a business plan based on educated guesswork, we use a litany of some of the industry’s best market research tools available to some of the most prestigious universities. Many a business plan software tools can also aid in your research work. Typically business plan software also includes industry-specific templates, which can help with how you approach your niche or even the broader market.

Today’s technology provides access to large data-sets for current and past information. Obtaining the data is not difficult. We help to analyze, interpret and make qualitative assumptions about future trends. By using both qualitative and quantitative approaches we work to derive parallel data forecasts for future trends within your business, your industry and the market as a whole. The future may be uncertain, but with the help of expert modeling, it can be simplified, understood and, in some cases, accurately predicted.

Many business planners lack the luxury of funding a previously-published market forecast from which to glean relevant data. In many cases, free published forecasts can help to paint a meaningful picture. However, when professional forecasts are not forthcoming on market size, supply/demand metrics and potential company penetration, it is usually left up to thoughtful opinion and expert “reverse engineering” to determine any meaningful dribble from the data.

Without free forecasts, a business owners may feel forced to purchase expensive data sets, market research reports and published articles to determine helpful data about the potential of a business idea. Where we can, we utilize past relationships and access to thousands of reports through expensive subscriptions to find the data-set that best fits your business goals for the plan you may be crafting.

Apart from the more obvious sources like the Internet, library references and popular publications, we provide access to industry-specific reports and paid-for research studies not accessible to would-be entrepreneurs. We fully recognize that data forecasting is part art and part science, but we prefer to adhere to more quantitative methods so as to make your business plan as convincing and relevant as possible for its particular audience.

Extrapolation of past data with large populations and data-sets helps to provide reliable predictions about future trends and outcomes. Understanding past growth, market saturation and the competing forces that can impact a company’s success in market entrance are absolutely vital components of the marketing portion of your business plan.  Past data is never a fail safe, but it can act as a healthy gauge of future trends in a marketplace.

When no relevant data on current conditions within your market can be found, we work with the available numbers to create plausible models that form convincing arguments for your particular plan goals.

Perhaps the greatest downfall of many potentially-successful business plans is the disconnect between gathered data, assumptions, external and internal market forces and projections. Without a common sense litmus test, many plans fail to deliver relevant metrics to help make business funding possible. Performing common sense tests often requires qualitative work outside the realms of the given data. Making phone calls to Chambers of Commerce, trade organizations and market reporting agencies to obtain a wider base and deeper foundation of information is extremely helpful when crafting assumptions.

Making wild guesses about targets, markets and industries without thoughtful research can be detrimental to fulfilling the goals of your particular business plan. BusinessPlanning.org helps to remove the guesswork and provide your business with relevant data from which to tell a compelling story.

Correctly identifying the structure and competitive dynamics of the industry you are proposing to enter will create a good general point of reference for judging whether you should enter it or not. If the general industry profile does not appear attractive to you, and you are planning to offer value propositions that have close industry substitutes, then this may be an important signal that your proposed venture may need to be reconsidered. But if the industry profile looks attractive, then this could be a sign that you are on to something.

A fantastic tool to analyze an industry that serves a Defined Existing Market is Porter’s Five Forces Model. Michael Porter is a professor at Harvard Business School and published this strategy model in his seminal work,  Competitive Strategy . Porter’s model is powerful. It demonstrates how an industry’s attractiveness to either its current competitors or a new entrant is an amalgam of disparate, and sometimes contradictory, factors.

To help determine if your business idea will be worth the investment of time, money and energy, you will conduct two sequential analyses using the Five Forces Model. The first Five Forces analysis will be of the overall industry that you are contemplating to enter. The second Five Forces analysis will be of the particular market segment(s) you would be choosing to serve with your Value Proposition(s).

The figure below illustrates how Porter’s model works by focusing on the five forces that shape competition within an industry: 1) the risk of entry by potential competitors, 2) the intensity of the rivalry among established companies within an industry, 3) the bargaining power of suppliers, 4) the bargaining power of buyers, and 5) the similarity of substitutes to an industry’s value propositions.[1]

The main point of Porter’s Five Forces Model is as follows. The stronger that one of the five competitive forces becomes, the greater the overall competitive rivalry becomes within the industry. The more intense the competitive rivalry becomes, the harder it is for ventures within the industry to raise prices or maintain high prices to reap greater profits. The less in average profits that a firm in the industry is able to earn, the more intense the rivalry for customer demand is among the industry’s rival competitors.

The opposite is true also. The weaker that one of the five competitive forces becomes, the less intense the overall competitive rivalry among the industry’s firms is. If rivalry amongst the industry’s firms decreases, the easier it becomes for the industry’s competitors to raise either raise prices or reduce their cost structure (by lowering their value propositions’ quality) and ultimately earn higher profits. The higher the average level of industry profits, the less intense the rivalry for customer demand will be among the industry’s rival competitors.

The importance of each of the five forces is situationally dependent upon the unique facts and circumstances of each industry. For example, the overall threat of new market entrants might be insignificant in determining whether an entrepreneur wants to enter an industry in its growth phase, but it may be a paramount factor in a mature industry.

I developed another diagram (below) to show how the five forces within Porter’s model interact with each other. As you can see, four of the forces (risk of entry by potential competitors, bargaining power of suppliers, bargaining power of buyers, and threat of new entrants) each act upon the fifth force – the intensity of rivalry among the industry’s competitors. This means that if the bargaining power an industry’s buyers increases, the intensity of rivalry among industry competitors will increase. This causal relationship works in only one direction – a change in any of the forces ultimately either increases or decreases the intensity of rivalry among the industry’s competitors. Therefore a change in the intensity of rivalry will not cause change in one of the other four forces.

[1] Charles W. L. Hill and Gareth R. Jones,  Strategic Management Theory , Eighth Edition, Houghton Mifflin Company, pg. 45, 2008.

Macroenvironmental forces are changes in the broader economic, political/legal, social, technological, demographic, and global forces beyond the industry being examined. Any one of these six forces can change or effect any one of an industry’s five internal competitive forces. In conducting an industry’s initial Five Forces analysis – which is a snapshot measurement of an industry’s present competitive environment – these macroenvironmental forces are automatically accounted for. They are already included because an industry’s competitive environment is an aggregate of these turbulent and often conflicting forces. But entrepreneurs and business owners must also make educated guesses about how macroenvironmental trends and forces will shape the industry’s attractiveness into the future, both in the short run and in the long run.

Below is a diagram that visually represents how each of these seven forces can affect an industry’s Five Forces as the future unfolds.

The Six Macroenvironmental Forces

The following is a detailed analysis of the seven macroenvironmental forces touched upon above.

Macroeconomic forces affect the general economic well-being of the nation or the region in which an industry operates. [1]  The following are the major macroeconomic forces that can affect an industry’s ability to deliver an adequate economic return.

• The rate of growth for the economy.  Economic expansions cause a general rise in aggregate consumer demand while recessions cause a general drop in aggregate consumer demand. Because aggregate demand for goods and services rises during economic expansions, an industry’s intensity of competitive rivalry, broadly speaking, will usually decline. The reason is that generally the market demand for an industry’s value propositions will cause an expansion in the industry’s revenue. Therefore its possible for the industry’s firms to generate revenue growth without fighting their competitive rivals for market share. Conversely, a decline in economic growth or a recession causes general aggregate demand to contract . This generally shrinks the amount of revenue an industry can earn and may cause price wars, consolidations and bankruptcies.
• Interest rates. Interest rates affect the cost of borrowing for consumers, thus affecting aggregate demand. Higher interest rates generally makes the cost of borrowing more expensive and can dampen demand for real estate and purchases of major assets (cars, durable goods). Ultimately, higher interest rates can lead to higher industry rivalry if the industry is directly or tangentially affected by borrowing costs. Higher interest rates also affect business’ cost of capital. High interest rates may restrict a business’s ability to invest in new equipment or facilities. On the other hand, low cost of capital makes it substantially easier for established businesses to borrow and invest into expanding their operations.
• Exchange rates.  Exchange rates either make imports more or less expensive for domestic consumers and exports more or less expensive for foreign consumers of domestically produced value propositions. A weak dollar makes imported value propositions more expensive and domestically produced value propositions comparatively less expensive. A strong dollar makes foreign value propositions less expensive and domestic value propositions comparatively more expensive.
• Inflation/Deflation.  Inflation is the decrease in the purchasing power of a nation’s currency over time. Inflation can destabilize an economy, slow economic growth, higher interest rates and increased currency volatility. [2]  Increasing inflation makes business planning very difficult because the future becomes less predictable. Uncertainty makes companies unwilling to invest in growing their operations. On other side of the coin is deflation. Deflation is even more potentially damaging than inflation is. If the purchasing power of currency is increasing over time, firms and consumers will hoard their cash. This will causes a self-reinforcing cycle of low or negative economic growth. Usually the best inflation formula for stable economic growth is a low, steady inflation rate.
• Wage Levels.  The price of labor from industry to industry can have a significant impacts on an industry’s costs of production. High or increasing industry labor costs can make substitute value propositions more attractive for the industry’s customers. Low or decreasing industry labor costs can make substitute value propositions less attractive for the industry’s customers.
• Level of Employment:  High unemployment levels give firms greater leverage over their employees in keeping wage increases down or in actually decreasing labor costs to the firms in an industry. This can reduce the industry’s cost structure and thus raise the industry’s average profitability.

Legal and political forces are the results of changes in laws and regulations within the country your business operates in. [3]  Political and legal developments can be both opportunities and threats. The following are the major legal and political changes that can impact the fortunes of industries.

• Current and Expected Levels of Taxation.  High tax rates can affect the decisions of entrepreneurs to engage in business activities or reduce the ability of companies to reinvest profits in expansion. But often the most important effect of taxes are not the levels of taxation, but the different effective tax rates for different activities. For example, the oil and gas industry, ecommerce businesses and the video game industry get significant tax breaks that reduces their effective tax rate. This can raise or lower the attractiveness of getting into certain industries.
• Import/Export Quotas and Tariffs.  Tariffs and import/export quotas affect the costs of value propositions imported into a country and those exported to other countries. Raising or lowering tariffs or trade quotas can cause demand for the value propositions of the industries affected to increase or decrease. An example of a broad change in trade quotas and tariffs was the implementation of the North American Free Trade Agreement (NAFTA).
• Government Grants.  Government grants are programs that can provide nascent industries with seed capital and resources. Governments (state, local and national) often provide businesses with financial support if the business pursues profit opportunities that align with a government’s policy goals. An example of a significant government grant program is the U.S. government’s Small Business Innovation Research grant (SBIR).
• War/Terrorism.  War and terrorism can increase regulations and transaction costs associated with global travel or insurance. Wars can also saddle nations with large medical costs to society. Wars and anti-terrorism efforts can also increase military related contracting opportunities.
• Quid Pro Quo.  Many industries try (and often succeed) in influencing politicians to enact laws that are favorable to their bottom line and create barriers of entry against potential competitors. A recent example of this was the influence the health care and pharmaceutical industries exerted upon the U.S. Congress during the passage of the Affordable Care Act in 2009.
• The Regulatory State.  In the U.S., most of the regulations that affect business and the general public are promulgated through various government agencies. Often, small changes in regulations can lead to desired or unintended consequences for a number of industries. Here is a small sample of legal and regulatory issues that are managed by various state and federal agencies: environmental protection, corporate governance, intellectual property rights, employment law, criminal law, tort law, food & drug regulation, public health… In the United States (and most other industrialized countries), virtually every area of commerce is affected by government regulations and laws. For any given industry, changes in these regulations and laws can be either threats or opportunities.

Social forces are changes in the social mores and values of a society and how they affect any particular industry. Social changes can create both opportunities and threats for any industry.

