what is an investor ready business plan

Writing an Investor-Ready Business Plan

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Crafting an investor-ready business plan is a pivotal step for entrepreneurs aiming to secure funding and propel their ventures forward. This comprehensive document not only outlines your business's vision but also delves into critical components such as market analysis , financial projections , and a persuasive value proposition . By mastering these essential elements, you can capture the attention of potential investors and set the stage for success.

What are the essential components of an investor-ready business plan?

Executive summary.

The executive summary is the first thing investors will read, and it should succinctly convey the essence of your business idea. This section serves as a snapshot of your entire business plan, highlighting key elements such as your mission statement, the problem you aim to solve, and your proposed solution. An effective executive summary should not exceed two pages and must captivate the reader’s interest immediately.

Market Analysis

A comprehensive market analysis is crucial for an investor-ready business plan. This section must include:

• Target Market Demographics: Define who your customers are, including age, gender, income level, and preferences.
• Market Size Analysis: Estimate the size of your target market and growth potential.
• Market Research Techniques: Utilize surveys, focus groups, and industry reports to gather relevant data.
• Competitive Advantage Analysis: Identify your competitors and analyze their strengths and weaknesses.

Providing solid data and insights will help investors understand your market position and potential for growth.

Business Model and Revenue Projections

The business model outlines how your business intends to make money. It should explain your product or service offerings and pricing strategy. In addition, include detailed revenue projections, such as:

• Sales forecasts based on customer acquisition strategies.
• Pricing models and expected profit margins.
• Projected customer retention rates.

Investors will look for realistic financial projections that demonstrate a clear path to profitability.

Marketing and Sales Strategy

Your marketing and sales strategy should detail how you plan to attract and retain customers. This section should cover:

• Effective Marketing Strategy: Outline your marketing channels, including digital marketing, social media, and traditional marketing methods.
• Customer Acquisition Strategy: Describe tactics for acquiring new customers and achieving sales targets.
• Marketing Budget Allocation: Provide a budget for your marketing initiatives and expected ROI.

Clearly articulating your strategy will assure investors that you have a solid plan for generating sales and building brand awareness.

Financial Projections and Funding Requirements

This section is critical for investors as it provides an overview of your financial health and future needs. Include:

• Profit and Loss Forecast Examples: Present a three to five-year profit and loss forecast, detailing expected revenues and expenses.
• Cash Flow Statements: Project cash inflows and outflows to demonstrate financial viability.
• Break-even Analysis: Indicate when your business will become profitable.
• Business Funding Requirements: Clearly state how much capital you need and how you plan to use it.

Investors will expect you to provide financial projections for investors that are realistic and backed by thorough research.

• Keep your executive summary concise and impactful to grab attention.
• Use visuals where appropriate to enhance your market analysis.
• Regularly update your financial projections based on new data and trends.

How do you define your business's value proposition?

Identifying unique selling points.

To successfully create an investor-ready business plan, start by identifying your unique selling points (USPs) . These are the specific features or benefits that distinguish your product or service from competitors. Consider what makes your offering special:

• Is it a new technology or a unique feature?
• Does it solve a specific problem more effectively than alternatives?
• Is it priced more competitively?

Highlighting these USPs in your business plan presentation can capture the attention of potential investors and demonstrate why your venture is worth funding.

Analyzing competitive advantages

Next, conduct a competitive advantage analysis . Understand where you stand in the market landscape. This involves:

• Researching your competitors and their offerings
• Identifying gaps in their services that you can fill
• Analyzing your operational strengths, such as superior customer service, innovative processes, or strategic partnerships

Articulating these advantages in your investor-ready business plan will help investors see the long-term viability of your business model.

Understanding customer pain points

Understanding your target market's pain points is crucial for defining your value proposition. These pain points are the specific issues or challenges your customers face that your product or service can address. To gain insights:

• Engage in direct conversations with potential customers to gather feedback.
• Utilize market research for business plan development to identify common frustrations.
• Analyze online reviews and feedback on similar products.

By addressing these pain points in your business plan, you can effectively align your offerings with market needs, increasing your appeal to investors.

Crafting a compelling narrative

A compelling narrative is essential for your investor pitch deck. This narrative should weave together your USPs, competitive advantages, and customer pain points into a coherent story that resonates with your audience. Consider these elements:

• Start with the problem: clearly articulate the market need.
• Introduce your solution: describe how your product or service addresses this need.
• Highlight success stories or testimonials to build credibility.

Crafting a well-defined narrative will not only help investors understand the value your business brings but also engage them emotionally.

Aligning value with market needs

Finally, ensure that your value proposition aligns with the current market needs and trends. Conduct thorough market analysis techniques to:

• Identify the size and dynamics of your target market demographics.
• Evaluate industry trends that may affect your business model and revenue projections.
• Adjust your offerings based on emerging consumer preferences or technological advancements.

By aligning your value proposition with market needs, you enhance the likelihood of investor interest and support for your business.

• Regularly revisit and refine your value proposition as market conditions change to remain relevant.
• Utilize surveys or focus groups to gain deeper insights into customer perceptions and pain points.
• Consider developing a prototype or minimum viable product (MVP) to showcase your solution during investor meetings.

What market research is necessary to support your business plan?

Identifying target demographics.

Understanding your target market demographics is crucial for crafting an effective marketing strategy. This includes identifying the age, gender, income level, education, and geographic location of your potential customers. By honing in on these characteristics, you can tailor your messaging and product offerings to meet the specific needs of your audience.

Evaluating industry trends

Conducting a thorough evaluation of industry trends will provide insight into the current market landscape and future opportunities. Analyzing trends helps you anticipate shifts in consumer behavior and adapt your business model accordingly. Utilize resources such as industry reports, articles, and expert interviews to gather relevant data.

Assessing competitor analysis

Performing a competitive advantage analysis is essential to understand how your business stacks up against others in the market. Identify your direct competitors and analyze their strengths, weaknesses, pricing strategies, and customer reviews. This analysis will help you identify gaps in the market that your business can exploit, as well as potential threats to your success.

Gathering customer feedback

Collecting customer feedback is invaluable for validating your business concept and refining your offerings. Engage with potential customers through surveys, interviews, and focus groups to gain insights into their preferences and pain points. This direct input can inform your value proposition definition and help you create products or services that resonate with your audience.

Quantifying market size and growth potential

To attract business funding requirements , it’s essential to quantify the market size and growth potential. Use market size analysis techniques to estimate the total addressable market (TAM) for your product or service. Consider factors such as current market demand, projected growth rates, and economic conditions that may impact your industry. This data will be crucial for your financial projections for investors.

• Utilize online tools and databases to gather demographic and industry data efficiently.
• Regularly review and update your market research to stay current with evolving trends.
• Engage with industry experts to gain deeper insights into market dynamics.

How should you outline your marketing and sales strategy?

Defining marketing channels.

Identifying the right marketing channels is crucial for reaching your target audience effectively. This involves exploring various platforms and methods to promote your product or service. Consider the following channels:

• Social media platforms (e.g., Facebook, Instagram, LinkedIn)
• Email marketing
• Content marketing (blogs, videos, podcasts)
• Search engine optimization (SEO)
• Pay-per-click advertising (Google Ads, social media ads)
• Traditional media (print ads, radio, TV)

Evaluate where your target market demographics spend their time and tailor your approach accordingly to ensure optimal engagement.

Setting sales goals and KPIs

Establishing clear sales goals and key performance indicators (KPIs) is essential for measuring your marketing success. SMART goals (Specific, Measurable, Achievable, Relevant, Time-bound) are a great framework to follow. Examples of sales goals include:

• Increasing monthly sales by 20% within six months
• Acquiring 100 new customers by the end of the quarter
• Improving customer retention rates by 15% over the next year

KPIs should be aligned with these goals, allowing you to track progress and make informed adjustments to your strategy.

Detailing customer acquisition tactics

Your customer acquisition strategy should be comprehensive, outlining how you plan to attract and convert potential customers. Consider the following tactics:

• Creating targeted advertising campaigns
• Implementing referral programs
• Utilizing influencer marketing
• Offering promotions and discounts
• Engaging in public relations efforts

Documenting these tactics in your investor-ready business plan will demonstrate your proactive approach to generating revenue.

Crafting a customer retention plan

Acquiring customers is only part of the equation; retaining them is equally important. A successful customer retention plan includes strategies to keep customers engaged and satisfied. Some effective strategies are:

• Implementing loyalty programs
• Providing exceptional customer service
• Regularly soliciting customer feedback
• Offering personalized experiences
• Communicating consistently through newsletters and updates

By focusing on retention, you can enhance customer lifetime value and reduce churn rates, ultimately improving your financial projections for investors.

• Regularly review and adjust your marketing budget allocation based on performance metrics to optimize spending.
• Utilize market research for business plan components to stay informed about changing customer preferences and industry trends.

Budgeting for marketing initiatives

Creating a detailed budget for your marketing initiatives is vital for controlling costs and maximizing return on investment. Consider the following when budgeting:

• Determine your overall marketing budget as a percentage of projected revenue.
• Allocate funds across various marketing channels according to their effectiveness.
• Include costs for tools and software that will enhance your marketing efforts.
• Factor in potential unexpected expenses and set aside a contingency fund.

A well-planned marketing budget will not only guide your spending but also demonstrate to investors that you have a solid understanding of your business funding requirements.

What financial projections should be included in the business plan?

Three to five-year profit and loss forecast.

