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.
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:
a business plan is not as hard as it seems. Here are four simple steps in
developing one:
Step 1:
Know Your Business
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.
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
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.
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
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:
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.
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.
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.
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.
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
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.
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:
business plan should be sequenced in this order:
• Mission
Statement
Statement
• Executive
Summary
Summary
• Product
or Service Offerings
or Service Offerings
• Target
Market
Market
• Marketing
Plan
Plan
• Industry
and Competitive Analysis
and Competitive Analysis
• Pro-Forma
Financials
Financials
• Resume
of the Company Principals
of the Company Principals
• Your
Offering (what type of financing you are seeking)
Offering (what type of financing you are seeking)
• Appendix
(any other pertinent information)
(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.
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