• Social and cultural forces specifically refer to changes in the tastes, habits and cultural norms within a significant segment of a country’s population. One example of a social trend is the growth of the organic and local food movements in the U.S. over the last thirty years. The local and organic food movements have created an opportunity for some small farmers near large population centers, but this movement has also created a potential threat to large mono-agriculture farms.
• Cultural attitudes can shift drastically over time, rendering once commonplace habits and activities to no longer be widely accepted or tolerated. An example is the decline of smoking in the U.S. Smoking used to be tolerated in most indoor spaces forty years ago. Now it is either banned or highly frowned upon and the public has become very aware of the health risks smoking causes. This has led to a significant decline in the percentage of adults in the U.S. who smoke. Conversely, marijuana use, which was highly frowned upon by the majority of U.S. society over forty years ago, has become more widely accepted among the public. As a result, many state laws are changing to reflect this increased tolerance of marijuana use.
• Changes in what society considers fashionable are in a constant state of flux. Various fads and crazes rise and fall, sparking opportunities and threats for the industries that capitalize on these trends. Examples of changes in fashion, fads or crazes are: rock n roll in the 1960s, disco music in the 1970s, the Pet Rock, the Hula Hoop, Cabbage Patch Dolls…

Technological change is a primary driver of Schumpeter’s “perennial gale of creative destruction” among business ventures. Technological forces can render established, profitable value propositions obsolete virtually overnight and usher into existence exiting new business ventures. Because of the dual role technological change (both creative and destructive) plays in our society, it can be both an opportunity and a threat.

• Technological forces can cause industries to move through their life cycles more quickly. They can also disrupt an industry in the beginning or middle of its life cycle, rendering it obsolete or changing it so radically that most of the industry’s competitors cannot keep up. Essentially, technological change makes the life cycles of industries more volatile and unpredictable.
• Technological change can lower the barriers of entry for many industries. An example is the internet made it much easier for a potential retailer to sell products to its customers through a virtual storefront versus acquiring, stocking and running a brick and mortar facility. The lowering of barriers of entry tends to increase an industry’s intensity of rivalry, leading to both lower prices and industry profits.
• Technological forces can also reduce transaction costs. Reducing transaction costs is often destructive to the industries that thrive on them (auction houses being replaced by eBay or newspaper classifieds being replaced by Craigslist). Within an industry, a reduction in transaction costs driven by technological change usually leads to an increase in the industry’s intensity of competitive rivalry.
• Technological change can either reduce or increase customer switching costs. An example of how technological forces can reduce customer switching costs are instant price comparison applications on mobile devices. These give the consumers the ability to identify which retailers offer the same value propositions at the lowest prices. Technological forces can also increase customer switching costs. An example is Facebook or eBay. Both of these websites lock in users due to their network effects – alternative market choices do not present as much value because they are not as big.
• Technological forces can unleash changes in industries far removed from the industry in which the technology originated. An example of this is the Internet. The Internet has caused massive sea changes in industries only tangentially related to it such as retail, the news industry, book publishing, and matchmaking services (online dating).

Demographic forces are changes in the characteristics of a population of people. These characteristics can be sex, age, education, race, national origin, social class… Changes in demographics can present businesses with both opportunities and threats.

• Changes in a population’s age distribution can present both opportunities and threats. For example, in the U.S., the population of elderly people is growing more rapidly than the population as a whole. This presents an opportunity for industries who provide long term assisted living, the financial industry (reverse mortgages and retirement planning), and both the health and pharmaceutical industries. It also presents a threat to certain industries like funeral and burial providers (if the general population is living longer, it means people are dying at a slower rate).
• The rapid increase of the Hispanic population in the U.S. has led to an increase in Spanish speaking music, television and news in the U.S. This represents a growing opportunity for food and media companies that market to Latinos.

Global forces are changes that occur within and beyond the borders of the country a business is operating within and affect how a company can operate on the international stage. Global forces can present both opportunities and threats to an industry.

• The economic growth rates of other countries can play important roles in determining the demand for imports and exports. As barriers to trade fall, national economies become more subject to the winds of international commerce and capital flows. This international liberalization of trading agreements can allow domestic firms greater access to foreign markets. An example of the liberalization of international trade is the outsourcing trend over the last two decades from industrial economies in the west to developing economies in Asia.
• Climate change is another example of a global force. The long term changes to the world’s climate will profoundly shape countless industries in the decades to come. Climate change can offer both opportunities and threats to different industries. For example, the wine industry in France may have to experiment with new varietals due to changes in temperature and rainfall expected by scientists in the coming decades. Climate change also presents some industries with opportunities. One example is the shipping industry. The rapidly dwindling polar ice cap in the Arctic Ocean presents the possibility that new, more efficient shipping routes might become available.

[1] Charles W. L. Hill and Gareth R. Jones,  Strategic Management Theory , Eighth Edition, Houghton Mifflin Company, pg. 66, 2008.

[2] Charles W. L. Hill and Gareth R. Jones,  Strategic Management Theory , Eighth Edition, Houghton Mifflin Company, pg. 68, 2008.

[3] Charles W. L. Hill and Gareth R. Jones,  Strategic Management Theory , Eighth Edition, Houghton Mifflin Company, pg. 70, 2008.

A good Five Forces analysis will cause you to sift through a lot of data, much of it conflicting and confusing. Below is a series of scorecards that try to condense the most important points from your Five Forces analysis and present them to you in an easily understandable format.

The scorecards rate the attractiveness of an industry’s five forces  from the perspective of a new venture attempting to enter the industry . Each force gets its own scorecard. Each scorecard has the main factors that help determine the strength the force exerts upon the industry. A factor’s attractiveness is rated on a five category scale that ranges from Highly Unattractive, Mildly Unattractive, Neutral, Mildly Attractive, to Highly Attractive. For each factors’ rating, the top line (yellow) indicates the level of the factor’s level of attractiveness at present. The bottom line (green) is the entrepreneur’s rating of what he or she thinks each factors’ level of attractiveness will be in the future. The level of future attractiveness for a factor is determined by analyzing how macroenvironmental forces will affect the industry in the future.

Directly below is a hypothetical example scorecard of an industry’s intensity of rivalry:

Remember, none of this is exact science. There is no mathematical formula that determines whether you should enter an industry or not. The purpose of this exercise is to ensure that you, the entrepreneur, have thoroughly thought about the nature and future of the competitive environment you are proposing to jump into.

Force One: Intensity of Rivalry among Industry Competitors

Force Two: Risk of Entry by Potential Competitors

Force Three: The Bargaining Power of Buyers

Force Four: The Bargaining Power of Suppliers

Force Five: The Availability and Similarity of Substitutes to an Industry’s Value Propositions

And finally, the table below is a final snapshot evaluation of the industry’s attractiveness. To fill out this table, you should look at your ratings in the tables above as guidelines. The importance of the forces, and the factors that comprise them, will change from industry to industry. It will ultimately depend upon the unique facts and circumstances of each industry being evaluated. Therefore you will have to use your best judgment.

Overall Evaluation of Industry’s Attractiveness

Porter’s Five Forces – Risk of Entry

Profitable industries are like chum in the water for new competitors. The smell of money to be made will attract potential competitors to circle an industry, try to enter it and look for an easy meal. The only thing stopping a myriad of potential competitors from entering an industry are  barriers to entry  – a business version of a steel shark cage.

Profitable industries attract new market entrants – potential competitors. Potential competitors are companies that are not currently competing in an industry, but possess the ability to do so if they choose. Theoretically, if it cost nothing to form a company and enter an industry serving a profitable market, new firms would flood into that industry until the industry’s average profit margin shrank to zero. But we don’t live in a frictionless, theoretical world and different industries have wildly different levels of profitability. Barriers of entry are what discourages new companies from entering a profitable market and making a killing.

Barriers of entry benefit established companies within an industry by protecting them from new competition and preserving their profit margins. Low barriers of entry leave an industry wide open to new market entrants. The results to an industry with low barriers of entry are lower profits for the companies within that industry will inevitably result.

Therefore, established firms within an industry have great incentive to erect barriers of entry to keep the number of potential rivals to a minimum. Some barriers of entry are passive and a natural result of the industry’s operations. An example of this is economies of scale. But companies often take active steps to discourage new companies from entering their industries. Examples of this are when companies create brand loyalty or try to purposely raise their customers’ switching costs. The reason is simple – the more companies that enter the industry, the more difficult it is for established companies to maintain their market share and protect their profits.

The risk of entry by potential competitors is a function of the industry’s profitability and the height of its barriers to entry. The higher an industry’s average profit margin, the more enticing it is for new competitors to jump into the fray and wrestle market share from the incumbent companies. High barriers to entry can deter potential competitors from trying to enter an industry and serve its market segments. The higher the cost of entry into an industry, the weaker the competitive force (the risk of entry by potential competitors) is and generally translates into higher average industry profits. Important barriers to entry include the following:

Capital Requirements  – If it takes a great amount of money or assets to enter the industry, this can be a significant barrier of entry for firms who wish to enter it. Usually industries with high fixed costs have high capital requirements (i.e. factories, warehouses, computing assets…).

Economies of Scale  – Economies of scale is where the companies in an industry enjoy diminishing per unit costs for their value propositions as the volume produced increases.

Brand Loyalty  – Consumers often have preferences for the value propositions offered by established companies due to familiarity and reputation.

Absolute Cost Advantages  – Other entrants cannot hope to match the established firms within the industry’s cost structure. Absolute cost advantages arise from three sources: 1) possessing unique and critical resources (patents, trade secrets, or accumulated experience), 2) control of particular inputs of production (i.e. fertile farm land, a prime piece of commercial real estate…), 3) access to cheaper funds because existing companies represent lower risks than new entrants.

Customer Switching Costs –  High customer switching costs occur when customers resist spending the time, money and energy to switch from the current supplier of a value proposition to one offered by a different company, even though that alternative value proposition may be of greater value.

Government Regulation –  Government regulations, and the lack of them, can be a significant barrier of entry for potential new entrants into an industry. An example of this would be environmental regulations placed on coal mining companies and their operations.

We will now dig deeper into how to identify and analyze these potential barriers of entry, and ultimately understand how they affect the competitive rivalry within an industry.

Capital costs mean the startup costs of your business idea that must be incurred before you can commence operations. Basically, this is the total amount of money you need to spend (on equipment, employees, facilities, legal, accounting….) before you can hang your “Were Open!” sign in your shop window. For some asset intensive businesses, such as a full service health club or a golf course, initial capital costs can be extensive. For other businesses that use relatively few assets, such as an internet marketing business or a hotdog stand, initial capital costs can be relatively small.

For many aspiring entrepreneurs without a lot of financial resources, capital costs can be the most daunting barrier of entry of all. Many industries are able to maintain decent profit margins simply because the capital costs required to enter the industry are significant and insurmountable for many. Also, your time can be thought of as a capital asset too. Your investment of time in pursuing a business endeavor represents an opportunity cost on your part – you are giving up time that you could be working for someone else (and the income that entails) in exchange for pursuing your entrepreneurial ambitions. For example, it may take $100,000 and one year of full time work to create and open a business. If you had to give up a $50,000 per year job in order to pursue the endeavor, the real capital cost for you to start your business would be $150,000, not $100,000.

Another example of this would be opening a law practice. Legal services, in the United States, is a fragmented industry that has an average industry profit of 19.5%. This is a very attractive profit margin. Furthermore, the capital cost required to start a legal practice – purely from creating the actual legal services business – is relatively small. A lawyer needs a laptop, access to research materials, a place to meet clients, and some office equipment. This may cost as little as $10,000 in initial startup capital. But this does not represent the actual capital cost to start a law firm. To actually open a law firm and practice law, a lawyer would have needed to: 1) obtain a law degree (lets estimate $120,000), not work for three years while going to law school (lets estimate $150,000 for three cumulative years), get a state bar card ($3,500 for the test and the study course), and not work for three months while studying for the bar (lets estimate $12,500). Then, an only then, a lawyer could spend $10,000 on opening a legal practice. The real cost of this venture, both in absolute capital costs and opportunity costs, would be $296,000.

