Describing the Opportunity
Presenting your idea
Executive summary
Business description
Analyzing the business environment
Industry background
Competitive analysis
Market analysis
Introducing Your Management Team
Highlighting qualifications
Presenting the team as a unit
Bringing Your Product to Market
Operations plan: Articulating day-to-day business
Marketing plan: Promoting your value proposition
Projecting Financial Risk and Reward
Preparing your financial plan
Anticipating readers’ concerns
Attachments and Milestones
Supplemental information
Milestones
Conclusion
Test Yourself
Learn More
Sources
Index
Creating Business Plans
Why Write a Business Plan?
Why Write a Business Plan?
So you’ve got a brilliant idea for a new product or service. You feel energized, inspired, and ready to forge ahead. Your first challenge: Write a business plan.
You may be thinking: “Why should I bother taking the time to draft a formal plan? Shouldn’t I just get going already?” If you’re working at a large company and your boss asks you to put together a plan before you move forward with a new product extension, you may feel equally frustrated. “What’s the point of this busywork?,” you might think. “Why can’t I just take the plunge?”
Don’t fall into this trap. Writing a business plan for internal or external ventures is beneficial in a variety of ways, including gaining buy-in and generating enthusiasm for your idea, improving your odds of successfully creating a new product or service, establishing a company, raising capital, generating sales, and sustaining your business over time.
Whether you’re planning to build a new company from scratch, expand an existing firm, spin off from a parent corporation, or even start an initiative within an established organization, writing a business plan gives you an opportunity to thoroughly evaluate your idea. It’s also a way for your audience—namely potential investors, managers, and the people who control vital resources you need to start and operate your business—to assess the feasibility of your concept. Your goal is to create a road map for your business that helps you navigate the opportunities and inevitable obstacles you’ll face and, perhaps most important, develop strategies to avoid problems before they arise.
This book shows you how to craft a persuasive argument for your idea by walking you through the elements of writing a business plan and providing a fully developed primary case study of an imaginary and hypothetical venture—TechnoExercise Corporation—which we’ll follow throughout the chapters.
Getting started
Most business plans devote too much ink to numbers and too little to the information that matters most to potential investors, according to William Sahlman, a professor at the Harvard Business School and an expert in entrepreneurial ventures. After all, savvy investors understand that financial forecasts for a new company—particularly detailed, month-by-month projections that extend for years and years—are typically nothing more than wildly optimistic fantasies. In light of this, Sahlman recommends organizing your business plan around a framework that assesses four factors that are critical to every new venture:
• The people. Those who will be starting and running the business, in addition to any outside parties who will provide important resources.
• The opportunity. A profile of the business itself: what it will sell and to whom, whether it can grow and how quickly, what its economics are, and what might stand in the way of success.
• The context. The big picture—the regulatory environment, interest rates, demographic trends, inflation, and so on. Essentially, factors that inevitably change but that you cannot control.
• The risk and reward. An examination of everything that can go wrong and right, as well as a discussion of how the team can respond.
With Sahlman’s four critical factors in mind, you’re ready to start thinking about what information you’ll gather to create the most compelling business plan you can. As you begin your research, ask yourself some important questions:
• What’s your purpose? If your business plan is a proposal within the resource-rich environment of a large corporation, certain parts of it—such as the marketing or operations sections—could be shorter and less developed than other sections. In this case, you ought to focus on the value proposition and competitive analysis. On the other hand, if you’re using the plan to raise money from venture capitalists, you ought to focus more on the opportunity itself and the management team.
• Who’s your audience? Knowing who will be reading your plan and why and having some sense of their goals and needs will help you tailor your message. To learn about your audience’s particular requirements and motivations, do some research. Tap your network—ask colleagues and other industry professionals for their views on the problem you’re trying to solve. Also, think about your proposal from the perspective of your audience. A corporate management committee or board of directors, for instance, will consider your idea within the context of the company’s other initiatives and may look for potential cost savings or other sales opportunities related to your idea. Investors and lenders, on the other hand, may want to know about the breakeven points and the business’s longer-term potential.
• What do you want? Think about your ultimate goal. Do you need a corporate stamp of approval or the active support of upper management? Are you just looking for funding, or do you want connections with other investors or business partners? Do you want to repay a loan, or are you willing to share ownership and profits?
What information will you need?
Now that you’ve organized your thoughts, you need to determine whether you have all the relevant material on hand. Some of this will be financial and legal information. For example, have you confirmed the necessary production costs for your product? Have you considered the most appropriate legal structure and tax status for your business? There are many sources for this kind of information. You should identify trade journals