A profit and loss forecast is a crucial component of an investor-ready business plan. This projection outlines expected revenues and expenses over a three to five-year period, enabling potential investors to gauge the viability and profitability of your business model. It should include:

• Revenue streams from various products or services
• Fixed and variable costs associated with running the business
• Net profit margins and overall profitability

Make sure to base your profit and loss projections on realistic assumptions derived from market research for business plan and historical data, if available.

Cash flow statements

Cash flow statements provide insights into the liquidity of your business. They detail the inflows and outflows of cash, helping to assess whether the company can meet its short-term obligations. The cash flow statement should include:

• Operating activities, such as cash received from customers and cash paid to suppliers
• Investing activities, like purchases of equipment or investments
• Financing activities, including loans taken and repayments made

Accurate cash flow projections are crucial for managing your business funding requirements effectively.

Balance sheet projections

Balance sheet projections reflect the financial position of your business at a specific point in time, showing assets, liabilities, and equity. Essential elements include:

• Current and long-term assets, such as cash, inventory, and property
• Liabilities, including accounts payable and long-term debts
• Shareholder equity, showing the net worth of the company

This projection helps investors understand the overall financial health and stability of your business.

Break-even analysis

A break-even analysis is essential for determining when your business will start to generate profit. It calculates the sales volume at which total revenues equal total costs. Key components of this analysis include:

• Fixed costs, which remain constant regardless of sales
• Variable costs, which fluctuate with production volume
• Sales price per unit and the contribution margin

This analysis is particularly useful in convincing investors of the potential for profitability within a realistic timeframe.

Sensitivity analysis for different scenarios

Sensitivity analysis tests how changes in key variables can impact your financial projections. It allows you to present various scenarios—such as best case, worst case, and most likely case—demonstrating the robustness of your business model and revenue projections . Consider factors like:

• Changes in market demand
• Fluctuations in costs
• Variations in pricing strategies

This analysis not only prepares you for potential challenges but also instills confidence in investors regarding your ability to navigate uncertainties.

• Ensure your financial projections are backed by thorough market analysis techniques and realistic assumptions.
• Regularly update financial forecasts to reflect changes in the business environment or market conditions.
• Utilize software tools for financial modeling to improve accuracy and professionalism in presentations.

How can you effectively present your business plan to investors?

Structuring the presentation for clarity.

When presenting your investor-ready business plan, a clear structure is paramount. Begin with an engaging executive summary that encapsulates the essence of your business. Follow this with sections dedicated to market analysis, business model and revenue projections, and your marketing strategy. Each section should logically flow into the next, guiding potential investors through your plan in a coherent manner.

Utilizing visual aids and data visualizations

Visual aids can significantly enhance your presentation, making complex information more accessible. Utilize charts, graphs, and infographics to illustrate key points, such as market size analysis and financial projections for investors. These visuals not only capture attention but also help convey your message more effectively, allowing investors to grasp your business model and competitive advantage analysis at a glance.

Practicing your pitch delivery

Effective delivery can make or break your presentation. Practice your pitch multiple times, focusing on your tone, pace, and body language. Rehearsing will help you convey confidence and passion for your business. Consider recording yourself or presenting in front of a small audience to receive constructive feedback. This preparation ensures you can articulate your value proposition definition with clarity and conviction.

Anticipating and preparing for questions

Investors will likely have questions about various aspects of your business plan. Anticipate these inquiries by reviewing common investor concerns, such as your customer acquisition strategy and financial forecasting for startups and investors. Prepare thorough responses and consider creating a FAQ section in your presentation to address potential queries proactively.

Highlighting key metrics and milestones

Throughout your presentation, emphasize key metrics and milestones that demonstrate your business's potential for success. Highlight critical elements such as:

• Projected revenue growth over the next three to five years
• Customer retention strategies and their expected impact
• Market research for business plan insights, including target market demographics
• Key partnerships or contracts that validate your business model

These metrics not only showcase your understanding of the business landscape but also provide tangible evidence to support your claims, making your presentation more compelling.

• Keep your slides concise. Aim for a maximum of six bullet points per slide to maintain focus.
• Engage with your audience. Encourage questions during or after your presentation to foster dialogue.
• Utilize storytelling techniques to make your presentation memorable. Share personal anecdotes or case studies that relate to your business.

What common mistakes should you avoid in your business plan?

Lack of clarity and focus.

One of the most detrimental mistakes in crafting an investor-ready business plan is a lack of clarity and focus. Investors need to easily understand your business model and how it aligns with your market goals. If your business plan components are muddled or overly complicated, it can lead to confusion and disinterest.

To avoid this pitfall:

• Use straightforward language and keep your sentences concise.
• Clearly define your value proposition definition and ensure it resonates throughout the document.

Overly optimistic financial projections

While it’s essential to present a positive outlook, overly optimistic financial projections can undermine your credibility. Investors are wary of inflated numbers that are not backed by realistic assumptions. Instead, provide financial projections for investors that reflect achievable goals based on thorough market research for business plan.

To mitigate this risk:

• Base your financial forecasts on historical data and realistic market size analysis.
• Include a range of scenarios in your profit and loss forecast examples to show potential variance.

Ignoring competition and market threats

Another common mistake is failing to conduct a thorough competitive advantage analysis. Investors want to know how you plan to position your business in the market and what threats you might face. Ignoring these factors can lead to a lack of confidence in your business plan.

To address this issue:

• Conduct a detailed competitor analysis to identify your market position.
• Discuss how your effective marketing strategy will differentiate your offering from competitors.

Failing to address potential risks and challenges

Investors appreciate transparency. Failing to acknowledge potential risks and challenges in your investor pitch deck can raise red flags. A well-rounded business plan should include a risk assessment that considers various scenarios.

To effectively tackle this challenge:

• Outline possible risks related to market fluctuations, operational challenges, or financial constraints.
• Present strategies for mitigating these risks, reinforcing your preparedness.

Neglecting to update and revise the plan regularly

Your business plan is a living document, and neglecting to update it regularly can lead to outdated information that can mislead investors. Regular revisions are crucial, especially as you gather new data from ongoing market research or as your business evolves.

To keep your plan relevant:

• Schedule periodic reviews of your business plan components to ensure accuracy.
• Adjust your financial projections for investors based on the latest market trends and performance metrics.
• Choosing a selection results in a full page refresh.

How to Write a Convincing Business Plan for Investors

Noah Parsons

9 min. read

Updated August 1, 2024

Raising money for your business is a major effort. You need lists of investors to reach out to and you need to be prepared for your investor meetings to increase your chances of getting funded . You need to practice your pitch and be ready to intelligently answer any number of questions about your business. A key to making this entire process much easier is to invest a little time and write a business plan . It’s true — not all investors will ask to see your business plan.

But putting together a business plan will ensure that you’ve considered every aspect of your business and are ready to answer any questions that come up during the fundraising process.

• Why do investors want to see a business plan?

The business plan document itself isn’t what’s important to investors. It’s the knowledge that you’ve generated by going through the process that’s important. Having a business plan shows that you’ve done the homework of thinking through how your business will work and what goals you’re trying to achieve.

When you put together a business plan, you have to spend time thinking about things like your target market , your sales, and marketing strategy , the problem you solve for your customers, and who your key competitors are . A business plan provides the structure for thinking through these things and documents your answers so you’re prepared for the inevitable questions investors will ask about your business. 

Even if investors never ask to see your business plan, the work you’ve done to prepare it will ensure that you can intelligently answer the questions you’ll get. And, if an investor does ask for your business plan, then you’re prepared and ready to hand it over. After all, nothing could be worse than arriving at an investor meeting and then getting a request for a business plan and not having one ready.

Beyond understanding your business strategy, investors will also want to understand your financial forecasts. They want to know how your business will function from a financial standpoint — what is typically called your “ business model .” They’ll also want to know what it will take for your business to be profitable and where you anticipate spending money to grow the business. A complete financial plan is part of any business plan, so investing a little time here will serve you well. 

• What do investors want to see in a business plan?

There’s no such thing as a perfect business plan and investors know this. After all, they’ve spent years, and often decades, hearing business pitches, reading business plans, investing in companies, and watching them both succeed and fail. As entrepreneur and investor Steve Blank likes to say, “No business plan survives first contact with a customer.” 

If this is true, then why bother writing a business plan at all? What’s the value of planning and why do investors want them if they know the plan will shortly be outdated?

The secret is that it’s the planning process, not the final plan, that’s valuable. Investors want to know that you’ve thought about your idea, documented your assumptions, and are on track to validate those assumptions so that you can remove risk from your business. 

So what do investors want to see in your business plan? Beyond the typical sections , here are the most important things that investors want to see in your plan.

A vision for the future

Investors, particularly those investing in early-stage startups, want to understand your vision . Where do you see your company going in the future? Who will your customers be and what problems will you solve for them? Your vision may take years to execute — and it’s likely that the vision will change and evolve over time — but investors want to know that you’re thinking beyond tomorrow and into the future.

Product/market fit and traction

Investors want more than just an idea. They want evidence that you are solving a problem for customers. Your customers have to want what you are selling for you to build a successful business and your business plan needs to describe the evidence that you’ve found that proves that you’ll be able to sell your products and services to customers. If you have “traction” in the form of early sales and customers, that’s even better.

Funding needed and use of funds

When you’re pitching investors, you need to know how much you’re asking for. Your financial forecast should help you figure this out. You’ll want to raise enough money to cover planned expenses and cash flow requirements plus some additional funding as a safety net. In addition, you’ll want to specify exactly how you plan on using your investment . In a business plan, this section is often called “sources and uses of investment.”