So the real capital cost of opening a law firm and practicing law (and being in an industry with an attractive 19.5% profit margin) may be at least nearly $300,000. This capital cost represents a serious barrier of entry to many people who would want to enter this industry, but balk at the $300,000 price tag that it requires.

Key Questions:

• What are the average total capital costs for entering the industry you proposing to enter?
• Is the average profit margin for the industry you are proposing to enter enough to service the capital costs required from a typical new market entrant?

Economies of scale arise when unit costs fall as a firm expands its output. In other words, the more of a value proposition a company produces, the less per unit the company pays to produce those value propositions. Sources of scale economies include 1) cost reductions gained by efficiently creating a massed produced output, 2) discounts on bulk purchases of raw materials, and 3) cost benefits gained from spreading production costs and marketing and advertising over a large production volume. Some industries benefit greatly from economies of scale (i.e. the beer industry, the auto industry…). Other industries do not enjoy economies of scale much at all (i.e. nail salons, massage therapy, dry cleaners…).

The following are examples of economies of scale: 1) when the creator of a product gets bulk discounts on the purchases of raw materials for their products, 2) spreading fixed production costs over a large production volume, 3) cost reductions through mass-producing a standardized output, 4) cost savings associated with spreading marketing and advertising costs over a large volume of output. Most manufacturing industries, such as pulp and paper products or textiles, are examples of industries with economies of scale. If economies of scale are a factor in an industry, then many small producers are at a disadvantage because their per-unit costs will be higher than that of their larger competitors.

An industry whose rivals have significant economies of scale creates powerful barriers to entry for an aspiring new entrant to overcome. First, the established firms will have a substantial cost advantage over a new rival. Second, because high economies of scale imply high fixed costs (equipment, facilities), it is critical that these companies protect their market share at all costs. If their sales volumes decrease, this can render them incapable of sustaining their high fixed costs.

Companies, who try to match the existing industry competitors’ economies of scale, must enter the industry as a large producer to overcome this problem. But to do so, it must raise enough capital (to purchase the necessary assets and facilities) to match its competitors’ economies of scale. This becomes another barrier of entry in itself. Furthermore, if a new company enters an industry with a large capital investment (to match current industry competitors’ economies of scale), the increased supply of products the new company brings to the market risks depressing prices and may trigger a price war with established industry competitors.

• Does the industry you propose to enter have significant economies of scale (where the per-unit costs for producing a good or service decrease significantly as the volume of production increases)?
• Does the industry you propose to enter have high fixed costs (equipment, facilities, or significant R&D requirements)?
• Do the suppliers of the industry you propose to enter give significant volume discounts and payment terms to large-volume buyers?
• Within the industry you are proposing to enter, do its company’s marketing and sales budgets increase, on a per unit basis, proportionally to sales of its value propositions, or do the costs of its company’s sales and marketing budgets decrease, on a per unit basis, with an increase in the sales volume of its value propositions?

Brand loyalty is when consumers develop and hold a preference for a particular company’s brand of value propositions. Significant brand loyalty makes it difficult for new market entrants to wrestle market share away from established industry brands. Examples of value propositions with strong brand loyalty are mass consumer products such as beer (Budweiser, Coors and Miller), soft drinks (Coca Cola and Pepsi), or tobacco products (Marlborough and Winston-Salem’s).

A company can also cultivate brand loyalty by developing innovative value propositions. Probably the most successful major company over the last decade that has leveraged innovative value propositions into brand loyalty has been Apple.

A venture may be able to sidestep an industry’s brand loyalty barriers of entry by entering the premium category of product markets. An example would be Dry Soda or small craft micro-brewers.

Significant brand loyalty makes it difficult for new entrants to take market share away from established industry brands. A company faces the daunting task of not only convincing consumers to buy its value propositions, but also to choose not to buy value propositions they already like and feel comfortable with.

• Are the value propositions in the industry you propose to enter highly branded?
• How strong is the brand loyalty in the industry you are proposing to enter?

Absolute Cost Advantages are when an established venture has an insurmountable cost advantage, meaning that new entrants cannot possibly hope to match the incumbent companies’ lower cost structure. Absolute cost advantages can arise from: 1) superior production operations and processes due to access to unique assets (i.e. patents, copyrights, or fertile farmland), 2) accumulated skill and expertise, 3) exclusive or relatively favorable control of their value propositions’ inputs (labor, materials, equipment, or management skill), and 4) access to cheaper capital due to their lower business risk when compared to a new market entrant. Also, access to superior distribution channels could be considered an absolute cost advantage. If established companies have absolute cost advantages, then the threat of entry as a competitive force will be weaker.

A new market entrant must be especially careful in attempting to directly compete with entrenched industry competitors that have absolute cost advantages. If a new entrant enters an industry where there are established competitors who have lower cost structures, the established firms can lower the price of their value propositions to eliminate the new entrant. This could erase any ability for the new market entrant to ever earn a profit. If this threat is credible, it can be a barrier of entry for new market entrants.

• Do the major competitors in the industry you are proposing to enter possess absolute cost advantages? If so, will you be able to acquire these absolute cost advantages before you begin directly competing with them?
• If the major competitors within the industry you are proposing to enter possess absolute cost advantages over your business idea, are there any steps or actions you can take to mitigate those absolute cost advantages?

Customer switching costs are the time, energy, and money necessary for them to switch from the value propositions offered by an established company to those of a new market entrant. If switching costs are high, customers will be unlikely to change even if the new product is superior to other market substitutes and alternatives. An example would be the switching costs associated with leaving the Microsoft Windows operating system or the QWERTY keyboard. Other value propositions in the market may be better/faster, but consumers often find themselves resistant to change because the time or hassle of switching to a better product or service proves prohibitive.

 K ey Questions:

• In the industry you are proposing to enter, do the value propositions the industry produces have high switching costs? If they do, can you think of a way your business idea can mitigate this obstacle?
• If the industry you are proposing to enter doesn’t typically have high switching costs, can you think of a way for your business to raise the switching costs for your proposed value propositions?

Government regulations create politically and legally defined barriers of entry for many industries. Government regulations can increase barriers of entry for market entrants and potentially reduce competition. An example would be food safety regulations or anti-pollution laws. Also, in industries where economies of scale are a powerful force, the absence of regulations can lead to an intense concentration of market share in the hands of a few firms. This can create barriers of entry that are extremely difficult for a new market entrant to overcome. To sum up, high regulation within an industry usually leads to higher barriers of entry, but not always.

• Does the industry you propose to enter require government licenses or strict adherence to statutory codes (construction, health care, lending money, real estate rental, restaurant & food preparation…)?
• To what degree are the industry’s regulations beneficial to the incumbent industry competitors?

Below is a chart that summarizes how the six types of barriers of entry affects industry attractiveness from both the perspective of a new market entrant and an industry incumbent.

Estimating Market Size

Estimating the size of the market you want to enter is the first critical step in testing the feasibility of your business idea. This is a lot like cliff diving. If you are going to jump off a cliff into a pool of water far below, it’s a really good idea to know beforehand just how deep the water is. If you jump without finding out (or at least making an educated guess based on objective facts), you run the very real risk of getting hurt. Bad.

The first order of business in determining the sizes of the various market types for your business idea’s value proposition(s) is to correctly define the parameters of the market types you are trying to measure.  This may sound rather simple, but it is honestly the hardest and most frustrating part of this process. Estimating a market size is the epitome of the phrase “garbage in – garbage out.” If you incorrectly define the boundaries of the type of market you are trying to size up, your entire estimate (and the basis for all of your future financial projections) won’t really be worth the paper it is printed on.

So, creating a quality market size estimate that’s based upon good, logical assumptions, is the first step in determining if your business idea can support a potentially successful business model. To make a quality market size estimate, you should roughly measure the size of each relevant market type for your business idea’s value propositions. By understanding the rough size of each of these market types, you can roughly gauge how much revenue (based upon your market share assumptions) your business idea could generate in the present and going forward into the future. Determining which market types to estimate the size of depends upon the type of market your business idea is attempting to serve. These general market types are Defined Exiting Markets, Cloned Markets, Re-segmented Markets, or a New Markets.

A market is a group of customers that have the willingness to buy a particular type of value proposition. When determining the size of the markets for your proposed business idea’s value proposition(s), you may use all or some combination of the following market type definitions.

• Examples: the car market (supplied by the car industry), the personal computer market (supplied by the personal computer industry), and the athletic shoe market (supplied by the athletic shoe industry).
• Examples: the total market for electric cars, the total market for tablet computers, the total market for running shoes.
• Examples: the market for electric cars in the United States sold through dealerships, the market for android compatible tablet computers sold through big box stores, the market for athletic shoes sold through e-commerce websites .
• The TM is comprised of one or more customer segments , each of which are offered a unique value proposition by your proposed business idea. For a comprehensive explanation of what comprises a customer segment, please refer to the following section.
• The TM is a measurement dependent upon the definition and size of the SAM (because it is a portion of the SAM), but independent of the SOM. Both the TM and the SOM are portions of the SAM that measure different things.
• Examples: Upper-middle class, educated, ecologically conscious automobile customers, early adopter electronics consumers who use their personal computers and laptops mostly for entertainment and not work, high school and college athletes who buy high performance running shoes to gain an edge on their competition.
• Like the TM, the SOM is dependent upon the definition and size of the SAM, but is independent of the TM. Both the TM and the SOM are portions of the SAM that measure different things.
• Examples: the portion of the market for electric cars sold in the United States through dealerships that your business idea can realistically capture, the portion of the android compatible tablet computer market in the United States sold though big box stores that your business idea can realistically capture, the portion of the market for high performance running shoes for athletes in the United States that are sold through ecommerce websites that your business idea can realistically capture.

For practical purposes, you can think of both the SOM and TM as a portions of the SAM, the SAM as a portion of the TAM, and the TAM as a portion of the TID. Both the SOM and TM are separate business concepts that measure different things. The SOM estimates your proposed value proposition’s penetration of the SAM. The TM estimates the size of the group of people for whom your proposed value proposition is specifically designed for.

I know, it’s a lot of acronyms to keep straight. But estimating the sizes of the TIM, TAM, SAM, TM and SOM are important for determining if the market size for your business idea’s value proposition(s) can support your entrepreneurial ambitions and business goals. The following are three generalizations – rule-of-thumb explanations – of what market sizes are necessary to support a particular business type, development path and outcome.

This type of company is usually entering a cloned, re-segmented, blue ocean or new market, or a defined existing market with a new product. They usually seek traditional angel investor and venture capital funding. Rapid scalability an achieving high market share is the key to this type of company. Often the founders of scalable, high growth companies have either an Initial Public Offering (IPO) or the sale of the company to a Fortune 500 corporation as their exit strategy .

These companies require a SAM large enough to support potential company EBITDA (after the company has successfully scaled its operations) of at least somewhere between $10 million to $20 million per year. Publically traded companies, on average, often trade for 10x their annual EBITDA or greater. This, depending upon the company’s industry and whether or not its founders and investors want it to have an IPO, would probably put the company’s valuation at greater than $100 million. A $100 million valuation is a safe rough estimate for whether a company will be able to both afford to go public and financially benefit from an IPO.

So, armed with these rough guidelines, to create a scalable, high growth company that proposes to enter an industry with a 10 percent average EBITDA and capture 10 percent of that industry’s market share, would need to at least generate $100 million per year in revenue ($10 million per year in EBITDA divided by the industry EBITDA average of 10 percent). To achieve this annual EBITDA target and a 10 percent SAM penetration, the overall SAM size would need to be $1 billion ($100 million per year in revenue divided by a 10 percent penetration of the market by the company).

