Manage Your Business
6 tips for crafting a winning business plan
How to create a roadmap for success
Nothing lays the groundwork for success like a well-written business plan. Besides helping you land investors and strategic partners, creating one also clarifies your goals and points out potential challenges.
A business plan typically includes seven sections:
- Executive summary
- Company description
- Market analysis
- Product or service description
- Sales and marketing strategy
- Organizational and management structure
- Financial projections
To help you get started, we asked business experts to share their insights on creating a compelling business plan. Here are their top six strategies.
1. Begin with the basics
Tackle your plan in small steps to make the task manageable, says Tim Berry, founder and chairman of Palo Alto Software, which provides startup and management tools for small companies. You can write bullet points first and expand on them later.
Start with the essentials: your business strategy, the tactics you'll use to execute it and key milestones such as launch dates. List startup costs, such as equipment, inventory and permits, and calculate your best estimates for sales in the early months. Working through your financials will help you determine how much funding you'll need.
2. Consider your audience
If you intend to pitch investors, your plan should demonstrate that you have a superior product or service that solves a difficult problem for a large target market, says Akira Hirai, founder and CEO of Cayenne Consulting, a business plan consulting firm. If you hope to win over a strategic partner, your plan—typically accompanying a partnership proposal—should describe your vision and ability to help the partner reach its strategic goals.
No matter whom you are writing your plan for, Hirai adds, make the case that your founding team has the experience and skills to build a successful company. The description of your organizational and management structure should include a brief bio of the founders detailing their employment history, education and background as relevant to your venture.
3. Think growth before profits
"Quite often, startup founders think investors want to see profits, and they'll come up with wildly unrealistic projections," Berry says. Investors, however, won't find such numbers credible, and may also see them as a sign that an entrepreneur isn't prioritizing growth.
"There's a tradeoff between profits and growth, since growth comes from spending," adds Berry, who is also an angel investor. "If you have too much profit, you're going to have trouble generating growth." Focus on explaining how your business will generate growth.
4. Demonstrate solid cash flow
The financial section of your business plan should thoroughly document your projected revenues and expenses, and expected cash flow. Not planning for the timing of inflows and outflows of cash will leave your business vulnerable to failure, no matter how strong your idea. "You can't just suddenly run out of cash," Berry says. "If you don't plan for and manage cash flow, you're putting yourself in danger."
Be sure to estimate your company's expenses and revenues as closely as possible. Certain expenses, such as merchant services fees and some types of insurance, can be easy to overlook. If you use a cash flow template to project your expenses, be sure to account for all of your spending categories.
5. Keep it clean
"Aesthetics matter," Hirai says. "An attractive, neatly formatted plan is more likely to be read than a disorganized plan."
Investors tend to favor brevity, with executive summaries running one to three pages and complete plans at 20 to 25 pages. Plans with spelling or grammar mistakes, or those packed with technical detail or scientific jargon, may get discarded.
6. Review and revise your plan
Some entrepreneurs complete a business plan only to set it aside and never look at it again. Review your plan monthly, Berry suggests, to compare your projections with reality and to be sure you're on track for hitting key milestones. "All of that review creates real management and accountability," he says. It also allows you to shift course quickly if sales, market conditions or other factors diverge from expectations.
Ami Albernaz is a Chase contributor who covers technology, finance and small business. She is a former lifestyle columnist for The Boston Globe and contributor to The Christian Science Monitor.