A strong management team

A good idea is really only a small part of the equation for a successful business. In fact, lots of people have good business ideas — it’s the people that can execute well that generally succeed. Investors will pay a lot of attention to the section of your plan where you talk about your management team because they want to know that you can transform your idea into a successful business. If you have gaps and still need to hire key employees, that’s OK. Communicating that you understand what your needs are is the most important thing.

An exit strategy

When investors give you money to start and grow your business, they are looking to eventually make a return on their investment. This could happen by eventually selling your business to a larger company or even by going public. One way or another, investors will want to know your thoughts about an eventual exit strategy for your business.

• What documents do investors want to see?

Even if investors never ask for a detailed business plan, your business planning process should produce a few key documents that investors will want to see. Here’s what you need to be prepared to pitch investors:

Cover letter

These days, a lot of fundraising outreach is done over email and you’ll need a concise cover letter that sparks investor interest. Your cover letter needs to be very brief, but describe the problem you’re solving for your target market.

Great cover letters are sometimes in a “story” format that hooks readers with a real-world, relatable example of the problems your customers face and how our product or service The goal of the cover letter isn’t to explain every aspect of your business. It’s just to spark interest and get a meeting with an investor where you’ll have more time to actually pitch your business. Keep your cover letter brief, engaging, and to the point.

If you get an investor meeting, you’ll almost certainly need a pitch deck to present your idea in more detail and showcase your business idea. Your pitch deck will cover the problem you’re solving, your solution, your target market, and key market trends.

Further Reading: What to include in your pitch deck

Executive summary and/or one-page plan

You might not get a meeting right away. Your cover letter may generate a request for additional information and this is where a solid executive summary or one-page business plan comes in handy. This document, while still short, is more detailed than your cover letter and explains a bit more about your business in a page or two.

Read more about what goes into a great executive summary and how to build a lone-page business plan.

Financial forecasts

Investors will inevitably want to see your financial forecasts. You’ll need a sales forecast, expense budget , cash flow forecast , profit and loss, and balance sheet . If you have historical results, you should plan on sharing those too as well as any other key metrics about your business. Investors will always look deep under the hood of your business, so be prepared to share all the details of how your business will work from a financial perspective.

• What to include in your investor business plan

When you put together a detailed business plan for investors, you’ll follow a fairly standard format. To get started, I recommend you download our free business plan template . It’s lender-approved and, of course, can be customized to fit your business needs.

Remember: your business plan isn’t about the plan document that you create — it’s about the planning process that helps you think through and develop your business strategy. Here’s what most investor business plans will include:

Executive Summary

Usually written last, your executive summary is an overview of your business. As I mentioned earlier, you might use the executive summary as a stand-alone document to provide investors more detail about your business in a concise form. Read our guide on executive summaries here .

Opportunity

The opportunity section of your plan covers the problem you are solving, what your solution is, and highlights any data you have to prove that people will spend money on what you’re offering. If you have customer validation in any form, this is where you highlight that information.

Market Analysis

Describe what your target market is and key trends that are occurring in this market . Is the market growing? Are buying patterns changing? How is your business positioned to take advantage of these changes? Be sure to spend some time discussing your competition and how your target market solves their problems today and how your solution is superior.

Marketing & Sales Plan 

Most businesses need to figure out how to get the word out and attract customers. Your business plan should include a marketing plan that describes how you’re going to reach your target market and any key marketing initiatives that you’re going to undertake. You should also spend time describing your sales plan, especially if your sales process takes time to close customers.

Milestones / Roadmap

Outline key milestones you hope to achieve and when you plan on achieving them. This section should cover key dates for product development, key partnerships you need to create, and any other important goals you plan on achieving.

Company & Management

Here’s where you describe the nuts and bolts of your business. How is your organization structured? Who is on your team and what are their backgrounds? Are there any important positions that you still need to recruit for?

Financial Plan

As I mentioned, you’ll need to create a profit and loss, cash flow, and balance sheet forecast. Your financial plan should be optimistic, yet realistic. This is a tough balance and your forecast is certain to be wrong, but you need to document your assumptions and plans for the business.

Finally, you can include an appendix for any key additional information you want to share. Product diagrams, additional details on how you deliver your service, or additional research can all be included.

• What comes next?

Writing a business plan for investors is really about preparing you to pitch your business . It’s quite likely that you’ll never get asked for the actual business plan document. But, the process will prepare you better than anything else to answer any questions investors may have.

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

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How to Write a Business Plan for Investors?

Business Plan Template

• June 17, 2024

Need to secure funds for kick starting or growing your business venture?

You’ll require a well-detailed business plan before approaching your investors.

But here’s the thing: Investors go through hundreds and thousands of plans every day. If yours doesn’t capture their attention in one go, you’ll lose the opportunity to win that investor.

To avoid this nightmare, prepare a business plan that checklists everything an investor seeks in a plan.

Wondering how? Read this blog post and learn how to prepare a business plan for investors . Also, understand why investors require a business plan and what they’re looking for.

Ready to dive in? Let’s get started.

Why do investors need a business plan?

While considering an investment opportunity, investors are looking for something other than a fancy business idea.

They’re looking to invest in a business opportunity that demonstrates a clear understanding of the target market and the competition. A business with clearly defined objectives, business strategies, and financials. A business that can prove its viability and financial sustainability in the long run.

That’s everything a business plan does by outlining these aspects in great detail. It answers all the questions an investor might have while considering your funding request, thereby helping them make an informed choice.

What do investors look for in a business plan?

Investors don’t expect a perfect plan. They are mainly interested to see if you have tested the business’s viability, have set goals, and can operate it successfully.

So stop striving for perfection. Simply ensure that a business plan touches on the following key aspects:

Product market fit

Investors want to see if you’re solving a viable problem and if there’s a sizable market of people who want to purchase your products. You can prove this through market share assumptions, competitors and target market analysis, beta testing, as well as traction.

Business vision and milestones

Investors want to know what you aim to achieve with your company through a clear mission and vision statement . They would like insight into the company’s long-term and short-term goals and any milestones you have achieved to date.

People in your organization

An investor wants to know the people who would execute your business idea. They would pay extra attention to this section evaluating the strengths, gaps, and weaknesses in your current team.

Funding demand

A business plan should offer a clear understanding of your funding requirements and offer answers about Return on Investment (ROI). Not only that, you need to justify the funding demands and explain your plans to utilize that funding.

These are the most important things an investor will require an answer to. With that said, let’s understand how to structure such information in your business plan.

How to write a business plan for investors?

An investor plan can be as long as 15-20 pages or as short as 1-2 pages (lean plan). Regardless, here are the key components that your business plan should have.

1. Executive summary

This section offers a quick overview of your entire business plan. Most entrepreneurs use it as a standalone document to offer investors a quick rundown of their business idea.

A well-crafted summary summarizes the key elements of a business plan such as the mission statement, products and services, market opportunity, marketing strategy, and financials in a line or two, individually.

You can even draft an executive summary that weaves all this information together into an engaging narrative. However, focus on brevity and remove all the fluff to make this section informative for investors.

2. Opportunity

The opportunity section of your business plan will define the problem you are solving and the solution you have to offer. It introduces your products and services as well as highlights their key features and Unique Selling Propositions (USPs).

In this section, you’ll prove that your company is chasing a viable problem and you have a segment of customers willing to pay for your products and services.

3. Industry and market analysis

Investors require a section on market research and analysis to see if you thoroughly understand the market you’re entering.

This section talks about the size of your industry and the market share you can capture. It outlines the emerging trends within your industry and also highlights the potential challenges you may face.

Investors also need a clear overview of your target customers. Building clear buyer personas or customer profiles at this stage can help them understand your audience better. Moreover, you can use these details to craft your business strategy and product offerings.

4. Competitors overview

Don’t shy away from talking about your competition and competitive advantage.

In this section, introduce your top competitors and conduct a SWOT analysis to identify their strengths and weaknesses.

Compare your competitors based on products, market share, target audience, revenue generation, location, and other related factors. Draw your competitive advantage and show how despite the competition your business can manage to thrive.

5. Revenue model

An investor absolutely needs an answer to how your business will make money. In your one-page business plan, you will quickly outline your revenue sources and your pricing strategies.

Explain how the chosen revenue model is fit for your business and include any additional models you plan to add in the future. Also, compare your pricing to the competitors and justify how charging less or more will be beneficial for your business.

6. Milestones and traction

Investors need to know that your business is more than just an idea. You need to prove its viability, and traction is the best way to do so.

Traction could be anything from a minimum viable product (MVP) to intellectual properties, such as early acquired customers, generated revenue, press mentions, testimonials, acquired key partnerships, or supplier contracts.

Pay extra focus to this section when you write your business plan for investors. It will instill investors’ confidence in your ability to turn ideas into a reality and build a successful business.

7. Team overview

This is your chance to introduce your team and prove how they’re the best fit for your business.

To write this section, introduce the members with a brief bio. The description should offer an overview of their professional experience, skills, and achievements along with the position they take at your company.

Moreover, don’t forget to define the organizational hierarchy as well as highlight if there are any gaps in your team and how you plan to overcome those.

8. Marketing and sales plan

Detail your strategies to acquire and retain the clients in this section.

Outline the marketing efforts you’ll make to reach your target market. This includes an overview of the marketing channels you’ll use, a marketing plan for each channel, your budget, and the metrics to track your marketing efforts.

Investors don’t expect a fool-proof line down of strategies. They just need a realistic overview of strategies that can bring you sales.

9. Company operations

This is your chance to prove that you have the means and capabilities to execute your business idea.

Define your business processes, establish SOPs, outline your hiring plan, detail your quality control processes, and list down all the equipment, technology, and resources you’ll require.