This type of company can be entering a Defined Existing Market, Cloned Market, Re-segmented Market, or Blue Ocean Market. They do not enter New Markets with New Products due to the incredible amount of time, business risk and resources that would be required. These businesses usually seek capital from the founders, founders’ friends and family, non-bank lenders, bank and institutional lenders, and some angel investors. Rapid scalability is usually not a primary goal for these business ventures. They often prioritize strong, stable profits and cash flow for their owners above all else. Exit strategies for these companies’ founders include selling the company to a third party such as another privately held business or private equity group, passing on the business to heirs, or simply holding on to the business. These types of businesses often make excellent cash cows.

Successful, mid-sized privately held businesses are usually valued between $5 million and $50 million. These businesses, as a rough rule of thumb and depending upon the industry, are usually valued at 3x to 5x their average yearly EBITDA. So, a $30 million dollar privately held business would need an average yearly EBITDA of between $6 and $10 million per year ($6 million per year if the business valuation ratio would be 5x; $10 million if the business valuation ratio would be 3x).

Lifestyle businesses are undertaken by entrepreneurs who want to create their own jobs and/or to support the conscious lifestyle choices of the entrepreneur (hobbies, schedules, living location…). This type of company usually solely enters Defined Existing Markets. Many, if not most, of the entrepreneurs who start lifestyle businesses do not begin their business ventures with any particular exit strategy in mind. Instead, the primary financial goal of these entrepreneurs is usually to generate enough cash flow to support their lifestyle needs. These businesses usually seek capital from the founders, bootstrap financing, and the founders’ friends and family. Rapid scalability is usually not a primary goal for these business ventures.

The market size necessary to support a lifestyle business really depends upon the needs and wants of each individual entrepreneur. The variables used to determine a rough estimate of the minimum market size needed to support a lifestyle business are: 1) the entrepreneurs’ desired minimum yearly EBITDA (include the entrepreneurs’ salaries in with EBITDA), 2) the average EBITDA ratio for a firm competing within the industry you are proposing to enter, and 3) the entrepreneurs’ assumption of how much of their proposed business idea’s SAM they will be able to capture.

For example, if an entrepreneur’s goal is to earn at least $120,000 (in EBITDA and salary) from the lifestyle business per year, the average EBITDA ratio for the proposed business idea’s industry is 15 percent of annual revenue, and the entrepreneur assumes she can capture 10 percent of the SAM she proposes to enter, then the minimum necessary SAM size needed to support the business venture would be $8 million ($120,000 divided by a 15 percent EBITDA ratio divided by a 10 percent SAM penetration equals $8,000,000).

The following chart summarizes the rule-of-thumb market size needs of the business types analyzed above:

Targeting a specific audience is most effective strategy when creating a marketing campaign. The more specific of a customer base a campaign can reach, the more dollars per potential customer a campaign will make. This is why companies will allocate a large amount of resources in order to find the audience that they are looking for. By doing this, you can create a marketing budget as effectively as possible and maximize your results. Knowing or choosing exactly who you are getting your message to has proven to be the most effective method of forming a marketing campaign. Once you have identified your target audience, the hard part is figuring out how to reach it. Below, we will discuss ways to do so.

The goal of any marketing campaign is to give the most amount of information about a product or service to the prospective customer possible. The more the customer knows, the more likely they are to take action. The more that is known about that customer, the more likely it is that you can communicate that information effectively. Using information about your customer base will help you make connections that they can relate to and in turn, they will be more likely to respond to your campaigns call to action.

There are four main ways that are commonly used in identifying targeted markets.

Geographic:  This includes the location, the geographical size and makeup of the area and other environmental factors such as climate.

Demographics:  This includes age, gender, income, average family size, average education, and the types of jobs that are in the geographic area.

Psychographics:  This involves factors such as the personality that you area tends to take on, what and how people behave that live in that area and also factors that will affect the way your potential customers will use your product or service. Will they use it often not so often? Is it a necessity or luxury?

Behaviors:  This has more to do with how your potential customers will react to things such as price changes and price points, how they will react based on what information is given to them, and what types of marketing campaigns they are most likely to respond favorably to. All of these factors can be used to help determine how a population will respond to a specific marketing campaign. Likewise, you can a marketing campaign that will increase conversions based on the information gathered above.

One of the fundamentals of marketing focuses on the benefits to cost trade-off. Understanding how customers will weigh the potential benefits of a product or service versus the costs to obtain that product or service is critical when designing a marketing campaign. Ask yourself, how will your customer gain monetarily or in other ways from purchasing your product or service? Though it is not always achievable, satisfying this is the most effective ways to create sales.

To better understand how they will you this trade-off, ask yourself the following questions.

• How much will it save them? Is this a product that can potentially pay for itself?
• Are there any intangible benefits to this particular product or service that a customer may ignore or find appealing?
• Will this product or service save the customer money, time, effort, or resources?
• Will it increase the customer’s income, investments, future, or personal relationship will it reduce a customer’s expenses, taxes, liabilities, or work?
• Will it improve that customer’s abilities, productivity, appearance, confidence or peace of mind?

Understanding the effect that your product or service will have on the customer will serve as an invaluable tool when designing an effective marketing campaign.

As mentioned in the beginning, understanding, identifying and reaching a target audience is the most effective way creating a marketing campaign that will give you the best results possible relative to the budget and time you are allotted. Ignoring these factors can costs you money and can be the difference between a successful and unsuccessful marketing campaign.

It’s important to define the nature of your involvement, in both depth and scope, in the business you are founding.  An entrepreneur’s involvement in his own business can range from being a full-time manager/employee (active ownership) to that of a hands-off investor (passive ownership).

An active owner materially participates in the day-to-day activities of the business. Most business owners and entrepreneurs actively participate in their businesses in some way, shape or form. Many work full-time in their businesses as employee/managers, drawing both a paycheck and profits (if there are any).

The definition of a passive owner is a little trickier to nail down. A passive business owner does not participate in the day-to-day activities of the business he or she owns. The IRS states that passive income can only come from two possible sources: rental activities or “ trade or business activities in which you do not materially participate .” Within the context of entrepreneurial endeavors some examples of passive income are:

• Earnings from a business from which you, an owner, are not required to be directly involved with (neither labor nor day-to-day management)
• Rent from either tangible personal property or real estate
• Royalties from intellectual property (patent, copyright, trademark…)

Receiving passive income is delightful. The hard part is usually accumulating enough assets in the first place to begin receiving passive income from them (rents or passive business activities). Examples, where an entrepreneur can derive passive income from her investments, are:

• A landlord rents an apartment building to tenants and uses a real estate management company to collect rents and make repairs.
• A passive investor invests capital into a partnership where others manage the business, and in return for his contribution of capital, the passive investor receives a portion of the business’s profits.
• An entrepreneur builds a successful business from scratch. She then hires a manager to manage the day-to-day affairs of the business. She then receives the profits from her business even though she is no longer actively involved in it.

Most entrepreneurs who start businesses have one of two basic plans for their involvement in their enterprises.

1. The entrepreneur(s) plan to be heavily involved in the lean startup plan and operations over a period of a couple of years. Then, at some undetermined point in the future, they plan to hire a manager and then run the company as a passive investment.

2. The entrepreneur(s) are essentially creating a job for themselves. They plan on working in the enterprise as an open-ended, long-term committment.

Starting and/or running a business is a complex and daunting task. Identifying both potential roadblocks and opportunities well in advance is essential for businesses of any size to outmaneuver the competition and gain a foothold as a dominant market leader. But over one-half of all new businesses will fail within five years of their founding. The vast majority of all new businesses never achieve the financial success originally envisioned by the founders. These new businesses and start-ups begin with energetic enthusiasm, but unfortunately, many business plans fall short due to various reasons: lack of capital, a flawed business strategy, unrealistic expectations, or they lack the people with the required skills and expertise to succeed.

Business plans may be required for any number of reasons. Here are a few of the most common business plan needs.

• To Obtain Debt Financing . A company may be required by a bank or other financial institution to provide a detailed, professional business plan in order to secure debt financing. Examples would be bank business loans or a line of credit.
• To Obtain Equity Financing . Start-ups and other new businesses often must sell equity (stock or membership units) to investors to raise capital for new business ventures. Investors can range from friends and family to angel investors to venture capital firms.
• For Internal Company Planning . Companies often need business plans to compare the relative viability between competing potential business projects. This can give those companies a clearer perspective on where to invest limited resources within the organization.
• Joint Ventures and Partnerships . When entering a strategic JV or partnership with another firm, a business plan works to outline the objectives of the two firms working in tangent.
• Mergers, Acquisitions and Corporate Divestiture . Detailed plans are needed when businesses change hands in order to help new owners see details in the industry and the enterprise itself. An expert plan can also serve as part of the marketing material to get the business sold.

The reasons for creating a business plan can be as varied as the businesses themselves. Each plan requires a unique approach to the industry you are in, the market you intend to serve, and your financial needs. That’s where we come in.

Creating a professional business plan can help mitigate these risks, raise capital from potential investors and put the company on the path to success. A good business plan helps to focus an entrepreneur’s mind on accomplishing the tasks necessary to make his or her business succeed. A business plan is not a static document. It is a logical series of informed assumptions that are relevant at the time the plan is written. As soon as market and industry conditions begin to change (which usually happens about five minutes after the plan is written), the plan begins becoming obsolete. For the entrepreneur, the value in the business plan isn’t necessarily the plan itself. Instead, its real value lies in the process – the research, thought and inquiry – in creating it.

We will work with you from start to finish to create a professional business plan that will help you accomplish your objectives. We will ask the necessary questions, help you find the answers, and organize your ideas into a coherent plan. From researching your market and industry to producing realistic, justifiable pro forma financial statements (cash flow, income statements & balance sheet), we will craft a document that can help you accomplish your business objectives.

So your business needs a plan. The question is, what kind of plan does it need? Please check out our business plan menu options and pricing here.

Business Plan Review & Evaluation

If you already have a business plan and would like to have it reviewed by a professional business plan consultant, then this is the right service for you. We will review and critique your business plan with an investor’s eye, scrutinizing it for financial errors, grammatical errors, and weak or unrealistic assumptions. We will also point out what you did right. Our business plan review service is an efficient and affordable way to ensure that your business plan is as good as it can be. Our business plan review services are provided at a substantial discount to our normal hourly rates. Depending on your needs and budget, we offer three levels of business plan review services:

– We will spend 2 and 1/2 hours reviewing your materials. We will then provide a written evaluation and critique your plan and financial model.

– We will spend 30 minutes consulting with you on the telephone, answering any questions you may have and offering additional guidance.

– Optional: if you have made any changes to your business plan, based upon the evaluations and critiques we made in our first examination of your materials, we can offer subsequent reviews of the improvements you have made to your plan. In these subsequent reviews, we will spend up to 2 hours examining your materials again.

–  Flat Rate Price:  $297 for first review; $147 for subsequent reviews

• Once you place your order, we will provide instructions for sending us your business plan. Your plan must be sent to us in Microsoft Word format so we can use the Track Changes feature).
• Your review will generally take place within 3-5 business days of you sending us your business plan.
• When our review of your business plan is complete, we will send you the redlined/track changes version of your business plan with our critiques and suggestions.
• After you receive your reviewed/critiqued version of your business plan, we will work with you to schedule a mutually convenient time for the telephone portion of the review service.
• Optional Subsequent Reviews: After you make changes to the critiqued version of your business plan that we sent you, you may send us your new version for further critiques/comments. Please allow 3-5 business days to complete the evaluation.

– All information you provide will be treated confidentially.

– Fees are payable in advance and are non-refundable. If you decide you no longer want a business plan review after you have made payment, we will provide an equivalent amount of consulting firm services of your choosing (3 hours for the Standard Evaluation and Review).

– Once you submit your plan for review, please allow two business days to schedule an initial discussion so that we can understand your needs and tailor our review for your specific situation. This allows us to make sure you get the most out of this process.

