Top ways to create an Effective Business Plan

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An effective business plan covers all of the bases from which major questions arise for funders. By including the answers to these question in the plan, funders never have to wonder whether or not the entrepreneur has thought them through, and discussions between funders and the entrepreneur can focus in reaching deal more quickly. Like in baseball, there are four bases to defend to create a powerful business plan.

First Base: Market Opportunity

The business plan must explain that there is a specific market opportunity for a new product or service. This requires researched data about the customers and their needs, how competitors are currently serving (or failing to serve) these customers, what substitutes exist for a new product or service, and how the industry is moving to make an attractive situation for a new company. The size of the customer market should be in dollars to demonstrate the potential for revenues. All of these elements must align before funders will feel good about the defense of first base.

Second Base: Strategy

The strategy laid out by the business plan cannot be truly generic. It must relate directly to the competitive advantage needed to serve the customers in a way that competitors cannot. Marketing strategy must be appropriate for the type of marketing that works with the customers in question. Operations strategy must make use of the best practices of the industry to be as efficient as possible, while supporting the competitive advantage the company is trying to create. Funders will want to see that all of these strategic elements fit together neatly.

Third Base: Entrepreneur’s Qualifications

The third base to cover is the qualifications of the founders to launch, lead, and run the company going forward. If these qualifications are lacking, there must be a reasonable plan to hire additional managers who can fill in missing expertise. Funders need to see that the entrepreneur or entrepreneurs are not just talented, but talented in the right way to make this business a success.

Home Base: Financial Returns

Finally, home base is defended with an explanation of the business’s financial returns. The financial plan and statements must show how and when profitability will be achieved, as well as how, specifically, returns will flow to investors and lenders. The financial statements should stand up to funder’s tests for specific ratios, and the revenue and cost assumptions must be explained in the narrative to the reader’s satisfaction.

Creating the Physical Business Plan

After drafting your basic business plan, it is time to polish the plan and make it presentation-ready. The primary goal here is to do nothing that distracts from the message your plan is communicating about your business. This means not overdoing it as well as keeping the presentation professional.

Neither Too Much Polish or Too Little

It is possible for a plan to be so slickly prepared in its graphics, paper quality, and formatting that it truly looks like a sales brochure for a product rather than a startup’s plan. This is not to say that a plan must look shabby to show that you are a poor startup. The plan is meant to be read (and hopefully reread) by funders, and its physical presentation must support their ability to do that without distractions, and nothing more.

Neatness and Proofreading

Neatness is certainly of the utmost importance. The plan must be printed on clean sheets of paper without smudges, use of white-out, or handwritten changes. The ink must be consistently dark and not fading at any point. It would make sense to have the pages printed on a professional machine rather than a home printer for this reason.

Paper Quality

The paper must serve its function, but, again, not be a distraction for the reader. Glossy paper can make it difficult to turn the pages of the plan and may create glare. Paper must stand up to repeated readings, but not be as hard as card stock which will be difficult to work with. There is no reason to use colored paper to make an impression. Stick to white paper.

Binding and Cover

The plan should be bound simply, perhaps within a softcover, clear top sheet and opaque back sheet for protection. There is no reason to use expensive binding, which gives the impression that your ideas are set in stone and will not be subject to future discussion and negotiation.

Additional Media

Providing your initial plan with a video, PowerPoint, or other type of media alongside it is not necessary. If you feel this must support an aspect of the plan, consider this additional media to be part of the appendices and know that not all funders will look at it. However, it is most important to be sure that you do not shortchange the paper version of the plan for other types of media. The paper document is a must and additional media is optional.

 

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