#1 – Know your reader. Always remember who you’re addressing. Financiers are hard-nosed capitalists, so they want firm facts and figures and solid details as to how your idea will generate profit.
#2 – Research your potential market. The more you know about your competitors and your customer base, the more you will be able to impress your potential backer. Your business plan must provide credible research data about the size of your potential customer base, its needs, and the trends affecting it. You must also show the respective strengths and weaknesses of your competitors, their market share and how your product or service matches up to theirs.
#3 – Follow the format. Business plans are about facts and figures, not creative genius. There are definite rules for compiling one. A professional business plan will have:
- An executive summary
- An explanation of the business idea
- A management review
- A marketing strategy
- A rollout schedule
- A risk assessment
- A financial projection covering cash flow, balance sheet and profit
Keep the type size and line spacing generous and the margins wide so the document is easy to read. Use a modern font like Arial, size 10, double-line spacing. Keep your language simple with minimal technical jargon. Don’t waffle. Get straight to the point. Use graphics. Financiers are busy people and a picture or graph can convey your message far more effectively than a wordy paragraph. Use photographs of the product, flow charts and various graphs to drive your point home.
#4 – Drive home the USP. The essence of your business idea is its ‘unique selling proposition’, or USP. Your USP must separate your product or service from the competition; make it unique, something the public will buy because it meets a definite need. Use your USP as a point of reference throughout your plan and make all your research and financial data support this selling proposition.
#5 – Make your executive summary sing. The first thing a financier will read in your business plan is the executive summary. It must, in a couple of pages, describe the entire business plan in a zippy, exciting way. You have to capture and retain the reader’s interest. Imagine you are making a thirty-second commercial of your entire plan; that limits you to mentioning only the really important elements from each section. Write it with the USP in mind and distill all the important information to highlight your competitive edge.
#6 – Punt your expertise. Let the reader know your history and skills relevant to the business idea. Describe the expertise of your associates too, even if they are outsourced strategic partners. It is common these days for small companies to use established businesses to handle certain areas of the business, like accounting and distribution.
#7 – Show marketing savvy. Venture capitalists will look very closely at how you intend to bring your product or service to market. Innovative marketing ideas go a long way to swaying financiers. Describe in detail how you intend to gain market share, how much, and in what time period. Explain how your competitors reach their market and describe how you intend to outflank them.
#8 – Be realistic in your financials and rollout schedule. There’s always a temptation to paint a rosy picture for your potential backer i.e. juicy returns in double-quick time. Be conservative in your predictions of how much and how quickly you will sell. Remember, your backer will hold you to your promises.
#9 – Know your numbers. Crucial to getting the capital you need is knowing how much to ask for and what kind of financing you need. Your financial projections and rollout schedule will illustrate your financing requirements, but, you must state what kind of arrangement you want to enter into with your potential backer, be it a loan (carrying repayable interest) or equity (offering a slice of future profits). Declaring exactly what kind of financial assistance you need will inspire confidence in your potential backer.
#10 – Seek advice. There are several organisations in South Africa willing to offer advice and information on critical areas around your plan. Just Google “business plan” and many search results should come up.
Don’t forget your bank manager, who is a ready source of solid financial advice. Let him read your plan before delivering it to venture capitalists.
A great business idea and a tight business plan will get you a hearing with potential backers. Compile a slide or PowerPoint presentation that mirrors your executive summary. Be confident and sell your idea. And, when it comes to crunch time… Ask for the money.