– Depending on our existing workload, please allow up to 5 business days for us to complete the review following this initial discussion.

– All reviews are provided on a best efforts basis. You are ultimately responsible for the accuracy of the information in your business plan (and related materials).

– You agree to defend, indemnify, and hold us harmless from and against all third party claims, losses, or damage which we incur and which arise from or are attributable to our role in this business plan review.

We believe that we have the most transparent and customer friendly pricing strategy on the market.

For someone writing their first business plan, even for simple small businesses, the process can take upwards of 100 hours of time. Often, it takes more than 200 hours . For complex business plans (business plans for unproven business models and undefined markets), the process can often take more than 400 hours. Because we have considerable experience and skill at writing plans, we estimate that, on average, that we can complete an average business plan (depending upon its type, audience and complexity) in the range of 30 to 120 hours.

The range between 30 and 120 hours depends upon three general factors that contribute to a business plan’s complexity. The first factor is whether the plan is for a new business or a business already in existence, The second factor is whether the business’s industry and market are well defined (for example: dry cleaners, dollar stores, organic vegetable farms, family restaurants…) or if the market or industry is new and untested. The third factor is who is the audience for the business plan: equity investors, debt lenders or the internal management of an existing business.

Note:  unless your business idea is exploiting a new market or market niche, or offering customers a product or service that is radically different from what is currently offered to the market, then only on rare occasions will your business plan require longer than 70 hours to complete.

From three factors above, we can generally estimate the average number of hours the plan will take to complete, and therefore we can charge a base flat fee for the project. We Our base flat fee rates are the product of our estimated number of hours times our business plan writing hourly rate. For our business plan writing, we charge $75 per hour.

The business plans we produce fall into the following six general categories:

But often, due to unseen factors (a change in the business plan format scope and direction), a plan may take longer than the anticipated range. Often project extensions occur when it becomes necessary to modify or change the focus of the business plan due to unforeseeable factors (i.e. new market research, assumptions are proven wrong, the founders choose to shift or expand the scope of the business…). So, if your business plan takes longer than the anticipated number of hours to produce, we will charge you at only $20 per hour beyond the original estimated time frame.

This ensures the following:

– By using our pricing formula (flat fee plus $20 per hour beyond the estimated project timeframe) versus using only a fixed billable hour rate, we mitigate any incentive to “run the meter” and unnecessarily inflate the price of your solid business plan. Our goal is to maximize our income per hour for each plan that we produce. Therefore, if we end up going beyond the project’s estimated timeframe, this means we will be working at a significant discount ($20 per hour after the end of the project’s initial timeframe estimate).

– We use our pricing formula also gives us some measure of protection against unforeseen changes to the project’s scope or direction. Creating a lean business plan is a dynamic process. Information discovered or uncovered during the plan writing process can change the focus, scope and goals of the project. Also, by charging a modest hourly rate beyond a predetermined period, helps to focus and frame exactly what you want in your business plan.

– Ultimately, our system encourages both you and us to remain disciplined, efficient and to maximize the value of each other’s time.

For example:  You task us with writing a Type 1 business plan. The project takes 50 hours to complete because the scope changed in the middle of the project. Under these circumstances, the final price for the project would be the Type 1 business plan flat fee ($2,250) plus $20 per hour for every hour spent on the project over 30 hours (20 hours x $20/hour = $400). Therefore, the final complete price for the project would be $2,650 ($2,250 + $400 = $2,650).

• One half (50%) of the project’s flat fee price is required to be paid up front.
• 30% of the project flat fee is due upon completion of the business plan’s Executive Summary (the last plan component to be completed).
• Upon completion of the business plan’s final draft and its approval by the client, the remaining 20% of the project’s flat fee is due  plus  any extra hourly charges if the project goes beyond its initially estimated time.

Preparing an expert business plan can be extremely time-consuming. While the process of mastering and completing your plan may be helpful in understanding the business dynamics, corporate strategy and overall financial and marketing model, it can take you away from operational support that is vital for day-to-day operations. That is where our business planning services come into play. We help business owners in crafting expert MBA-level business plans for internal management buy-in as well as external business funding needs.

Companies often create business plans to obtain financing from venture capitalists, private equity groups and angel investors. Your particular plan will be dependent on the industry you play in, the financing you are seeking to obtain and your overall strategy for execution. Finding the key strengths, knowing potential flaws and being conversant with competitive forces in the industry are only a few of the necessary components of your completed plan. In other words, a full SWOT analysis may be necessary.

Regardless of whether you write a business plan yourself or outsource it to one of the expert members of our qualified MBA team, it is helpful to have a second pair of eyes to edit and provide constructive feedback. You plan and pitch will help to make or break your financing efforts. Don’t skimp on quality. You need to show off your financial health.

Being conversant in finance is certainly not a requirement to operate or be successful in business. Having great financials, including thoughtful projected and proforma financial statements is a must for any entrepreneur seeking to secure funding or internal management buy-in. We help to craft properly-structured financial plans for your business using historical data and realistic assumptions.

Obtain financing for your business with an professionally crafted financial plan as part of your overall strategy.

Business plans are great, but execution is the name of the game. Without a proper marketing plan coupled with flawless execution, your business may eventually disappear.

We work directly with the entrepreneurs themselves to craft detailed, specific and attainable goals and strategies to take your product or service to market. For the seasoned entrepreneur, this may be “old hat,” but having an expert business plan consultant in your corner is helpful to the proper execution of your overall strategy. While there are many business plan software providers on the market, you will still need the human-touch element to really make business plan sing.

If you are seeking funding from any number of sources or simply need help crafting a plan to help you take your business to the next level, we can help. Contact us today to find out more.

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How To Write A Business Plan: A Comprehensive Guide

The Startups Team

How To Write A Business Plan: A Comprehensive Guide

A comprehensive, step-by-step guide - complete with real examples - on writing business plans with just the right amount of panache to catch an investor's attention and serve as a guiding star for your business.

Introduction to Business Plans

So you've got a killer startup idea. Now you need to write a business plan that is equally killer.

You fire up your computer, open a Google doc, and stare at the blank page for several minutes before it suddenly dawns on you that,  Hm…maybe I have no idea how to write a business plan from scratch after all.

Don't let it get you down. After all, why would you know anything about business planning? For that very reason we have  4 amazing business plan samples  to share with you as inspiration.

For most founders,  writing a business plan  feels like the startup equivalent of homework. It's the thing you know you have to do, but nobody actually wants to do.

Here's the good news: writing a business plan doesn't have to be this daunting, cumbersome chore.

Once you understand the fundamental questions that your business plan should answer for your readers and how to position everything in a way that compels your them to take action, writing a business plan becomes way more approachable.

Before you set fingers to the keyboard to turn your business idea into written documentation of your organizational structure and business goals, we're going to walk you through the most important things to keep in mind (like company description, financials, and market analysis, etc.) and to help you tackle the writing process confidently — with plenty of real life business plan examples along the way to get you writing a business plan to be proud of!

Keep It Short and Simple.

There's this old-school idea that business plans need to be ultra-dense, complex documents the size of a doorstop because that's how you convey how serious you are about your company.

Not so much.

Complexity and length for complexity and length's sake is almost never a good idea, especially when it comes to writing a business plan. There are a couple of reasons for this.

1. Investors Are Short On Time

If your chief goal is using your business plan to secure funding, then it means you intend on getting it in front of an investor. And if there's one thing investors are, it's busy. So keep this in mind throughout writing a business plan.

Investors wade through hundreds of business plans a year. There's no version of you presenting an 80-page business plan to an investor and they enthusiastically dive in and take hours out of their day to pour over the thing front to back.

Instead, they're looking for you to get your point across as quickly and clearly as possible so they can skim your business plan and get to the most salient parts to determine whether or not they think your opportunity is worth pursuing (or at the very least initiating further discussions).

You should be able to refine all of the key value points that investors look for to 15-20 pages (not including appendices where you will detail your financials). If you find yourself writing beyond that, then it's probably a case of either over explaining, repeating information, or including irrelevant details in your business plan (you don't need to devote 10 pages to how you're going to set up your website, for example).

Bottom line: always be on the lookout for opportunities to “trim the fat" while writing a business plan (and pay special attention to the executive summary section below), and you'll be more likely to secure funding.

2. Know Your Audience

If you fill your business plan with buzzwords, industry-specific jargon or acronyms, and long complicated sentences, it might make sense to a handful of people familiar with your niche and those with superhuman attention spans (not many), but it alienates the vast majority of readers who aren't experts in your particular industry. And if no one can understand so much as your company overview, they won't make it through the rest of your business plan.

Your best bet here is to use simple, straightforward language that's easily understood by anyone — from the most savvy of investor to your Great Aunt Bertha who still uses a landline.

How To Format Your Business Plan

You might be a prodigy in quantum mechanics, but if you show up to your interview rocking cargo shorts and lime green Crocs, you can probably guess what the hiring manager is going to notice first.

In the same way,  how  you present your business plan to your readers equally as important as what you present to them. So don't go over the top with an extensive executive summary, or get lazy with endless bullet points on your marketing strategy.

If your business plan is laden with inconsistent margins, multiple font types and sizes, missing headings and page numbers, and lacks a table of contents, it's going to create a far less digestible reading experience (and totally take away from your amazing idea and hours of work writing a business plan!)

While there's no one  right  way to format your business plan, the idea here is to ensure that it presents professionally. Here's some easy formatting tips to help you do just that.

If your margins are too narrow, it makes the page look super cluttered and more difficult to read.

A good rule of thumb is sticking to standard one-inch margins all around.

Your business plan is made up of several key sections, like chapters in a book.

Whenever you begin a section (“Traction” for example) you'll want to signify it using a header so that your reader immediately knows what to expect from the content that follows.

This also helps break up your content and keep everything nice and organized in your business plan.

Subheadings

Subheadings are mini versions of headings meant to break up content within each individual section and capture the attention of your readers to keep them moving down the page.

In fact, we're using sub-headers right now in this section for that very purpose!

Limit your business plan to two typefaces (one for headings and one for body copy and subheadings, for example) that you can find in a standard text editor like Microsoft Word or Google Docs.

Only pick fonts that are easy to read and contain both capital and lowercase letters.

Avoid script-style or jarring fonts that distract from the actual content. Modern, sans-serif fonts like Helvetica, Arial, and Proxima Nova are a good way to go.

Keep your body copy between 11 and 12-point font size to ensure readability (some fonts are more squint-inducing than others).

You can offset your headings from your body copy by simply upping the font size and by bolding your subheadings.

Sometimes it's better to show instead of just tell.

Assume that your readers are going to skim your plan rather than read it word-for-word and treat it as an opportunity to grab their attention with color graphics, tables, and charts (especially with financial forecasts), as well as product images, if applicable.

This will also help your reader better visualize what your business model is all about.

Need some help with this?

Our  business planning wizard  comes pre-loaded with a modular business plan template that you can complete in any order and makes it ridiculously easy to generate everything you need from your value proposition, mission statement, financial projections, competitive advantage, sales strategy, market research, target market, financial statements, marketing strategy, in a way that clearly communicates your business idea.

Refine Your Business Plans. Then Refine Them Some More.

Your business isn't static, so why should your business plan be?

Your business strategy is always evolving, and so are good business plans. This means that the early versions of your business plans probably won't (and shouldn't be) your last. The details of even even the best business plans are only as good as their last update.

As your business progresses and your ideas about it shift, it's important revisit your business plan from time to time to make sure it reflects those changes, keeping everything as accurate and up-to-date as possible. What good is market analysis if the market has shifted and you have an entirely different set of potential customers? And what good would the business model be if you've recently pivoted? A revised business plan is a solid business plan. It doesn't ensure business success, but it certainly helps to support it.

This rule especially holds true when you go about your market research and learn something that goes against your initial assumptions, impacting everything from your sales strategy to your financial projections.