10. Financials

A brilliant business idea needs convincing financials to persuade the investors’ interest in an investment opportunity.

Investors expect a well-detailed financial plan that includes three quintessential financial statements, i.e. cash flow statement, income statement, and balance sheet.

These statements help them assess the financial health of a business as well as calculate essential future growth, profitability, and break-even ratios.

Make sure that you add the future projections for at least 3-5 years and include realistic justification for your assumptions.

11. Funding demand

Lastly, but most importantly, investors want a clear understanding of how much funding you require and your plan to utilize the same in different business activities.

Clarify what an investor will gain by investing in your business. Also, outline your repayment plan and your exit strategy .

12. Appendix

Investors might need additional documents that support the information in your plan.

Here are a few things you can include in your appendix of business plan :

• Intellectual proofs
• Registration and licensing permits
• Product pictures
• Detailed financial statements
• Raw market research
• Competitors research

Although optional, this section is quite useful in offering investors key details and proof related to your organization.

And that’s everything you need to include in your business plan for investors.

Prepare your investors’ plan with Upmetrics

A convincing business plan wins over the investors’ trust in your business and secures you the funding essential to get started.

However, despite the basic understanding, writing a crisp plan that covers all the essential information and makes a professional display takes a lot of work.

What if there was an easier way?

With the Upmetrics , you can create business plans in less than 10 minutes. All you need to do is answer some basic questions and its AI business plan generator will develop investor-ready plans from scratch in no time.

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Frequently Asked Questions

What are investors looking for in a business plan.

An investor looks for a business plan that offers insight into the business vision, mission, product market fit, and management team while clarifying the funding demand.

An overview of competitors and market analysis, business strategies, and your target user are additional details that investors would love to see.

How can I make my business plan stand out to investors?

To make your business plan stand out, ensure that you cover the key elements of your plan and present it in a structured and organized manner. Make your plan concise and crisp, free of non-inessential information.

Additionally demonstrate a strong understanding of the target market, competitors, product, and your business financials to win over the investors’ trust.

Should I seek professional help when creating a business plan for investors?

Yes, if you don’t have any experience in writing a business plan. The professional help can be in the form of plan writing service providers or business planning tools like Upmetrics . Generally, it’s much more affordable and reliable to use business planning software than hiring an agency or a human writer.

Can I use a template for my business plan for investors?

Yes, absolutely. A business plan template offers structure to write a cohesively flowing business plan. Instead of preparing your plan from scratch, a template makes the task much easier. All you have to do is fill in the blanks with the information you have already collected.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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How to Write a Business Plan For Investors (That They Will Love)

The Startups Team

A good business plan does more than just inform readers about what your company does, how you earn money, or what you want to do. It persuades the reader that your company is awesome, gets them excited about the opportunity to get involved, and makes them want to help you succeed.

But how do you write a good business plan for investors? You probably didn’t go to business school and if you’re a first-time founder, it can be really hard to figure out how to do something so technical. But don’t worry! This guide will walk you through how to write a business plan for investors, will help you answer the most important questions about your business, and will show you the best ways to illustrate them. We’ve also thrown in some additional resources you can turn to for help.

And if that’s still not enough, Bizplan is giving Startups.com readers 50 percent off their first month of business planning services. Check it out here .

The Big Picture

There are 14 important sections of a business plan. But that is by no means an excuse to write out your entire life story on paper. The average business plan should be around 15 pages — no more than 20.

In the past, the average business plan was anywhere from 40 to 100 pages, and guess what they found out? No one was reading all of that. So don’t let important information about your company get lost in a jumble of words. Investors look for founders who can provide the most value in the least amount of time, and your business plan is a great indication of that ability.

The Big Questions

By the time readers are done reading your business plan, they should have a clear understanding of the following: Why (Why this? Why now? Why you? Why them?) and how (How will you make money? How will you get customers? How will you grow your business?).

These questions should be answered throughout your business plan, and should prove to those reading it that your company has the right product, market, team, time, and strategy to make them a return on their investment.

So without further adieu, here is a breakdown of writing a business plan for investors:

1. Executive Summary

The Executive Summary is an introduction to the main ideas that you will discuss in the rest of the plan. If an investor read only the Executive Summary and nothing else, you’d want them to be able to walk away with a clear understanding of the main highlights of your business and why it’s exciting.

A good Executive Summary includes quick, one to two sentence overviews of the following information: mission statement, product/service summary, market opportunity summary, traction summary, next steps, and vision statement.

Pro tip: Although the Executive Summary comes first, it is often helpful to write it last because you’ll have worked through everything by then.

2. Investment Opportunity

The Investment Opportunity section is where you tell investors what your goals are, why they are integral in helping you achieve those goals, and what they have to gain from getting involved with your company. This includes:

• Your Funding Goal : How much money do you need to move forward
• Terms : What will investors get in exchange for their investment?
• Use of Funds : How do you plan to use those funds? (Hint: a 6-figure salary for yourself isn’t what they’re looking for here)
• Milestones : What will you be able to achieve with their investment?

Again, the most important question to answer here is why: Why should investors want to be a part of your company, and why is now the time for them to get involved? Identify the three to four key factors that make your company a great opportunity and make sure they’re included in this section.

3. Team Overview

This is where you introduce your team and how you’ll work together to bring the business to life. An ideal Team Overview section makes the case not only that your team is the right team for the job, but that you’re the only team for the job.

In order to do this, you need to create a bio for each member of the team. Each team bio should include: the team member’s name; their title and position at the company; their professional background; any special skills they have developed as a result of their past experience; their role and responsibilities at your company; and what makes them uniquely qualified to take that role on.

Pro Tip: This is not the time or place for cheesy fun facts or hobbies. Aim for three to five concise sentences on each team member.

4. Market Opportunity

Before you do a deep dive into what your company does, it’s important to set the stage and provide readers with some insight about why you’re starting this company in the first place. A good market opportunity section addresses two key points: The problem that your product/service solves, and the industry trends that make now the time for your company to succeed.

When writing the “problem” part of this section, consider two questions: What problems do your target customers face that your product/service solves? What annoyances or inconveniences do they face that your company helps to eliminate?

When writing the “trends” section, consider these three questions: What recent emerging trends have you developed your product/service in response to? Are there any new or emerging technologies that make your product/solution possible? Are there any specific brands you can point to that illustrate the demand for products/services like (but not too like) yours?

And to sum it all up, write a conclusion that answer this question: How do the problems customers face and the trends that are happening come together to create the perfect environment for your company to succeed?

5. Company Synopsis

The company synopsis section is where you introduce readers to your company and what you have to offer. This is the easy part: It’s where you get to talk about what you’re doing and why it’s awesome.

Consider these questions if you’re having trouble getting started: What does your company do? How does it solve the problem you’ve previously outlined? What products and services do you offer? How will customers use your product/service? What are the key features? What makes your product/service different from anything currently available?

6. Revenue Model

This is where you answer the age-old question of any business: How does your company make money? Identify all current/initial revenue sources, including pricing, COGS, and margins.

Ask yourself: Why is this revenue model the right fit for your current stage? How does your pricing compare to competitors? Are there additional revenue sources you plan to add down the line? If you haven’t started generating revenue when & how will you “flip the switch”?

7. Traction/Company Milestones

It’s important for investors to see that your business is more than just an idea on a cocktail napkin; it’s an actual, viable business. Traction is a huge part of making that case.

Here are some key categories of traction that signal to readers that your company is making moves.

• Product Development : Where are you in the process? Is your product in the market?
• Manufacturing/Distribution: Do you have an established partner for production/manufacturing? Distribution?
• Early Customers and Revenue : Do you have existing customers? How many? And how fast are you growing? Have you started generating revenue?
• Testimonials and Social Proof : Do you have any positive client reviews of your product/service? Any high profile customers or industry experts?
• Partnerships : Have you secured partnerships with any established brands?
• Intellectual Property : Do you have any patents for the technology behind your company? Is your company name trademarked?
• Press Mentions : Has your company been featured by any media outlets? Which ones?

8. Industry Analysis

The industry analysis section provides a bird’s eye view of the industry your company is positioned in, what’s happening in the industry, and where your company stands in relation to your peers. You want readers to walk away from your business plan seeing not only that you’re an expert in your company but that you’re highly knowledgeable about the industry you’re entering into.

Be intentional about the statistics you include in the plan. Include only numbers that really help to illustrate: the size of the opportunity your company is positioned to address; the demand for your solution; the growth of the audience/demand for your product that is already happening; and competitor analysis.

Now that you’ve introduced readers to your industry, it’s time to give them a glimpse into the other companies that are working in the same space, and how your company stacks up. Identify at least three sources of competition for your company and answer the following questions about each one:

• Basic Info : Where are they based? What stage of growth are they in?
• Traction : How much revenue do they generate? How many customers do they have? Have they received funding?
• Similarities and Differences : What are their strengths? How do you plan to neutralize them? What are their weaknesses? How is that an advantage to you?
• The Takeaway : What can you learn from your competitors to make your company stronger?

Pro tip: When identifying competitors, it’s important to think outside the box, and look beyond companies that are offering the exact same product or service that you are. A skimpy competitor analysis section doesn’t tell investors that your solution is unrivaled — it tells them that you’re not looking hard enough.

9. Differentiating Factors

The differentiating factors section is where you outline how your product/service is different from others on the market and how those differences will help you to maintain your strategic edge. Ask yourself: What are three to five key differentiators between your company and other solutions out there? How will these advantages translate into a long-term advantage for your company?

10. Target Audience

The target audience section is where you show readers that you know who your audience is, where they are, and what is important to them.

