12 Tips to Polishing Your Business Plan
A business plan is a working document through which you set your goals and trace progress towards increased success. There may come the opportunity to present that plan to investors or a financial institution. Listed below are a list of tips to make that presentation more effective.
- If you are using the plan to secure external financing, ensure that the market, management and product sections are strong. Most importantly, the market must be large enough to produce a strong three-five year growth rate in sales. Sales must be explosive (e.g. go from $1 million to $10 million in three-five years)
- Be succinct and to the point if the plan has an external audience. A caveat here: this largely depends on your audience. Investors who evaluate many business plans over the course of a year will prefer short (15-20 page), concise plans. Private equity investors or lenders may prefer longer plans with which to evaluate the business.
- Be positive whenever possible, but avoid unsubstantiated statements. Use action-oriented words. Do not weaken your plan by using qualifiers such as: may, might, probably, maybe, perhaps, should, could.
- Proceed Slowly; Gain Momentum. Many of the problems encountered while collecting data and formulating the business plan can be avoided by carefully preparing yourself and your team for the task. Like any other project, designing an explicit task strategy, which includes contingencies, will save time and focus the quality of the work.
- Clearly define areas of responsibilities between team members and make information sharing as easy as possible, in order to deal with inevitable overlap.
- Have a clear definition of who the business plan “customers” You may want to adjust your strategy and orientation if the plan is intended for a group of predetermined investors or if it is to be used internally only.
- Sketch the plan first before concentrating on one section. This should include preparing a preliminary product – market matrix (graphs all products in the industry versus market segments), a preliminary industry matrix (graphs all competitors including substitutes in the industry versus the areas in which they compete), a preliminary operations milestone sketch and a brief strategy analysis. Preliminary work is vital to help focus your resources and anticipate problems.
- Substantially complete the groundwork before preparing financial information. Trying to put pro-forma statements together without having all the necessary data is a frustrating and time consuming experience. As financial information is collected, deposit it in a central folder. This speeds up the process as marketing, strategy and operations information come together.
- Talk to customers as early as possible. Talking to customers is the best way to get a real sense of the product, the need it is serving and the industry in which it is being delivered. Customers can often point out excellent sources of data.
- Build Credibility; Don’t Try to Whitewash. If a particular area of the business strategy contains a high degree of risk, make sure it is apparent that the risk has been identified and contingencies have been prepared to deal with it. One section that sounds fake or improperly optimistic creates skepticism for the entire plan.
- Perform reality checks. The business plan is intended to logically present the overall strategy and viability of a firm. Because of the amount of speculation involved in formulating business strategy, it is useful to explicitly ask whether particular aspects of the business strategy (small and large) seem sufficiently “real”.
- First impressions are critical. Good organization, proper grammar, and correctly spelled words are all important.