How to Write a Winning Business Plan

It is my belief that the business plan takes on two purposes. Firstly it is a means for you to truly understand your business. Secondly it is a communication tool between your business and potential investors.

I’ve written business plans for the purpose of approval by the board of directors. I’ve also taken that same business plan and re-written it for the presentation to potential investors. With hindsight it seems quite odd, even to me, that someone will write a business plan for the company only to write a different business plan for investors. The company’s purpose didn’t change between writings so why would somebody write two business plans for the one company? Before you attach blame to me, understand that most companies have mimicked this example. They write a business plan just because they were told they needed to then they go ahead and re-write the plan when they need funding from an investor or commercial lender.

Many business plans later I write only one plan. However, I do have an understanding why the majority of companies write multiple business plans. The primary reason being is due to the audience. For a potential investor we want to make the business look attractive. For the Board of Directors we want to be conservative (under promise and over deliver). For a potential investor we want to include as much information as humanly possible, for the Board of Directors we keep it a minimum. For a potential investor we will add color, diagrams, quotes, figures and facts, anything to allow the investor to feel the product and the business. For the Board of Directors we will keep it plain and simple.

You need to throw out the notion that a company or its board deserves less presentation, less information and less effort than a potential investor may need. Understanding your business is a necessity and by putting in as much effort into a business plan as you possibly can will put you ahead of your competition.

Excessive information and an over the top glossy color presentation is not necessarily the correct way to produce a winning business plan either. Too much information is likely to be a deal breaker with most time-poor professionals. Too much effort into presentation is also likely to be a deal breaker unless your content equals the effort put into the presentation.

So what is the right way to prepare a business plan? Stick to these basic rules and you won’t go wrong:

Limit the main content of your business plan to 20 pages. Closer to 15 pages is preferred. If you feel compelled to include large diagrams, flow charts, cash flow, detailed company history etc then place it within the Appendix. The main content should be concise, easy to read and to the point.

Provide one or two color pictures describing your product. As the old saying goes, a picture is worth a thousand words. Don’t go overboard with pictures. One or two will be plenty. If your business is online, include some sample screen shots. If your business is still in the early stages of development, include sketches of your product or a flowchart of how it works.

Consider your audience. I don’t care if you say you don’t need to find an investor for your company, at some point you will need money from someone whether it be from a bank, family, friends, an angel investor or venture capital firm. So always, always write your business plan assuming you are proposing your idea or business to an investor. I like to picture that I’m preparing my business plan for Warren Buffett – it forces me to be selective with my words and my numbers.

Keep a common theme through your business plan. Write in the third person, as an outsider reporting on the business. Quoting I or we tends to diminish the professionalism of the business. Also, push your branding throughout the plan. This is you selling the business as much as expressing its inner workings.

Understand that your business plan is a living document. A business plan should evolve with the business. As needs change, as markets change and the diversity of your work force change so should your business plan. Maintaining a static business plan is a sure way of making your business plan redundant within six months of writing it. An evolving business plan demonstrates to the reader that you are offering them an insight into the business, not a sales document.

Review, review, review. Once you’re done writing the plan set it aside for some days and then re-read it with fresh eyes. More importantly have someone from outside of the business read it. An outsiders perspective is invaluable.

When I write a business plan I always picture an investor flicking through my document. As his/her thumb flicks past each page I want to have something of interest on each page, whether it be a color picture, diagram or a catchy title. I will always highlight exciting points, such as “with current trends we will see a 15% increase in market share to 55% in the financial year 2010”. Keeping the document exciting and engaging could be the one thing that gets the needed capital injection your company so desperately needs. There are so many great ideas out there and so many companies seeking capital to manufacture or produce their product. Ask yourself how you can make your product noticed and then put your answer into action within your business plan.

Adopt the following headings and sub-headings:

Cover Page

1. Executive Summary

2. Business Description

• Business Name and Location
• Company Purpose
• The Problem
• The Solution

3. Entering the Market

• Why Now?
• Market Size
• Competition
• Product Formula
• Development Procession

4. Business Model

• Revenue Model
• Pricing
• Average Account Size

5. Sale and Distribution Model

6. Customer List

7. Team

• Board of Directors
• Senior Management
• Professional Team and Advisors to the Board

8. Financials

• Profit and Loss
• Cash Flow
• Capitalization table

Appendices (if needed)