At the same time, before you begin shopping your business plan around to potential investors or bankers, it's imperative to get a second pair of eyes on it after you've put the final period on your first draft.

After you run your spell check, have someone with strong “English teacher skills” run a fine-tooth comb over your plan for any spelling, punctuation, and grammatical errors you may have glossed over. An updated, detailed business plan (without errors!) should be constantly in your business goals.

More than that, your trusty business plan critic can also give you valuable feedback on how it reads from a stylistic perspective. While different investors prefer different styles, the key here is to remain consistent with your audience and business.

Writing Your Business Plan: A Section-By-Section Breakdown

We devoted an entire article carefully breaking down the  key components of a business plan  which takes a comprehensive look of what each section entails and why.

If you haven't already, you should check that out, as it will act as the perfect companion piece to what we're about to dive into in a moment.

For our purposes here, we're going to look at a few real world business plan examples (as well as one of our own self-penned “dummy” plans) to give you an inside look at how to position key information on a section-by-section basis.

1. Executive Summary

Quick overview.

After your Title Page — which includes your company name, slogan (if applicable), and contact information — and your Table of Contents, the Executive Summary will be the first section of actual content about your business.

The primary goal of your Executive Summary is to provide your readers with a high level overview of your business plan as a whole by summarizing the most important aspects in a few short sentences. Think of your Executive Summary as a kind of “teaser” for your business concept and the information to follow — information which you will explain in greater detail throughout your plan. This isn't the place for your a deep dive on your competitive advantages, or cash flow statement. It is an appropriate place to share your mission statement and value proposition.

Executive Summary Example

Here's an example of an Executive Summary taken from a sample business plan written by the Startups.com team for a fictional company called Culina. Here, we'll see how the Executive Summary offers brief overviews of the  Product ,  Market Opportunity ,  Traction , and  Next Steps .

Culina Tech specializes in home automation and IoT technology products designed to create the ultimate smart kitchen for modern homeowners.

Our flagship product, the Culina Smart Plug, enables users to make any kitchen appliance or cooking device intelligent. Compatible with all existing brands that plug into standard two or three-prong wall outlets, Culina creates an entire network of Wi-Fi-connected kitchen devices that can be controlled and monitored remotely right from your smartphone.

The majority of US households now spend roughly 35% of their energy consumption on appliances, electronics, and lighting.  With the ability to set energy usage caps on a daily, weekly or monthly basis, Culina helps homeowners stay within their monthly utility budget through more efficient use of the dishwasher, refrigerator, freezer, stove, and other common kitchen appliances.

Additionally, 50.8% of house fires are caused in the kitchen — more than any other room in the home — translating to over $5 billion in property damage costs per year.  Culina provides the preventative intelligence necessary to dramatically reduce kitchen-related disasters and their associated costs and risk of personal harm.

Our team has already completed the product development and design phase, and we are now ready to begin mass manufacturing. We've also gained a major foothold among consumers and investors alike, with 10,000 pre-ordered units sold and $5 million in investment capital secured to date.

We're currently seeking a $15M Series B capital investment that will give us the financial flexibility to ramp up hardware manufacturing, improve software UX and UI, expand our sales and marketing efforts, and fulfill pre-orders in time for the 2018 holiday season.

2. Company Synopsis

Your Company Synopsis section answers two critically important questions for your readers: What painful  PROBLEM  are you solving for your customers? And what is your elegant  SOLUTION  to that problem? The combination of these two components form your value proposition.

Company Synopsis Example

Let's look at a real-life company description example from  HolliBlu * — a mobile app that connects healthcare facilities with local skilled nurses — to see how they successfully address both of these key aspects.  *Note: Full disclosure; Our team worked directly with this company on their business plan via Fundable.

Notice how we get a crystal clear understanding of why the company exists to begin with when they set up the  problem  — that traditional nurse recruitment methods are costly, inconvenient, and time-consuming, creating significant barriers to providing quality nursing to patients in need.

Once we understand the painful problem that HolliBlu's customers face, we're then directly told how their  solution  links back directly to that problem — by creating an entire community of qualified nurses and directly connecting them with local employers more cost-effectively and more efficiently than traditional methods.

3. Market Overview

Your Market Overview provides color around the industry that you will be competing in as it relates to your product/service.

This will include statistics about industry size, [growth](https://www.startups.com/library/expert-advice/the-case-for-growing-slowly) rate, trends, and overall outlook. If this part of your business plan can be summed up in one word, it's  research .

The idea is to gather as much raw data as you can to make the case for your readers that:

This is a market big enough to get excited about.

You can capture a big enough share of this market to get excited about.

Target Market Overview Example

Here's an example from HolliBlu's business plan:

HolliBlu's Market Overview hits all of the marks — clearly laying out the industry size ($74.8 billion), the Total Addressable Market or TAM (3 million registered nurses), industry growth rate (581,500 new RN jobs through 2018; $355 billion by 2020), and industry trends (movement toward federally-mandated compliance with nurse/patient ratios, companies offering sign-on bonuses to secure qualified nurses, increasing popularity of home-based healthcare).

4. Product (How it Works)

Where your Company Synopsis is meant to shed light on why the company exists by demonstrating the problem you're setting out to solve and then bolstering that with an impactful solution, your Product or How it Works section allows you to get into the nitty gritty of how it actually delivers that value, and any competitive advantage it provides you.

Product (How it Works) Example

In the below example from our team's Culina sample plan, we've divided the section up using subheadings to call attention to product's  key features  and how it actually works from a user perspective.

This approach is particularly effective if your product or service has several unique features that you want to highlight.

5. Revenue Model

Quite simply, your Revenue Model gives your readers a framework for how you plan on making money. It identifies which revenue channels you're leveraging, how you're pricing your product or service, and why.

Revenue Model Example

Let's take a look at another real world business plan example with brewpub startup  Magic Waters Brewpub .*

It can be easy to get hung up on the financial aspect here, especially if you haven't fully developed your product yet. And that's okay. *Note: Full disclosure; Our team worked directly with this company on their business plan via Fundable.

The thing to remember is that investors will want to see that you've at least made some basic assumptions about your monetization strategy.

6. Operating Model

Your Operating Model quite simply refers to how your company actually runs itself. It's the detailed breakdown of the processes, technologies, and physical requirements (assets) that allow you to deliver the value to your customers that your product or service promises.

Operating Model Example

Let's say you were opening up a local coffee shop, for example. Your Operating Model might detail the following:

Information about your facility (location, indoor and outdoor space features, lease amount, utility costs, etc.)

The equipment you need to purchase (coffee and espresso machines, appliances, shelving and storage, etc.) and their respective costs.

The inventory you plan to order regularly (product, supplies, etc.), how you plan to order it (an online supplier) and how often it gets delivered (Mon-Fri).

Your staffing requirements (including how many part or full time employees you'll need, at what wages, their job descriptions, etc.)

In addition, you can also use your Operating Model to lay out the ways you intend to manage the costs and efficiencies associated with your business, including:

The  Critical Costs  that make or break your business. In the case of our coffee shop example, you might say something like,

“We're estimating the marketing cost to acquire a customer is going to be $25.  Our average sale is $45.  So long as we can keep our customer acquisition costs below $25 we will have enough margin to grow with.”

Cost Maturation & Milestones  that show how your Critical Costs might fluctuate over time.

“If we sell 50 coffees a day, our average unit cost will be $8 on a sale of $10.  At that point we're barely breaking even. However as we scale up to 200 coffees a day, our unit costs drop significantly to $4, creating a 100% increase in net income.”

Investment Costs  that highlight strategic uses of capital that will have a big Return on Investment (ROI) later.

“We're investing $100,000 into a revolutionary new coffee brewing system that will allow us to brew twice the amount our current output with the same amount of space and staff.”

Operating Efficiencies  explaining your capability of delivering your product or service in the most cost effective manner possible while maintaining the highest standards of quality.

“By using energy efficient Ecoboilers, we're able to keep our water hot while minimizing the amount of energy required. Our machines also feature an energy saving mode. Both of these allow us to dramatically cut energy costs.”

7. Competitive Analysis

Like the Market Overview section, you want to show your readers that you've done your homework and have a crazy high level of awareness about your current competitors or any potential competitors that may crop up down the line for your given business model.

When writing your Competitive Analysis, your overview should cover  who  your closest competitors are, the chief  strengths  they bring to the table, and their biggest  weaknesses .

You'll want to identify at least 3 competitors — either direct, indirect, or a combination of the two. It's an extremely important aspect of the business planning process.

Competition Analysis Example

Here's an example of how HolliBlu lays out their Competitive Analysis section for just one of their competitors, implementing each of the criteria noted above:

8. Customer Definition

Your Customer Definition section allows you to note which customer segment(s) you're going after, what characteristics and habits each customer segment embodies, how each segment uniquely benefits from your product or service, and how all of this ties together to create the ideal portrait of an actual paying customer, and how you'll cultivate and manage customer relationships.

Customer Definition Example

HolliBlu's Customer Definition section is effective for several reasons. Let's deconstruct their first target market segment, hospitals.

What's particularly successful here is that we are explained why hospitals are optimal buyers.

They accomplish this by harkening back to the central problem at the core of the opportunity (when hospitals can't supply enough staff to meet patient demands, they have to resort on costly staffing agencies).

On top of that, we are also told how  big  of an opportunity going after this customer segment represents (5,534 hospitals in the US).

This template is followed for each of the company's 3 core customer segments. This provides consistency, but more than that, it emphasizes how diligent research reinforces their assumptions about who their customers are and why they'd open their wallets. Keep all of this in mind when you are write your own business plan.

9. Customer Acquisition

Now that you've defined who your customers are for your readers, your Customer Acquisition section will tell them what marketing and sales strategy and tactics you plan to leverage to actually reach the target market (or target markets) and ultimately convert them into paying customers.

marketing Strategy Example

Similar to the exercise you will go through with your Revenue Model, in addition to identifying  which  channels you're pursuing, you'll also want to detail all of relevant costs associated with your customer acquisition channels.

Let's say you spent $100 on your marketing plan to acquire 100 customers during 2018. To get your CAC, you simply divide the number of customers acquired by your spend, giving you a $1.00 CAC.

10. Traction

This one's huge. Traction tells investors one important thing: that you're business has momentum. It's evidence that you're making forward progress and hitting milestones. That things are happening. It's one of the most critical components of a successful business plan.

Why is this so important? Financial projections are great and all, but if you can prove to investors that your company's got legs before they've even put a dime into it, then it will get them thinking about all the great things you'll be able to accomplish when they do bankroll you.

Traction Example

In our Culina Traction section, we've called attention to several forms of traction, touching on some of the biggest ones that you'll want to consider when writing your own plan.

Have I built or launched my product or service yet?

Have I reached any customers yet?

Have I generated any revenue yet?

Have I forged any strategic industry relationships that will be instrumental in driving growth?

The key takeaway here: the more traction you can show, the more credibility you build with investors. After all, you can't leave it all on market analysis alone.

11. Management Team

Here's what your Management Team section isn't: it's not an exhaustive rundown of each and every position your team members have held over the course of their lives.

Instead, you should tell investors which aspects of your team's experience and expertise directly translates to the success of  this  company and  this  industry.

In other words, what applicable, relevant background do they bring to the table?

Management Team Example

Let's be real. The vast majority of startup teams probably aren't stacked with Harvard and Stanford grads. But the thing to home in on is how the prior experience listed speaks directly to how it qualifies that team member's current position.

The word of the day here is relevancy. If it's not relevant, you probably don't need to include it in your typical business plan.

12. Funding

Funding overview.

The ask! This is where you come out and, you guessed it,  ask  your investors point blank how much money you need to move your business forward, what specific milestones their investment will allow you to reach, how you'll allocate the capital you secure, and what the investor will get in exchange for their investment.

You can also include information about your  exit strategy  (IPO, acquisition, merger?).

