HOW TO CREATE A STELLAR BUSINESS PLAN

 

Anyone starting a business must have a business plan. Numerous studies have shown that one of the major reasons new businesses fail is poor planning. A business plan serves two purposes: it provides a road map for your business and it enhances your chances of obtaining finance.

Developing a business plan is not as hard as it seems. Here are four simple steps in developing one:

Step 1: Know Your Business

You must have very sound knowledge of the business in order to prepare a business plan. This means doing lots of research. You can carry out a research by reading everything you can about the industry or talking to those who are already in it. Learn everything you can about your business and industry.

Step 2: Determine Your Purposes for the Plan

A business plan serves to crystallise your business vision and guide you in fulfilling that vision; it is also frequently used to entice potential investors. If you are self-financing your business, you design the plan mostly for your benefit, but if you are seeking for outside investors, you will need to target them. So, before you create your plan, determine whether you will solicit for outside investors.

Step 3: Determine Your Audience

 

If you plan to recruit investors, you need to build a plan to suit them. Outside investors, ranging from friends and family members to banks, will invest through either loaning you the money, buying shares in your company or a combination of the two. You need to determine their level of sophistication and what they are looking for in a potential business investment. Remember that regardless of their level of sophistication, they are all looking for four things:

1. Trust in you - You build trust by demonstrating sound ethics and integrity so your business plan should demonstrate those qualities.

2. Understanding of the business - It is your job to clearly articulate your mission statement, your product offerings and how you will make money. You may have to tailor your plan to suit your audience: less-sophisticated investors may be scared off by industry jargon, while investment professionals will probably expect it.

3. Financial confidence - Clearly articulate the risks of investing in your business. Also, show investors how they can recoup their money - whether your venture succeeds or fails.

4. A good return on investment –Typically, investors will look to beat a certain internal rate of return. Your job is to make sure your projected returns are in line with those of similar industries.

Step 4: Create Your Business Plan

Develop an outline of your business plan first. Consider every aspect of your business and how it will affect your business plan. Remember, this business plan is a road map. It must guide you. It must also communicate to investors what you are doing and why they should invest with you.

Your business plan should be sequenced in this order:

•        Mission Statement

•        Executive Summary

•        Product or Service Offerings

•        Target Market

•        Marketing Plan

•        Industry and Competitive Analysis

•        Pro-Forma Financials

•        Resume of the Company Principals

•        Your Offering (what type of financing you are seeking)

•        Appendix (any other pertinent information)

*You will also need to state personal seed capital you are investing in the venture. Financiers want (and often require) entrepreneurs to put their own funds in the venture, and the greater the portion you invest, relative to your net worth, the better.

By Ifeyinwa Olloh

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