Writing a Business Plan; Back to The Basics

If you have ever set out to write a business plan, you must know how frustrating it can get. The writer’s block is like 10 times its normal size. You simply cannot brainstorm by typing a stream of letters. No. You must start from somewhere where it makes sense. Writing a business plan should however not be such an intimidating task: discovering a few simple tricks can reduce your wanderings by a dozen.

Here:

Before you go around for shopping for a business plan writer or downloading a business plan template, who is your plan intended for?

Knowing the answer to this question will determine the amount of time and money you ought to spend writing the plan. If you are writing a business plan for the sake of meeting a regulatory commission’s requirement – like when registering an institution – you can write anything that can pass. You don’t need to hire an $80/hr writer who will spend more than 80 hours on your project. Simply download a free template from the internet, tweak it here and there, and then submit for review. On the other hand, writing a business plan for the banks or venture capitalists is like delivering a sales pitch that is backed by financial data.

A bank will want to see a plan with minimum risk; as long as it can pay its debt, even if it closes down after that. No bank will want to hang out with you if you are experimenting with a risky investment, no matter how profitable it can turn out to be. On their part, venture capitalists prefer investments which promise high returns, and are sometimes willing to accommodate higher risks if it implies higher returns.

In both cases, the plan must be workable. No matter how good you deliver your sales pitch, you won’t receive any funding if all they see is hot air.

Even though the format of your business plan is not as important its content, it will help you know where to start writing from. If you are an experienced business plan writer, this should be no big deal. However if you are starting out, look at several business plan templates and see which format suits you best. The format you choose should also depend on how much investment you want to make. For example, you don’t need to write a 70 page document for a business that will cost you $1000. On the other hand, a 20 page document will not convince a bank to give you a $1,000,000 loan.

 I liken research to the process of collecting ingredients when trying out a new dish.  Once you have decided on the fundamentals of your business plan: the format, the content, the size, and the layout, it is time to research on your subject.

A lot of experience in the area you want to invest in is a good thing. However, if you want to get funding from a third party, you must prove to him that there are other people besides you who think that your idea is worth their attention.

You do this by backing up your optimism with information from two sources:

1. Primary data: This refers to data that has not been published before. Such information is usually gathered for reasons directly related to the project. Primary data sources include: face-to-face interviews, questionnaires, surveys, observation etc.

2.  Secondary Data: This refers to data that has been collected, published, and used previously. This information can come from trade journals, government agencies, consumer research organizations, and so forth. The advantage of this type of data source is that it is usually more affordable compared and readily available compared to primary data. In-fact, many business decisions are made based entirely on secondary

 The best way to handle a business plan writing task – or any task - is to break up the job into manageable tasks. Get files or folders for each section of the business plan. These files and folders can be either physical or computer based or both. As you conduct your research, ensure that you place the collected information in the respective files. These files are also good for brainstorming ideas.

This is the first step when you want to explain why you think your business idea is practical and profitable. You are simply looking at where the market is without you.  Read trade journals, authoritative reports, product reviews and customer feedback.  Here, you’ll asses your potential competitors, suppliers and customers.

Get a clear overview of the market situation and you won’t be embarrassed when making your presentation. 

After you have had an overall view of the industry, its time to analyze the market and see where you come in:

• What solutions do you intend to provide and why do you think you will succeed?
• What risks to you think you will face and how do you intend to deal with them?
• What are you contingency plans?
• Do you have any exit plan?

Once you’ve delivered your sales pitch, it’s time to back up your story with figures. The financial section should include basic things such as the first year’s forecasted budget, forecasted cash-flow statements for the period of the plan, projected profit and loss accounts and profoma balance sheets. Apart from these, you’ll also need to know the critical ratios in your industry when writing your business plan. You can get them by looking at the available financial statements of companies in your industry or related industry. If you do not have basic accounting knowledge, get an accountant to work with on this issue. Be cautiously optimistic; don’t sound like a compulsive gambler.

 The executive summary gives the reader an idea of what to expect in the rest of the plan. Though it is placed at the beginning of the plan, make sure that you write it last. Be brief by making sure that every word counts. Highlight the benefits that the business will have to the reader. If you are seeking debt financing, show that the business will be able to meet its long term financial obligations. If you want to deal with venture capitalists, show them – at least on paper – that if they don’t hang out with you, they’ve lost it.

It is now time to perfect the plan. Every word should be meant to sell the business idea and any word can throw you out.

Go through the plan severally and proofread the document again and again. Don’t rely on the Word’s spell-check. You certainly don’t want to recover your profits by “yearn 4.” And remember not to oversell. Don’t try to put things like “amazing opportunity!!!!!!” Or “the best of the best – WHY lie?”

Perfect the plan so that it sounds like a sober man; not like an overly-talkative drunkard and certainly not like a drunk-dead grandpa.

Get others to read it. Not your buddies, but people who know how to read and write.

You know what I mean.