Funding Example

While we've preached against redundancy in your business plan, an exception to the rule is using the Funding section to offer up a very brief recap that essentially says, “here are the biggest reasons you should invest in my company and why it will ultimately benefit you.”

13. Financials

Spreadsheets and numbers and charts, oh my! Yes, it's everybody's “favorite” business plan section: Financials.

Your Financials section will come last and contain all of the forecasted numbers that say to investors that this is a sound investment. This will include things like your sales forecast, expense budget, and break-even analysis. A lot of this will be assumptions, or estimates.

The key here is keeping those estimates as realistic as humanly possible by breaking your figures into components and looking at each one individually.

Financials Example

The balance sheet above illustrates the business' estimated net worth over a three-year period by summarizing its assets (tangible objects owned by the company), liabilities (debt owed to a creditor of the company), and shareholders' equity (source of financing used to fund the assets).

In plain words, the balance sheet is basically a snapshot of your business' financial status by laying out what you own and owe, helping investors determine the level of risk involved and giving them a good understanding of the financial health of the business.

If you're looking to up your game from those outdated Excel-style spreadsheets,  our business planning software  will help you create clean, sleek, modern financial reports the modern way. Plus, it's as easy to use as it is attractive to look at. You might even find yourself enjoying financial projections, building a cash flow statement, and business planning overall.

You've Got This!

You've committed to writing your business plan and now you've got some tricks of the trade to help you out along the way. Whether you're applying for a business loan or seeking investors, your well-crafted business plan will act as your Holy Grail in helping take your business goals to the next plateau.

This is a ton of work. It's not a few hours and a free business plan template. It's not just a business plan software. We've been there before. Writing your [business plan](https://www.startups.com/library/expert-advice/top-4-business-plan-examples) is just one small step in startup journey. There's a whole long road ahead of you filled with a marketing plan, investor outreach, chasing venture capitalists, actually getting funded, and growing your business into a successful company.

And guess what? We've got helpful information on all of it — and all at your disposal! We hope this guides you confidently on how to write a business plan worth bragging about.

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Writing an Investor-Ready Business Plan

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Crafting an investor-ready business plan is a pivotal step for entrepreneurs aiming to secure funding and propel their ventures forward. This comprehensive document not only outlines your business's vision but also delves into critical components such as market analysis , financial projections , and a persuasive value proposition . By mastering these essential elements, you can capture the attention of potential investors and set the stage for success.

What are the essential components of an investor-ready business plan?

Executive summary.

The executive summary is the first thing investors will read, and it should succinctly convey the essence of your business idea. This section serves as a snapshot of your entire business plan, highlighting key elements such as your mission statement, the problem you aim to solve, and your proposed solution. An effective executive summary should not exceed two pages and must captivate the reader’s interest immediately.

Market Analysis

A comprehensive market analysis is crucial for an investor-ready business plan. This section must include:

• Target Market Demographics: Define who your customers are, including age, gender, income level, and preferences.
• Market Size Analysis: Estimate the size of your target market and growth potential.
• Market Research Techniques: Utilize surveys, focus groups, and industry reports to gather relevant data.
• Competitive Advantage Analysis: Identify your competitors and analyze their strengths and weaknesses.

Providing solid data and insights will help investors understand your market position and potential for growth.

Business Model and Revenue Projections

The business model outlines how your business intends to make money. It should explain your product or service offerings and pricing strategy. In addition, include detailed revenue projections, such as:

• Sales forecasts based on customer acquisition strategies.
• Pricing models and expected profit margins.
• Projected customer retention rates.

Investors will look for realistic financial projections that demonstrate a clear path to profitability.

Marketing and Sales Strategy

Your marketing and sales strategy should detail how you plan to attract and retain customers. This section should cover:

• Effective Marketing Strategy: Outline your marketing channels, including digital marketing, social media, and traditional marketing methods.
• Customer Acquisition Strategy: Describe tactics for acquiring new customers and achieving sales targets.
• Marketing Budget Allocation: Provide a budget for your marketing initiatives and expected ROI.

Clearly articulating your strategy will assure investors that you have a solid plan for generating sales and building brand awareness.

Financial Projections and Funding Requirements

This section is critical for investors as it provides an overview of your financial health and future needs. Include:

• Profit and Loss Forecast Examples: Present a three to five-year profit and loss forecast, detailing expected revenues and expenses.
• Cash Flow Statements: Project cash inflows and outflows to demonstrate financial viability.
• Break-even Analysis: Indicate when your business will become profitable.
• Business Funding Requirements: Clearly state how much capital you need and how you plan to use it.

Investors will expect you to provide financial projections for investors that are realistic and backed by thorough research.

• Keep your executive summary concise and impactful to grab attention.
• Use visuals where appropriate to enhance your market analysis.
• Regularly update your financial projections based on new data and trends.

How do you define your business's value proposition?

Identifying unique selling points.

To successfully create an investor-ready business plan, start by identifying your unique selling points (USPs) . These are the specific features or benefits that distinguish your product or service from competitors. Consider what makes your offering special:

• Is it a new technology or a unique feature?
• Does it solve a specific problem more effectively than alternatives?
• Is it priced more competitively?

Highlighting these USPs in your business plan presentation can capture the attention of potential investors and demonstrate why your venture is worth funding.

Analyzing competitive advantages

Next, conduct a competitive advantage analysis . Understand where you stand in the market landscape. This involves:

• Researching your competitors and their offerings
• Identifying gaps in their services that you can fill
• Analyzing your operational strengths, such as superior customer service, innovative processes, or strategic partnerships

Articulating these advantages in your investor-ready business plan will help investors see the long-term viability of your business model.

Understanding customer pain points

Understanding your target market's pain points is crucial for defining your value proposition. These pain points are the specific issues or challenges your customers face that your product or service can address. To gain insights:

• Engage in direct conversations with potential customers to gather feedback.
• Utilize market research for business plan development to identify common frustrations.
• Analyze online reviews and feedback on similar products.

By addressing these pain points in your business plan, you can effectively align your offerings with market needs, increasing your appeal to investors.

Crafting a compelling narrative

A compelling narrative is essential for your investor pitch deck. This narrative should weave together your USPs, competitive advantages, and customer pain points into a coherent story that resonates with your audience. Consider these elements:

• Start with the problem: clearly articulate the market need.
• Introduce your solution: describe how your product or service addresses this need.
• Highlight success stories or testimonials to build credibility.

Crafting a well-defined narrative will not only help investors understand the value your business brings but also engage them emotionally.

Aligning value with market needs

Finally, ensure that your value proposition aligns with the current market needs and trends. Conduct thorough market analysis techniques to:

• Identify the size and dynamics of your target market demographics.
• Evaluate industry trends that may affect your business model and revenue projections.
• Adjust your offerings based on emerging consumer preferences or technological advancements.

By aligning your value proposition with market needs, you enhance the likelihood of investor interest and support for your business.

• Regularly revisit and refine your value proposition as market conditions change to remain relevant.
• Utilize surveys or focus groups to gain deeper insights into customer perceptions and pain points.
• Consider developing a prototype or minimum viable product (MVP) to showcase your solution during investor meetings.

What market research is necessary to support your business plan?

Identifying target demographics.

Understanding your target market demographics is crucial for crafting an effective marketing strategy. This includes identifying the age, gender, income level, education, and geographic location of your potential customers. By honing in on these characteristics, you can tailor your messaging and product offerings to meet the specific needs of your audience.

Evaluating industry trends

Conducting a thorough evaluation of industry trends will provide insight into the current market landscape and future opportunities. Analyzing trends helps you anticipate shifts in consumer behavior and adapt your business model accordingly. Utilize resources such as industry reports, articles, and expert interviews to gather relevant data.

Assessing competitor analysis

Performing a competitive advantage analysis is essential to understand how your business stacks up against others in the market. Identify your direct competitors and analyze their strengths, weaknesses, pricing strategies, and customer reviews. This analysis will help you identify gaps in the market that your business can exploit, as well as potential threats to your success.

Gathering customer feedback

Collecting customer feedback is invaluable for validating your business concept and refining your offerings. Engage with potential customers through surveys, interviews, and focus groups to gain insights into their preferences and pain points. This direct input can inform your value proposition definition and help you create products or services that resonate with your audience.

Quantifying market size and growth potential

To attract business funding requirements , it’s essential to quantify the market size and growth potential. Use market size analysis techniques to estimate the total addressable market (TAM) for your product or service. Consider factors such as current market demand, projected growth rates, and economic conditions that may impact your industry. This data will be crucial for your financial projections for investors.

• Utilize online tools and databases to gather demographic and industry data efficiently.
• Regularly review and update your market research to stay current with evolving trends.
• Engage with industry experts to gain deeper insights into market dynamics.

How should you outline your marketing and sales strategy?

Defining marketing channels.

Identifying the right marketing channels is crucial for reaching your target audience effectively. This involves exploring various platforms and methods to promote your product or service. Consider the following channels:

• Social media platforms (e.g., Facebook, Instagram, LinkedIn)
• Email marketing
• Content marketing (blogs, videos, podcasts)
• Search engine optimization (SEO)
• Pay-per-click advertising (Google Ads, social media ads)
• Traditional media (print ads, radio, TV)

Evaluate where your target market demographics spend their time and tailor your approach accordingly to ensure optimal engagement.

Setting sales goals and KPIs

Establishing clear sales goals and key performance indicators (KPIs) is essential for measuring your marketing success. SMART goals (Specific, Measurable, Achievable, Relevant, Time-bound) are a great framework to follow. Examples of sales goals include:

• Increasing monthly sales by 20% within six months
• Acquiring 100 new customers by the end of the quarter
• Improving customer retention rates by 15% over the next year

KPIs should be aligned with these goals, allowing you to track progress and make informed adjustments to your strategy.

Detailing customer acquisition tactics

Your customer acquisition strategy should be comprehensive, outlining how you plan to attract and convert potential customers. Consider the following tactics:

• Creating targeted advertising campaigns
• Implementing referral programs
• Utilizing influencer marketing
• Offering promotions and discounts
• Engaging in public relations efforts

Documenting these tactics in your investor-ready business plan will demonstrate your proactive approach to generating revenue.

Crafting a customer retention plan

Acquiring customers is only part of the equation; retaining them is equally important. A successful customer retention plan includes strategies to keep customers engaged and satisfied. Some effective strategies are:

• Implementing loyalty programs
• Providing exceptional customer service
• Regularly soliciting customer feedback
• Offering personalized experiences
• Communicating consistently through newsletters and updates

By focusing on retention, you can enhance customer lifetime value and reduce churn rates, ultimately improving your financial projections for investors.

• Regularly review and adjust your marketing budget allocation based on performance metrics to optimize spending.
• Utilize market research for business plan components to stay informed about changing customer preferences and industry trends.

Budgeting for marketing initiatives

Creating a detailed budget for your marketing initiatives is vital for controlling costs and maximizing return on investment. Consider the following when budgeting:

• Determine your overall marketing budget as a percentage of projected revenue.
• Allocate funds across various marketing channels according to their effectiveness.
• Include costs for tools and software that will enhance your marketing efforts.
• Factor in potential unexpected expenses and set aside a contingency fund.

A well-planned marketing budget will not only guide your spending but also demonstrate to investors that you have a solid understanding of your business funding requirements.

What financial projections should be included in the business plan?

Three to five-year profit and loss forecast.

A profit and loss forecast is a crucial component of an investor-ready business plan. This projection outlines expected revenues and expenses over a three to five-year period, enabling potential investors to gauge the viability and profitability of your business model. It should include:

• Revenue streams from various products or services
• Fixed and variable costs associated with running the business
• Net profit margins and overall profitability

Make sure to base your profit and loss projections on realistic assumptions derived from market research for business plan and historical data, if available.