Some questions to help you get started include: Who are the people that your product/service is designed to appeal to? What do you know about customers in this demographic? Does your target audience skew more male or more female? What age range do your target customers fall in? Around how many people are there in this target demographic? Where do your target customers live? How much money do they make? Do they have any particular priorities or concerns when it comes to the products/services they buy?

11. User Acquisition and Marketing Strategy

Now that we know who your customers are, the next question is: How do you plan on getting them?

Ask yourself: How will you get your first customers? Who will you target first? Will you introduce your product in certain key geographic locations? Are there any existing brands that you are planning to partner with? How do you plan to raise awareness for your brand? What forms of media will you use? Why? Do you have a presence on social media? Which platforms do you use and why? Essentially, what is your marketing strategy ?

12. Future Growth and Development

Once you’ve accomplished all the short-term goals, built out your initial product offering, and acquired your first customers — what will you do to grow your business from there?

Ask yourself: Do you have any new products in the pipeline? How will these new products enhance your current offerings? Are you planning to expand into new markets (new cities, new demographic categories)? Can you provide a timeline of when you expect each new development to take place? What metrics or conditions will help you to decide when it’s time to move forward? What are some potential exit strategies for your company down the road? Will you seek acquisition by a larger company? Do you plan to take the company public with an Initial Public Offering?

13. Financial Overview

Financial data is always at the end of the business plan, but that doesn’t mean it’s any less important. In fact, poor financials can rip apart anything you initially had going for you. The charts, tables, and formulas in your financial section show an investor how well you’re doing and what your odds are for continued survival.

The three most important things to include are: cash flow statement, income statement, and your balance sheet. While these three things are related, they measure quite different aspects of a company’s financial health.

We’re Here To Help

There you have it: A comprehensive guide to writing your next business plan for investors. Sound like a big undertaking? Our friends at Bizplan.com have your back. Click here for a Startups.co exclusive discount on their services. Good luck!

Bhavin Bhagat

The truly informative article you shared.

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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A business plan is a document that outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.

Key Takeaways

• A business plan is a document detailing a company's business activities and strategies for achieving its goals.
• Startup companies use business plans to launch their venture and to attract outside investors.
• For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
• There's no single required format for a business plan, but certain key elements are essential for most companies.

Investopedia / Ryan Oakley

Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.

Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.

A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.

While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.

A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.

Common elements in many business plans include:

• Executive summary : This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
• Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
• Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
• Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.

Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.

2 Types of Business Plans

Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
• Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.

Why Do Business Plans Fail?

A business plan isn't a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections. Markets and the economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All this calls for building flexibility into your plan, so you can pivot to a new course if needed.

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.

A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.

As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.

University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.

Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

Harvard Business Review. " How to Write a Winning Business Plan ."

U.S. Small Business Administration. " Write Your Business Plan ."

SCORE. " When and Why Should You Review Your Business Plan? "

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What is an Investor Ready Business Plan?

The reading level for this article is Novice

A Business Plan, as all good entrepreneurs starting out in life should know is the foundation, or rather a springboard, towards the establishment and growth of ones business. A business plan is an essential component towards the realization of your goals. A vital aspect of a business plan is that it should be Investor Ready.

What is an Investor Ready business plan?

An investor ready business plan is a document that has been prepared by going into all the concerns of the investors. In your Business Plan, you should be able to see your own project with the investor’s eye. Your plan must be able to answer the concerns of an investor.

The investors, both venture capitalists and angels, are risking their hard earned cash by investing in your venture in the hope of long term returns that are worth many times their original investment. An investor ready business plan , in a way addresses all the concerns of the investors. One addresses these needs by giving a comprehensive and detailed view of what ones business aims and objectives are. Some important sections that address different concerns of the investors are given below:   

Investors invest in management – not just ideas. It is very important that you express your knowledge, passion and dedication to your business as best as you can. The competence of your team along with their experience levels, their passion and dedication to the set business goals, and their commitment levels are also factors that investors look into before making their investment decisions.       

It is important to communicate to the investors that you understand the needs and requirements of your customers and to articulate your market strategy within your business plan.

Product/Service Description

A complete description of the product or the services offered by you should be outlined in detail. A short description of the overall industry of your product/service, along with the details of your customer base is essential. The investors need to know the reach and the kind of customers your product / service is catering to. Marketing Strategy Plan

One of the most important sections of business plan is your marketing strategy plan. This section will outline your sustainable competitive advantage to your investors. In a way assure them why you will succeed where others have failed. This section is where you include a definitive description of your customers, market size, demographics, characteristics, growth prospects, trends and sales potential per product/service category.

Here is where the pricing strategies are outlined and how they can directly influence the growth potential of each product /service. It is also important to include the future growth, market share and trend influences.

Barriers to Entry

Along with giving the details of what your product / service is and who your customers are, you also have to inform your investors how you will you prevent your competitors from taking away your customers. The barriers to entry section essentially outline your business strategy to keep your competitors at bay and grow in the market. Investors need to be insured about the soundness of your strategy before they invest in your venture.

Click here to contact us to learn more about writing an investor ready business plan, http://www.investorbusinessplan.com/writing-business- plan.html .

For more in-depth information on Business Plans, you can visit our site on www.investorbusinessplan.com .

This Business article was written by Howard Schwartz on 3/3/2005

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Business Planning: Ultimate Guide to Writing a Business Plan for Investors

If you are planning to start, grow or sell a business, it is almost essential you have a plan of attack.

A traditional business plan is much more than a general list of things that you need to do.

An effective plan focuses on short-term and long-term business goals, with information that outlines how you intend to reach them.

A formal business plan will be one of the most valuable tools that you will use in raising capital from investors and for building and growing your business.

Like the businesses themselves, business plans come in many types and forms.

Oftentimes even established business owners and managers underestimate the effectiveness of a qualified business plan.

Some mistakenly think business plans are only used in the venture capital world of start-up finance.

This simply is not true. Enterprise planning is often required for anything from SBA lending and debt financing to internal planning and partnership qualification.

Many find they regularly refer to a previously-written business plan to ensure they stay on track and under budget.

A business plan can also help you establish a framework for your dream business, including structure and planning goals.

In addition, business planning is often a fluid process and a living document, with changes occurring mid-stream which means those best prepared have already done their homework and are prepared to pivot.

Crafting Your Business Plan(s)

Discovering a business idea, introductory page, executive summary, industry analysis, description of the venture, production or service plan, marketing plan, organization and management, assessment of risk, financial plan, start-up plan, internal plans, operations plans, growth plans, type 1 and type 2 business plans, type 3 and type 4 business plans, type 5 business plan, type 6 business plan, benefits of an outsourced business plan, business plan executive summary, financial statements & financial plan, how long should a business plan be, expert forecasting, market estimates from past data, common sense market estimations, porter’s five forces – industry, porter’s five forces, porter’s five forces – macroenvironmental factors, macroeconomic forces, legal/political forces, social & cultural forces, technological forces, demographic forces, global forces, porter’s five forces – scorecard, capital costs, economies of scale, brand loyalty, absolute cost advantages, customer switching costs, laws & regulation, summary of barriers to entry , defining market type boundaries, a recap of market boundaries , the importance of the tim, tam, sam, tm and som, scalable, high growth company, successful, mid-sized privately held businesses, lifestyle businesses, target marketing, time expectations as an entrepreneur, business plan writing, why write a business plan, standard evaluation and review, the business plan writing process, terms & conditions, pricing & cost of your business plan, business plans for financing, pro forma financial plans, marketing business plan.

You will essentially create two plans. The first is known as the  internal or initial start-up business plan . This plan includes your company’s mission statement, product/service description, marketing strategy plan and initial start-up goals. Most importantly, the initial plan will also include a market analysis. Performing research on the market helps both internal managers understand whether the business concept or business idea is viable and worth pursuing and to attract investors.

If it is, the initial plan will morph into something suitable for angel investors, venture capitalists and private equity groups. Typically, your final secondary plan will incorporate the details in your initial start-up plan into a more finalized version ready for publication. InvestmentBank.com assists throughout this entire process.

How you go about your business plan process is dependent on the audience for which it will be created.

For example, if you will be seeking a business loan, you need to create  business plan for bank loans . Conversely, if you are seeking investment capital in equity financing, you’ll most likely need a  venture capital business plan . Regardless of the audience any typical business plan will generally include the following:

• A company description, including a description of your business and the products and/or services offered
• A detailed description of the target market and how they will best be served
• Information regarding the management team and key employees within the company
• Detailed information about cash flow and financial analysis, budget and market penetration
• An  Executive Summary  for a snapshot 30,000 foot view of all aspects of the business and how it will be successful

Discovering a business idea is the first step towards creating a business model hypothesis. Specifically, a business idea worth investigating further is a “proto-business model” – the embryo of a viable business model. The business idea is essentially your best guess that describes your Value Proposition (the thing you want to sell) and your Customer Segment(s) (the target customers you want to sell to). This is your initial pass at creating a viable Value Proposition – Customer Segment “fit”.

At a minimum, a business idea worth investigating further should have one or more Customer Segments and a corresponding Value Proposition to match each Customer Segment. Completing the following steps will validate that your business idea is worth investigating further.

