As investors, we review hundreds of business plans every year and are frequently asked what makes a good one — one enticing enough for an investor to take a closer look and possibly invest. The short answer is “it depends on the business”, but the simplest and most important is “make certain all the elements are there”. Entrepreneur Magazine recently published an article detailing the seven major sections of a business plan — consider it a checklist to make certain all the information an investor is looking for is there.
The seven business plan sections include:
- Executive summary: Many entrepreneurs bury “the ask” deep within the business plan. If your company is looking for capital, say that. If your company is recruiting board members, say that. Keep it straightforward and clear.
- Business description: Don’t only describe your company, but show you clearly understand the industry in which you operate. Investors want to understand the bigger picture. If you’re presenting to investors, clearly explain how your business will be profitable.
- Market strategies: This section is very important for investors. We like to see that an entrepreneur has taken the time to understand their customers and pull together a comprehensive market analysis. This section enables the entrepreneur to establish pricing, distribution and promotional strategies that will allow the company to become profitable within a competitive environment.
- Competitive Analysis: This is a statement of the business strategy and how it relates to the competition. The purpose of the competitive analysis is to determine the strengths and weaknesses of the competitors within your market.
- Design & Development Plan: This section details how the company is expected to grow. This section should include information related to product development, market development and organizational development. This section will allow investors to understand the “burn rate” of capital.
- Operations & Management: This section details how the company runs on a daily basis — including explaining how the management team operates and their corresponding responsibilities. Many investors come from the operations side of the business. They understand how to streamline resources and where management needs to be added.
- Financial Components: The depth of information presented in this section varies. It is common to at least include the income, balance sheet and cash flow statements. These three documents provide a good “temperature” of the company. As the discussions progress, investors will ask for more detail.
As your company evolves, this business plan should be reviewed and updated. It’s an important document to keep management focused on reaching milestones and achieving goals.