We see many business plans here at Bayleaf – some are good, some need more work. In fact, with our sister company at StartUp Wizards, we also write business plans for would-be business owners.
But what makes a great plan? What do we look for when we decide whether to invest our money?
Blogs are full of advice about how to write a great business plan, and publications have produced some excellent articles on the topic, including this one from Entrepreneur.
But how many of them come from readers and evaluators? We are both and here are our top five tips.
1 Understand The Purpose.
A business plan needs to be written with a clear objective in mind. Is it for your internal management of the business, to provide a roadmap? Is it to secure investment? To hire key staff? To win customer accounts?
If you write it for everybody, you write it for nobody. Different stakeholder groups have different interests so while the core of the plan may remain the same, the focus and emphasis will be – and should be – very different.
2Discuss Client Acquisition in Depth.
The single most commonly neglected area in the business plans that we see is the area of client acquisition. If your business is operating in an established market, your potential clients probably already have a solution and you need to persuade them that your version is better. If it’s a new market, you need to explain to clients what your product is.
Business plans which assume that by launching an app, a site or a drink and that clients will magically adopt are naive and we will not invest.
Likewise “We will just use social media” as if that is a silver bullet to find clients is similarly ambitious. A recent premium beverage start-up estimated that their cost-per-paying client on Instagram was more than $100.
3Why Will Customers Choose Your Product or Service?
It would seem to be obvious but many potential partners of ours don’t understand how important this is. Can you clearly explain why your potential customers will want your offering versus the others out there. There seems to be an over-reliance on “brand” or “logo” as a source of competitive advantage. In our experience, brand supports product advantage, it doesn’t generate it.
Your business plan needs to explain the inherent benefits of your solutions and why you will get repeat and sustainable sales.
4Show You Understand the Market
Spend time explaining the market as it exists today, competition, discounting, pricing, routes to market etc. Research other start-ups – how did they do? Is anybody crowdfunding in your market? Any mergers or acquisitions?
It’s important to any investor that you understand not only your own business, but the wider environment in which your business operates.
5Answer the Next Questions!
When you have written the plan, share it with a trusted friend or colleague and see what questions they ask – and then answer then in the second draft. No matter how good you think your plan is, there will be obvious questions that jump out, things you have forgotten, numbers that don’t add up.
Get some feedback and build it in. Your document will be stronger for it.