• Identify Value Proposition – Customer Segment pairings.  This step involves pinpointing the type and number of Customer Segment(s) your business is going to serve and what your business’s Value Proposition will be for each of those Customer Segments. This will create one or more Value Proposition – Customer Segment pairings.
• What your Customer Segment is trying to do (i.e. eat dinner, find a date, get in shape…). What are your Customer Segment’s problems (they are hungry and don’t want to cook, they can’t find a suitable boyfriend/girlfriend, they are out of shape…). What does your Customer Segment expect to gain from accomplishing whatever they want to do (eat a tasty meal, find a pleasant date, loose a few pounds and feel better)?
• What your company can offer your Customer Segment (i.e. a good quick meal, a matchmaking service, a place to work out…). How will your offer solve your Customer Segment’s problems? What benefits will your offer create for your Customer Segment? The best business solves real-world problems.

Business Plan Outline

A business plan may contain many types of information depending on the nature, size, and financing needs of the company. One general business plan template can be developed with the help of our JDs, MBAs and expert business planning professionals. While various institutions like the Small Business Administration (SBA) help provide guidelines, it is often best to get your detailed business plan drafted by professionals who know what it takes to get funded and what investors are looking for when they sift through thousands of plans.

This is the title or cover page. This page will contain the information of the names and addresses of business enterprise and entrepreneurs, a paragraph describing the nature of business, and the vision and mission statement of the company.

An executive summary of the comprehensive business plan report should be presented within four pages, summarizing the whole report and emphasizing on business purpose, industry analysis, market opportunity, key elements of the business, revenue, and planning.

This segment of a viable business plan will show the present conditions of the industry, in which the entrepreneur desires to enter. This section should include present and future outlook and demographic developments, analysis of competitors, market segmentation, and industry financial forecasts.

In this segment of the business plan a detailed picture of the venture should be outlined with particular reference to products, services, office equipment, machinery, personnel, size of business, and background of entrepreneurs.

This portion of the business plan is indeed an operational plan. The operational activities of manufacturing, trading and service business are different. So the operational plans of different types of enterprises will be different. For example operational plan of a manufacturing business may cover unique aspects such as manufacturing process,equipment, names of the providers of the raw materials and other inputs of the production process, and so on.

It includes market condition, market strategy, and future market prospect. The pricing, promotion, distribution, product forecasts, and controls should be evaluated carefully for the business plan.

This section includes forms of the ownership, identification of partners or major shareholders, the authority of the managers, management-team background, and the duties and responsibilities of members of the organization.

It is very important for any business plan to assess all the possible risks that may affect the enterprise, prior to starting the business. Assessment of risk must include evaluation of the weaknesses of the enterprise, latest technologies, and contingency plans.

This section shows financial viability of the business plan, in which the entrepreneur must prepare forecasted income statement, cash flow estimates, forecasted balance sheet, break-even analysis, and sources and usages of funds. This section will be scrutinized to determine the profitability and sustainability of the enterprise by the investors, such as the bankers or venture capitalists.

It contains all the backup materials such as legal documents, market research data, lease contracts, and price forecasts from suppliers.

These are the general contents of a business plan that are suggested by the experts, but these contents may vary from business to business. A good business plan should be comprehensive enough to provide a complete picture and understanding of the venture regarding its present status and future growth potential to the prospective investors and other interest groups.

Business Plan Types

Traditional business plans come in many types. They include strategic plans, expansion plans, investment plans, growth plans, operational plans, internal plans, annual plans, feasibility plans, product plans, and many more.

The various types of business plans will always matche the specific business situation. For instance, it is not necessary to add all the background information that is known already, while preparing a plan to use internally and not circulating it to financial institutions or investors. Investors always look for information on the description of the management team, while bankers always look for financial background or history of the company.

The various types of business plans are due to the specific case differences:

Start-up plan is the most standard plan that explains the steps for a developing new business. Start-up plans often include standard topics such as the organization, product or service offering, market place, business forecasts, strategy, management team, implementation milestones, and financial analysis. Sales forecast, profit and loss statement, cash flow statements, balance sheet, and probably a few other tables are included in the financial analysis.

First year monthly projections are shown in the start-up plan, which usually begins with an abstract and ends with appendix.

Click on the following link to learn more about how we approach startup investing .

Business plans that are not usually intended for external investors, financial institutions, or any other third parties are called Internal plans. A detailed description of the organization or the management team may not be included in it. Detailed financial projections like budgets and forecasts may or may not get included in Internal plans. Instead of presenting the whole business plan in the form of paragraph text, Internal plans display the main points in the form of bullet points in slides.

Operations plan can be referred to as Internal plan, which is also known as an annual plan. More detailed information on specific dates, implementation milestones, deadlines, and teams and managers responsibilities are given in Operations plan.

Strategic planning usually does not focus on specific responsibilities and detailed dates, rather it focuses on setting high priorities and high-level options and is also referred to as an internal plan. Unlike most other internal plans, it includes data in the form of bullet points in slides. Organization or management team descriptions are not included in it. Also, some of the financial information is not explained in detail and left while preparing strategic plans.

Some business plans focuses on specific areas of the business or a subcategory of the business, and these plans are referred to as a growth plan or an expansion plan or a new product plan. Depending on whether these business plans are linked to new investments or loan applications, they could be classified as internal plans or not. For instance, like a start-up plan developed for investors, an expansion plan that requires new investment would also have detailed description of the company and its management teams background data. These details will also be required for loan applications. But, these descriptions are skipped in an internal business plan, which is used to design the steps for growth or expansion that is funded internally within the organisation. Although, detailed financial projections might not be given, forecast of the sales as well as the expenses for the new business venture is at least included in more detail.

A very simple start-up plan is the feasibility plan, which include an abstract, mission statement, market analysis, keys to long-term success, and initial cost analysis, pricing, and projected expenses. Feasibility plans helps to analyze whether it is good to continue with a plan or not, to find if the business plan is worth continuing.

Writing a business plan is a highly collaborative affair between the entrepreneur(s) and the business plan writer. The more complex the plan is, the more both the entrepreneur(s) and the business plan writer will need to communicate and collaborate in order to produce a professional, marketable business plan. The business plans we write fall into six general categories. We will discuss each in detail below.

These are business plans for new companies that are 1) trying to raise startup capital to launch the business and 2) the business will serve a clearly defined target market with a service or product that already exists. These business plans are usually the least complex to write because the business models

The hourly fee for work over the project’s estimated number of hours is $20 per hour.

Type 1 and Type 2 business plans are written in five distinct units. Each unit reflects a progressive step in putting the business plan together. Before we can begin writing each unit, we must receive feedback to specific questions that we will send you concerning the topics covered in each specific unit.  After we complete each of the first four units, we will send you a draft of that unit in a Microsoft Word document. You will then have the opportunity to review unit draft and critique or clarify it.

We will make any necessary changes needed for each unit draft. The fifth and final unit will be integrating the information in each of the previous four units into a final, complete business plan. You will then have the opportunity to review and critique that completed business plan draft. We will then correct any and all discrepancies in that final complete draft.

The entire business planning process of writing a Type 1 or Type 2 business plan depends upon our general workload and the speed with which you respond to our requests for information about your business. We estimate that either a Type 1 or Type 2 business plan will take generally 10 to 15 work days to complete (two to three weeks).

These are business plans for existing companies that are 1) trying to raise capital for a new business project or idea and 2) the business project is serving a clearly defined market with a service or product that already exists.

Type 3 and Type 4 business plans are written in six distinct units. Each unit reflects a progressive step in putting the business plan together. Before we can begin writing each unit, we must receive feedback to specific questions that we will send you concerning the topics covered in each specific unit.  After we complete each of the first five units, we will send you a draft of that unit in a Microsoft Word document. You will then have the opportunity to review the draft of each unit and critique or clarify it. We will change or modify any discrepancies you have with the drafts of each unit. The final unit will be integrating the information in each of the five units into a final, complete business plan. You will then have the opportunity to review and critique that completed business plan draft. We will then correct any and all discrepancies in that final complete draft.

The entire process of writing a Type 3 or Type 4 business plan depends upon our general workload and the speed with which you respond to our requests for information about your business. We estimate that either a Type 3 or Type 4 business plan will take generally 15 to 20 work days to complete (three to four weeks).

These are business plans for classic startup companies that are trying to create new products or services to serve new or reimagined markets. These companies are usually looking to raise equity capital from angel investors and venture capital firms. These business plans are far more difficult to write because their business models are largely unproven.

Type 5 business plans are written in five distinct units. Each unit reflects a progressive step in putting the business plan together. Before we can begin writing each unit, we must receive feedback to specific questions that we will send you concerning the topics covered in each specific unit.  After we complete each of the first four units, we will send you a draft of that unit in a Microsoft Word document. You will then have the opportunity to review unit draft and critique or clarify it. We will make any necessary changes needed for each unit draft. The fifth and final unit will be integrating the information in each of the previous four units into a final, complete business plan. You will then have the opportunity to review and critique that completed business plan draft. We will then correct any and all discrepancies in that final complete draft.

The entire process of writing a Type 5 business plan depends upon our general workload and the speed with which you respond to our requests for information about your business. Also, the novelty and newness of the industry you are entering and the market you will be serving are real wild card variables in terms of how much time the business plan will take to complete. We estimate that a Type 5 business plan will take generally 25 to 40 work days to complete (five to eight weeks).

These are business plans for existing companies that are attempting to create new products or services to serve new or reimagined markets. The markets these companies are trying to serve with their new products and services are either undefined or completely new. Usually these companies are seeking financing to raise equity capital (because these business projects are usually risky), but sometimes raising debt capital may be an options for them. These business plans are as difficult to write as Type 5 plans.

