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Entrepreneurship: Business Plan Essentials

by Mike Wilkinson on August 30, 2010

We have the opportunity to talk with entrepreneurs every day.  Some are eager to learn and take advice; others seek affirmation that what they are doing is correct.  I believe if we can help educate people by providing them with what we’ve learned over the years, then they will have a better chance of achieving their goals.

One necessary element in starting a business is a business plan.  A business plan should be short and sweet, under 20 pages.  Most people, especially potential investors, do want to read a 50-page business plan.

Executive Summary
The most important section of your business plan is the executive summary.  In less than five pages, the executive summary provides investors with an overall view of your entire plan.  You should include the most important points from each section of the plan. Ideally, a one-page executive summary can demonstrate your ability to communicate clearly, effectively and concisely to the investment community – a true bonus if done right.

Your executive summary should include the following sections.  You may want to change the order as you decide the best way to frame the problem/solution.

  • Business Summary Provide a clear explanation of what the product does and who benefits from it.  This is a concise statement of your unique solution to a big problem.
  • Management Why is your team uniquely qualified to win?  Explain why the background of your team members fits what the company needs.  Use brand name company experience if it’s relevant to what the company is doing.  Discuss key hires if they are critical to you plan.
  • Customer Problem Describe the significant problem your product is going to solve.  You are defining your value proposition– you are going to increase revenues, reduce costs, increase speed, eliminate, inefficiency, increase effectiveness. And so on.  Don’t confuse your statement of the problem with the size of the opportunity (that’s below)
  • Solution What specifically are you offering and who is going to buy it?  Avoid jargon, rely on commonly used terms to say what you have, or what you do, that solves the problem you’re identified.  Clarify the value chain or distribution channels.  If you have customers and revenues, make it clear.  If not, tell when you will.
  • Target Market What is the market segment, size, and growth rate?  How many customers are there and what is driving the segment.  Target a reasonable percentage of a well-defined growing market.
  • Customers Describe the typical customer.  Make it clear who is in the target market.
  • Sales/Marketing Strategy How will you generate revenue?  How will you create your message and reach your target market?  What is your sales model?  Is it scalable and can it be leveraged?  What are the planned sales and marketing expense levels?
  • Business Model How will your company be structured?  Will all key activities be done in-house?  Will you use contractors or outsourcing?  Who are your key partners, what role will they play, and why are they the right choice?
  • Competitors You have competition.  Your prospects are dealing with this problem in some way.  There may be competition about to emerge.  It’s important to be realistic and not understate the competitive landscape.
  • Competitive Advantage The key here is to state your sustainable competitive advantages clearly and concisely.  Articulate your unique benefits and advantages.
  • Management Team – Identify your management team and whom you will need to hire.  Accurately state your experience and don’t be afraid to identify roles you need to fill.
  • Board of Advisors – Do you have a board of advisors?  This is a group of industry experts, which is separate from your board of directors and does not have a legal say in the daily operations of your company.
  • Financials – State how much money you are looking for and how that money will be used over a specific timeframe.  Explain how the company has been funded so far, and identify the skills and experience of the types of investors you would like to invest. Provide projections, which are based on detailed financials calculated on sales price and units sold.
  • Contact Information – List the name of the company and primary contact information including phone, email and URL.

Backup Material
The remaining sections of your business plan provide the backup material and references to the information in your executive summary.  For example, when you describe your market and competition, the business should include all references you used to derive that information.  The more you can rely on industry data, the more credible your offering.

Key Points to Keep in Mind
As you are writing your business plan, be clear who you audience is and what is important:

  • Investors are not really interested in how much sweat equity and money you have spent so far on your idea.
  • When calculating salaries, you should think about creative ways to show you have an on-going financial stake in the business.  You can defer a portion of your salary, which you can help justify why you should have majority control.
  • The further along in product development process and marketing testing your products, the better you are positioned to retaining more of the company.

Online Resources
There are lots of online resources available to you.  The Small Business Administration site has guidelines and templates for creating a plan. Berry’s site features more than 500 industry-specific plans so you can find your sector and start writing. SCORE is a good resource for growing companies that need to expand their plans. Right-Brain Business Plan helps creative companies brainstorm the left side of their business.

One-Page Executive Summary Template
We’ve provided a sample you may want to use as a starting point when working on your one-page executive summary.  To access the template, click here.

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