Cash flow statements

Cash flow statements provide insights into the liquidity of your business. They detail the inflows and outflows of cash, helping to assess whether the company can meet its short-term obligations. The cash flow statement should include:

• Operating activities, such as cash received from customers and cash paid to suppliers
• Investing activities, like purchases of equipment or investments
• Financing activities, including loans taken and repayments made

Accurate cash flow projections are crucial for managing your business funding requirements effectively.

Balance sheet projections

Balance sheet projections reflect the financial position of your business at a specific point in time, showing assets, liabilities, and equity. Essential elements include:

• Current and long-term assets, such as cash, inventory, and property
• Liabilities, including accounts payable and long-term debts
• Shareholder equity, showing the net worth of the company

This projection helps investors understand the overall financial health and stability of your business.

Break-even analysis

A break-even analysis is essential for determining when your business will start to generate profit. It calculates the sales volume at which total revenues equal total costs. Key components of this analysis include:

• Fixed costs, which remain constant regardless of sales
• Variable costs, which fluctuate with production volume
• Sales price per unit and the contribution margin

This analysis is particularly useful in convincing investors of the potential for profitability within a realistic timeframe.

Sensitivity analysis for different scenarios

Sensitivity analysis tests how changes in key variables can impact your financial projections. It allows you to present various scenarios—such as best case, worst case, and most likely case—demonstrating the robustness of your business model and revenue projections . Consider factors like:

• Changes in market demand
• Fluctuations in costs
• Variations in pricing strategies

This analysis not only prepares you for potential challenges but also instills confidence in investors regarding your ability to navigate uncertainties.

• Ensure your financial projections are backed by thorough market analysis techniques and realistic assumptions.
• Regularly update financial forecasts to reflect changes in the business environment or market conditions.
• Utilize software tools for financial modeling to improve accuracy and professionalism in presentations.

How can you effectively present your business plan to investors?

Structuring the presentation for clarity.

When presenting your investor-ready business plan, a clear structure is paramount. Begin with an engaging executive summary that encapsulates the essence of your business. Follow this with sections dedicated to market analysis, business model and revenue projections, and your marketing strategy. Each section should logically flow into the next, guiding potential investors through your plan in a coherent manner.

Utilizing visual aids and data visualizations

Visual aids can significantly enhance your presentation, making complex information more accessible. Utilize charts, graphs, and infographics to illustrate key points, such as market size analysis and financial projections for investors. These visuals not only capture attention but also help convey your message more effectively, allowing investors to grasp your business model and competitive advantage analysis at a glance.

Practicing your pitch delivery

Effective delivery can make or break your presentation. Practice your pitch multiple times, focusing on your tone, pace, and body language. Rehearsing will help you convey confidence and passion for your business. Consider recording yourself or presenting in front of a small audience to receive constructive feedback. This preparation ensures you can articulate your value proposition definition with clarity and conviction.

Anticipating and preparing for questions

Investors will likely have questions about various aspects of your business plan. Anticipate these inquiries by reviewing common investor concerns, such as your customer acquisition strategy and financial forecasting for startups and investors. Prepare thorough responses and consider creating a FAQ section in your presentation to address potential queries proactively.

Highlighting key metrics and milestones

Throughout your presentation, emphasize key metrics and milestones that demonstrate your business's potential for success. Highlight critical elements such as:

• Projected revenue growth over the next three to five years
• Customer retention strategies and their expected impact
• Market research for business plan insights, including target market demographics
• Key partnerships or contracts that validate your business model

These metrics not only showcase your understanding of the business landscape but also provide tangible evidence to support your claims, making your presentation more compelling.

• Keep your slides concise. Aim for a maximum of six bullet points per slide to maintain focus.
• Engage with your audience. Encourage questions during or after your presentation to foster dialogue.
• Utilize storytelling techniques to make your presentation memorable. Share personal anecdotes or case studies that relate to your business.

What common mistakes should you avoid in your business plan?

Lack of clarity and focus.

One of the most detrimental mistakes in crafting an investor-ready business plan is a lack of clarity and focus. Investors need to easily understand your business model and how it aligns with your market goals. If your business plan components are muddled or overly complicated, it can lead to confusion and disinterest.

To avoid this pitfall:

• Use straightforward language and keep your sentences concise.
• Clearly define your value proposition definition and ensure it resonates throughout the document.

Overly optimistic financial projections

While it’s essential to present a positive outlook, overly optimistic financial projections can undermine your credibility. Investors are wary of inflated numbers that are not backed by realistic assumptions. Instead, provide financial projections for investors that reflect achievable goals based on thorough market research for business plan.

To mitigate this risk:

• Base your financial forecasts on historical data and realistic market size analysis.
• Include a range of scenarios in your profit and loss forecast examples to show potential variance.

Ignoring competition and market threats

Another common mistake is failing to conduct a thorough competitive advantage analysis. Investors want to know how you plan to position your business in the market and what threats you might face. Ignoring these factors can lead to a lack of confidence in your business plan.

To address this issue:

• Conduct a detailed competitor analysis to identify your market position.
• Discuss how your effective marketing strategy will differentiate your offering from competitors.

Failing to address potential risks and challenges

Investors appreciate transparency. Failing to acknowledge potential risks and challenges in your investor pitch deck can raise red flags. A well-rounded business plan should include a risk assessment that considers various scenarios.

To effectively tackle this challenge:

• Outline possible risks related to market fluctuations, operational challenges, or financial constraints.
• Present strategies for mitigating these risks, reinforcing your preparedness.

Neglecting to update and revise the plan regularly

Your business plan is a living document, and neglecting to update it regularly can lead to outdated information that can mislead investors. Regular revisions are crucial, especially as you gather new data from ongoing market research or as your business evolves.

To keep your plan relevant:

• Schedule periodic reviews of your business plan components to ensure accuracy.
• Adjust your financial projections for investors based on the latest market trends and performance metrics.
• Choosing a selection results in a full page refresh.

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How to Write a Business Plan For Investors (That They Will Love)

• August 22, 2022

If you’re an entrepreneur who likes to forge ahead without putting too much thought into the future, writing a business plan is crucial to starting your company.

After all, it’s hard to get funding without one, and if you fail to provide investors with all the information they need upfront, they might not want to invest in your company at all.

What is a Business Plan?

A business plan is a written document that lists business goals, stages of business development, and how you tend to achieve these goals and objectives. This document provides a snapshot of your business to potential investors. In modern terms, we can also call it a pitch deck.

Since a business plan is the foundation of your business, it will determine how investors perceive your business and provide you with the necessary funding to kickstart your idea.

If you want your business plan to be compelling that investors can’t say no , check out these seven steps to writing a business plan that investors will love.

Step 1: Research your industry

When it comes to writing a business plan, research is key. You need to have a clear understanding of your industry, your target market, and your competition.

Entrepreneurs tend to focus on the “right format” for writing a business plan. However, there is no such thing as a right or wrong business plan format. What matters is how you cover key aspects of your startup in the plan.

This will not only help you create a more comprehensive business plan but will also give you the opportunity to address any potential concerns that investors may have.

Step 2: Define your goals

When you’re thinking about your business goals, it’s important to be REALISTIC . Write down what you want to achieve in the short-term and long-term, and make sure that your goals are specific, measurable, achievable, relevant, and time-bound (SMART) .

Doing this will give you a clear idea of what success looks like for your business, and will make it easier to create actionable steps that will help you get there.

Step 3: List your risks

Every startup has to consider the risks, and it’s important to list these out in your business plan so that investors are aware of them.

By being upfront about the risks, you’ll show that you’re prepared and have thought through the potential challenges your business may face.

Step 4: Create a marketing plan

No matter how great your product or service is, you need to have a plan for getting it in front of your target market.

A good marketing plan will help you define your target market, set budget and marketing goals, and determine the best channels for reaching your customers.

Plus, a well-executed marketing plan can be a great way to get investors interested in your business.

Step 5: Include an operations manual

An operations manual is an important part of your business plan because it shows investors that you have a clear understanding of how your business will run on a day-to-day basis .

Plus, it will help keep your business organized once it’s up and running. Here are two things to include in your operations manual:

• A description of your company’s structure and hierarchy!
• A list of your company’s key personnel, their roles, and responsibilities!

Step 6: Include financial statements

Financial statements are important because they show potential investors whether or not your business is viable .

They also help you track your progress and identify any areas where you may need to make changes.

Step 7: Market your plan

Now that you have a killer business plan, it’s time to market it to potential investors. Here are a few tips for getting your plan in front of the right people :

1) If you’re going for a bank loan or venture capital funding, find out who is on their investment committee and address your proposal to them with the rest of the member’s CC’ed on the email.

2) Create an informative video about your company and post it to your company website and social media pages.

3) Reach out to the channels with huge followings in your area(they often post interviews with experts). By having an opportunity to appear on others’ pages, you will have a much bigger exposure than if you were to start out on yourself.

The Main Concerns of Investors

Cashing out.

Many startup owners show concerns about why investors have such a short attention span. Many people who consider their initiatives as a lifetime commitment assume that anyone else who joins them would feel the same way.

When evaluating a business strategy, investors assess whether or not to invest, but also how and when to exit. The exit plan is super critical as it paves a way for investors to come out of unfavorable circumstances in case the startup fails to make an impact in the market.

Sound Financial Projections

Profit estimates over the next 5 years might assist investors to negotiate the amount they will receive in exchange for their capital. Investors use financial forecasts as a measure for evaluating future performance.

Entrepreneurs go to extremes with their numbers. They don’t put enough effort into their finances in some situations, relying on figures that are so skewed or optimistic, anyone who has read more than a dozen business plans can see right through them. Some entrepreneurs feel that the financials are the company plan.

They may envelop the project in a mist of numbers. Many investors threw off by “spreadsheet merchants,” who have pages of computer printouts covering every possible company variation and analyzing product sensitivity.

Even when genuine marketing finds data financial projections, investors are apprehensive because emerging companies almost never realize their optimistic profit forecasts.

The Development Stage

Every investor wants to lower their risks. They analyze the status of the product and the management team while assessing the risk of a new and developing enterprise. The smaller the risk, the higher the chances of funding. 

A solitary entrepreneur with an unproven idea is at one extreme. Such a venture has a limited chance of acquiring investment capital unless the creator has a stellar track record.

At the more desirable extreme, is a venture with an approved product in an established market and a trained and staffed management team. 

If you’ve never launched a business before, you’ll need to show a lot of tangible progress in order to assuage investors’ concerns about your lack of expertise.

Do a Pilot Test

Unless you are wealthy enough to fund the company and test the pet product or service yourself, the only way to meet your wants is to satisfy those in the market.

Off course, you’ll have to overcome a number of obstacles before you can persuade investors that your company can thrive. What, for example, are the proprietary aspects of the product or service? How will you achieve consistency in quality? What would be the payback period? How long would it take before you become profitable?

Have you focused on a single market segment, or are you aiming to accomplish too much? The outcome will be more successful if you reply in terms of the market and investors rather than your personal preferences.

Numberly has Got Your Back!

Whether it’s your first startup, or you’ve raised funding in the past, writing a killer pitch deck or business plan is always a nerve-wracking experience. Blank pages will haunt you for days unless you have a concrete idea of where to take a head start.

Coming up with great business strategies is as much an art as it is a science, despite what we hope. The concept of a master document with blanks for executives to fill in, similar to how lawyers use example wills or real estate deals, is as fascinating as it is impossible.

Businesses have different marketing, manufacturing, and financial obstacles. Their strategies must account for these differences, stressing appropriate areas while downplaying minor problems. Keep in mind that investors view a business plan as a distillation of the company’s aims and personality.

Let Numberly be your guide here. Our careful and thought-out process ensures your business plan takes into account all stakeholders.

We will help you save time and energy while increasing your chances of attracting investors and clients.

Get investor-ready with a simple and easy to follow, yet fully customized financial model.

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When to Say “No”: The Power of Prioritization for Startups

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