Type 6 business plans are written in six distinct units. Each unit reflects a progressive step in putting the business plan together. Before we can begin writing each unit, we must receive feedback to specific questions that we will send you concerning the topics covered in each specific unit.  After we complete each of the first five units, we will send you a draft of that unit in a Microsoft Word document. You will then have the opportunity to review the draft of each unit and critique or clarify it. We will change or modify any discrepancies you have with the drafts of each unit. The final unit will be integrating the information in each of the five units into a final, complete business plan. You will then have the opportunity to review and critique that completed business plan draft. We will then correct any and all discrepancies in that final complete draft.

The entire process of writing a Type 6 business plan depends upon our general workload and the speed with which you respond to our requests for information about your business. Also, the novelty and newness of the industry you are entering and the target market you will be serving are real wild card variables (in terms of how much time the business plan will take to complete). We estimate that a Type 6 business plan will take generally 25 to 40 work days to complete (five to eight weeks).

Running a Business Is Tough, Especially Without a Business Plan

If you are running a business, it’s very important to have a business plan made up and it’s just as important to stick to your business plan once you create it. When you have a business plan you are setting objectives for yourself and you are establishing the priorities you have for your business. It also makes it much easier to reach the goals that you set for yourself as well which is always crucial in a business.

Think of your business plan as a map for your business, without this map you and the way you run your business are traveling blindly which is very dangerous. You want to have a clear idea of where your business is headed and where you want it to go and a business plan outlines what will steer you in the right direction.

Looking for a Loan?

If you are looking to get a loan for your business, you’re going to need a definite business plan. Most banks won’t even consider giving you a loan until they see a business plan. If you don’t have a business plan they’ll think of you as a risk since you don’t truly know where you want your business to go. When you present your business plan to a bank to get the loan you desire be sure that you go over what your business is all about and why you started it. You will also want to list for them what you see in the future of your business as well.

Looking for a Business Investment?

Having a business plan doesn’t mean that you will surely get the investment you desire but not having a business plan will surely mean you will not get the investment you desire. Investors need to know what exactly they are investing in and they will look to your business plan to understand what the idea of the business is, your businesses track records, the technology behind your business and of course yourself. You will absolutely not get a business investment without having a business plan because the investors won’t have anything to help them understand what your business is all about.

Have Business Partners?

A business plan is what defines your agreements that you have made with your business partners which means you’ll have a lot of issues if you don’t have a business plan if you are in this business with more than just yourself. A business plan is the only way to keep everything between you and your partners fair and it ensures that everyone knows what the ground rules are for the business and where each and every one of you stand.

Communicating with a Management Team Won’t Work Without a Business Plan

How can you and your management team effectively run your business without being able to see where you all want it to go? The answer is, you can’t. You can’t steer your business down the right path if nobody knows exactly where it should be going and your management team will feel the exact same way. There will be a lot of different problems that will come up during the day-to-day work and it will be very challenging for you to face them and communicate all of these problems when you or your management team don’t truly know where the problem falls under in the business plan.

Do you need a business valuation?

Whether you need to place a value on your business to sell it or for taxes, a business plan is an essential part in this. It’s always important to know what your business is worth even if you don’t plan on selling it at all, you may need to know what it’s worth when it comes to planning an estate or an unexpected divorce could come up. You always should know what your business is worth an a business plan will help you understand that and keep track of it.

When it comes to developing a business plan, many people believe that it’s too difficult or it’s just too time consuming to do but what those people don’t realize is that putting together a business plan will save you in many ways and you it will help your business in more ways than you can imagine.

Developing a business plan is not that much of a challenge and it will very valuable to you in the future. Nobody should ever try to do something big without planning it first and this includes running a business. You have all these business plans in your head so just lay those plan out on paper so you have tangible evidence of your business and what you want to do with it.

A business plan a very crucial part in creating and owning a business so take the time and effort in creating one and you will benefit from it much more than you think and you’re business will run much more smoothly.

A business plan’s executive summary section provides a round-up of the main points of your business plan. Although the summary will appear at the top of the final printed piece, the majority of business plan developers do not write the executive summary until the last moment. The summary forms the gateway to the remainder of the plan. If you do not write a business plan executive summary it well, your target audience will not read beyond the executive summary.

What should be included in an executive summary?

When a regular business plan is being written, the following should usually be incorporated into the opening paragraph of the executive summary:

• The name of the business • The location of the business • The service or product being offered • The aim of the plan

A further paragraph should underline significant points, for example projected profits and sales, profitability, unit sales, and keys to success. Give the details you need everyone to notice. This is also a sensible point at which to include a highlights chart, a bar chart depicting gross margin, profits before taxes and interest, and sales for the three years to come. These numbers must be explained and cited in the text.

Different summaries are required for different plans

Internal plans, for example annual or strategic plans, or operations plans, do not need such formal executive summaries. With such a plan, make its purpose obvious, and be certain that all the highlights are mentioned, but other details – such as the description of your service or product, and location – may not need to be repeated.

Be concise with your summary

If investment is what you are seeking, mention this in your executive summary, specifying the amount of investment required and the level of equity ownership that will be provided in return. It is also a good idea to include some highlights regarding your competitive advantage and your management team.

If it is a loan that you are looking for, say so in the executive summary, specifying the sum required. Do not include details of the loan.

What is the right length for an executive summary? There are differing views from experts about the ideal length of an executive summary. Some recommend taking only one or two pages, while others suggest a more in-depth approach, with the summary lasting for anything up to ten pages and including sufficient information to be used instead of the full plan. Although it was once common to write business plans of 50 or more pages, today’s lenders and investors expect a more focused, concise plan.

A single page is the perfect length for an executive summary. Keep everything brief, emphasizing the major aspects of your plan. You are not trying to explain every last detail, simply piquing your readers’ interest about the rest of the plan and encouraging them to read further.

Be careful not to confuse a summary memo with an executive summary. The executive summary is the opening section of a business plan, while a summary memo is a distinct publication, usually running to no more than five or ten pages; this is intended as a substitute for the full plan for the benefit of those who are not yet in a position to read the full plan.

In general, a financial plan is a set of steps or goals put together for the business which is intended to help attain and accomplish a final financial goal. It shows the future and current financial state of a business by using known variables to forecast future cash flows, asset values and withdrawal plans. The plan shows financial viability of the business plan, in which the entrepreneur must prepare forecasted income statement, cash flow estimates, forecasted balance sheet, break-even analysis, and sources and usages of funds.

Why is a financial plan important? Investors and bankers must have an incentive to invest in your business. Profitability gives them an incentive to invest.  If your plan is weak and unorganized it will portray your business as unsustainable. Investors and banks will see you only as a risk and be unlikely to give the kind of capital needed for your business. For this reason you need to create a solid financial plan which will convince investors that your business is worth investing in.

Here at InvestmentBank.com we will design for you a financial plan intended to demonstrate to the bank and your investors that your business is sustainable and profitable.  We cannot guarantee you the investments you are hoping for, but we can guarantee that if you don’t have a plan, you will also not receive your hopeful investments. Let us guide you in the planning process.

One core component of market analysis is market forecasting and proforma financial statement drafting. The future trends, characteristics, and numbers in your target market are projected in market analysis. In a standard analysis process, the projected number of potential customers is divided into segments.

Generally, market size is not the only factor that is determined, but the market value is also very important. For instance, small business customers spend around 4 times as much as the home office customer, even though they are 2.5 times smaller than their high-end home segment in terms of customer size. So, in terms of dollar value, the small business market is often considered very important.

Market value is calculated through simple mathematics. The number of potential customers in the market is multiplied by the average purchase per customer. Market value is calculated by taking the average number of customers in each segment over a period of time and then multiplied that figure by the average purchase per customer. In market analysis table, the other items are only subjective qualities that help with marketing. These points are allotted to people who are assigned in preparing marketing information.

Reality Checks Reality checks are always important for market forecast. Finding a way to check reality, while performing a forecast is essential. If you are able to estimate your total market value, then you would relate that figure to the estimate sales of all their competitors to check if the 2 figures relate to each other. The import and export value and production values are checked in an international market to find whether the annual shipments estimates appear to be somewhere in the same range as the estimated figures. To check your results with the forecast, you might also check for some given years with the vendors, who sold products to this market. Macroeconomic data can also be overlooked to confirm the size of this market compared to other markets with same characteristics.

Target Focus Review

Market analysis should help in the development of strategic market focus, which means selecting the key target markets. This is considered the critical foundation of strategy. We speak on this as market positioning and segmentation.

Company will not try to address the needs of all market segments under normal circumstances. While selecting target market segments, understand the inherent market differences, competitive advantage, keys to success, and strengths and weaknesses (SWOT analysis) of your organization. Everyone wants to focus on the best market segment, but the market segment with the maximum growth or the largest market segments, might not be necessarily the best one to address. The best market segment to address would be the one that matches your own company profile.

It is not a good idea to use page count as a gauge to determine the length of a business plan. A business plan with 20 pages of text alone can be considered to be longer than a 35-page plan which is well laid out with bullet points, helpful images of products or locations and charts that highlight vital projections.

In fact, a plan should be measured by its readability as well as the summary provided. If the business plan is prepared keeping these aspects in mind, the reader will be able to get an overall idea in about 15 minutes by quickly browsing through the key points.

Illustrations, headings, format and white space contribute to improving the appeal of the business plan. The summary section is a very important aspect of any business plan. The salient points of the business plan must be clearly visible to the reader as it is done in a presentation.

It is unfortunate that many people still tend to measure the worth of a business plan by the number of pages in it. In this connection, some of the key aspects to be kept in mind are as follows:

• Practical business plans prepared for internal use only can have five to ten pages
• Business plans of large companies may have hundreds of pages

A standard expansion or start-up plan prepared for presentation to outsiders can have 20 to 40 pages. However, it should be easy to read with text well spaced and have bullet point formatting, illustrations in the form of business charts and financial tables in the condensed form. The details of financial aspects can be organized in appendices.

However, the  length of the business plan  is decided by its nature and the purpose for which it is prepared. Some of the questions that can be considered when drafting out a business plan in order to decide on its length are:

• Should descriptions about the company as well as the management team be included as outsiders are likely to read the business plan?
• Should a standalone executive summary be provided for the business plan?Is there a need to incorporate plans, blueprints, drawings and detailed research?Is it an investment proposal?
• Should it be worded in such a way as to clear legal scrutiny?

The form of the business plan is actually decided by the requirement for which it is to be prepared.

Often, venture contests specify a limit of 30 pages or 40 pages at times, but rarely 50 pages, including the appendices that contain detailed financial statements, for a business plan. Some contestants make very bad options because of page restrictions and cram the content using thick texts and bold typefaces, making it worse and not better.

Most often,  good plans have as many as 30 to 40 pages . The plans have 20 to 30 pages of text, excluding graphics to illustrate locations, menus, designs, etc. and appendices consisting of team leaders’ resumes, monthly financial projections, etc. Some pages may have to be included for standard financials. This calls for tables for sales, income and cash flow statement, balance sheet and personnel on a monthly basis. In the body of the plan, annual numbers may also have to be included.

It is not prudent to reduce the length of the plan by cutting down on helpful graphics. Readability is more important than the length. Making use of business charts to illustrate numbers makes it easier to understand. Make use of drawings and photographs to depict locations, sample menus and products. It is important to use as much illustration as possible. Finally, extra graphics such as clip art that are not relevant to the matter at hand may better be avoided.

Business Plan Market Forecast

Proper market forecasting helps provide budgetary allocation for coming market trends, innovative shifts and internal financial allocation. It is a key component of proforma financial statements and  professional market research . Intelligent estimates are best backed by quality, time-intensive research. That’s where we come in. Rather than producing a business plan based on educated guesswork, we use a litany of some of the industry’s best market research tools available to some of the most prestigious universities. Many a business plan software tools can also aid in your research work. Typically business plan software also includes industry-specific templates, which can help with how you approach your niche or even the broader market.

Today’s technology provides access to large data-sets for current and past information. Obtaining the data is not difficult. We help to analyze, interpret and make qualitative assumptions about future trends. By using both qualitative and quantitative approaches we work to derive parallel data forecasts for future trends within your business, your industry and the market as a whole. The future may be uncertain, but with the help of expert modeling, it can be simplified, understood and, in some cases, accurately predicted.

Many business planners lack the luxury of funding a previously-published market forecast from which to glean relevant data. In many cases, free published forecasts can help to paint a meaningful picture. However, when professional forecasts are not forthcoming on market size, supply/demand metrics and potential company penetration, it is usually left up to thoughtful opinion and expert “reverse engineering” to determine any meaningful dribble from the data.

Without free forecasts, a business owners may feel forced to purchase expensive data sets, market research reports and published articles to determine helpful data about the potential of a business idea. Where we can, we utilize past relationships and access to thousands of reports through expensive subscriptions to find the data-set that best fits your business goals for the plan you may be crafting.

Apart from the more obvious sources like the Internet, library references and popular publications, we provide access to industry-specific reports and paid-for research studies not accessible to would-be entrepreneurs. We fully recognize that data forecasting is part art and part science, but we prefer to adhere to more quantitative methods so as to make your business plan as convincing and relevant as possible for its particular audience.

Extrapolation of past data with large populations and data-sets helps to provide reliable predictions about future trends and outcomes. Understanding past growth, market saturation and the competing forces that can impact a company’s success in market entrance are absolutely vital components of the marketing portion of your business plan.  Past data is never a fail safe, but it can act as a healthy gauge of future trends in a marketplace.

When no relevant data on current conditions within your market can be found, we work with the available numbers to create plausible models that form convincing arguments for your particular plan goals.

Perhaps the greatest downfall of many potentially-successful business plans is the disconnect between gathered data, assumptions, external and internal market forces and projections. Without a common sense litmus test, many plans fail to deliver relevant metrics to help make business funding possible. Performing common sense tests often requires qualitative work outside the realms of the given data. Making phone calls to Chambers of Commerce, trade organizations and market reporting agencies to obtain a wider base and deeper foundation of information is extremely helpful when crafting assumptions.

Making wild guesses about targets, markets and industries without thoughtful research can be detrimental to fulfilling the goals of your particular business plan. BusinessPlanning.org helps to remove the guesswork and provide your business with relevant data from which to tell a compelling story.

Correctly identifying the structure and competitive dynamics of the industry you are proposing to enter will create a good general point of reference for judging whether you should enter it or not. If the general industry profile does not appear attractive to you, and you are planning to offer value propositions that have close industry substitutes, then this may be an important signal that your proposed venture may need to be reconsidered. But if the industry profile looks attractive, then this could be a sign that you are on to something.

A fantastic tool to analyze an industry that serves a Defined Existing Market is Porter’s Five Forces Model. Michael Porter is a professor at Harvard Business School and published this strategy model in his seminal work,  Competitive Strategy . Porter’s model is powerful. It demonstrates how an industry’s attractiveness to either its current competitors or a new entrant is an amalgam of disparate, and sometimes contradictory, factors.

To help determine if your business idea will be worth the investment of time, money and energy, you will conduct two sequential analyses using the Five Forces Model. The first Five Forces analysis will be of the overall industry that you are contemplating to enter. The second Five Forces analysis will be of the particular market segment(s) you would be choosing to serve with your Value Proposition(s).

The figure below illustrates how Porter’s model works by focusing on the five forces that shape competition within an industry: 1) the risk of entry by potential competitors, 2) the intensity of the rivalry among established companies within an industry, 3) the bargaining power of suppliers, 4) the bargaining power of buyers, and 5) the similarity of substitutes to an industry’s value propositions.[1]

The main point of Porter’s Five Forces Model is as follows. The stronger that one of the five competitive forces becomes, the greater the overall competitive rivalry becomes within the industry. The more intense the competitive rivalry becomes, the harder it is for ventures within the industry to raise prices or maintain high prices to reap greater profits. The less in average profits that a firm in the industry is able to earn, the more intense the rivalry for customer demand is among the industry’s rival competitors.

The opposite is true also. The weaker that one of the five competitive forces becomes, the less intense the overall competitive rivalry among the industry’s firms is. If rivalry amongst the industry’s firms decreases, the easier it becomes for the industry’s competitors to raise either raise prices or reduce their cost structure (by lowering their value propositions’ quality) and ultimately earn higher profits. The higher the average level of industry profits, the less intense the rivalry for customer demand will be among the industry’s rival competitors.

The importance of each of the five forces is situationally dependent upon the unique facts and circumstances of each industry. For example, the overall threat of new market entrants might be insignificant in determining whether an entrepreneur wants to enter an industry in its growth phase, but it may be a paramount factor in a mature industry.

I developed another diagram (below) to show how the five forces within Porter’s model interact with each other. As you can see, four of the forces (risk of entry by potential competitors, bargaining power of suppliers, bargaining power of buyers, and threat of new entrants) each act upon the fifth force – the intensity of rivalry among the industry’s competitors. This means that if the bargaining power an industry’s buyers increases, the intensity of rivalry among industry competitors will increase. This causal relationship works in only one direction – a change in any of the forces ultimately either increases or decreases the intensity of rivalry among the industry’s competitors. Therefore a change in the intensity of rivalry will not cause change in one of the other four forces.

[1] Charles W. L. Hill and Gareth R. Jones,  Strategic Management Theory , Eighth Edition, Houghton Mifflin Company, pg. 45, 2008.

Macroenvironmental forces are changes in the broader economic, political/legal, social, technological, demographic, and global forces beyond the industry being examined. Any one of these six forces can change or effect any one of an industry’s five internal competitive forces. In conducting an industry’s initial Five Forces analysis – which is a snapshot measurement of an industry’s present competitive environment – these macroenvironmental forces are automatically accounted for. They are already included because an industry’s competitive environment is an aggregate of these turbulent and often conflicting forces. But entrepreneurs and business owners must also make educated guesses about how macroenvironmental trends and forces will shape the industry’s attractiveness into the future, both in the short run and in the long run.

Below is a diagram that visually represents how each of these seven forces can affect an industry’s Five Forces as the future unfolds.

The Six Macroenvironmental Forces

The following is a detailed analysis of the seven macroenvironmental forces touched upon above.

Macroeconomic forces affect the general economic well-being of the nation or the region in which an industry operates. [1]  The following are the major macroeconomic forces that can affect an industry’s ability to deliver an adequate economic return.

• The rate of growth for the economy.  Economic expansions cause a general rise in aggregate consumer demand while recessions cause a general drop in aggregate consumer demand. Because aggregate demand for goods and services rises during economic expansions, an industry’s intensity of competitive rivalry, broadly speaking, will usually decline. The reason is that generally the market demand for an industry’s value propositions will cause an expansion in the industry’s revenue. Therefore its possible for the industry’s firms to generate revenue growth without fighting their competitive rivals for market share. Conversely, a decline in economic growth or a recession causes general aggregate demand to contract . This generally shrinks the amount of revenue an industry can earn and may cause price wars, consolidations and bankruptcies.
• Interest rates. Interest rates affect the cost of borrowing for consumers, thus affecting aggregate demand. Higher interest rates generally makes the cost of borrowing more expensive and can dampen demand for real estate and purchases of major assets (cars, durable goods). Ultimately, higher interest rates can lead to higher industry rivalry if the industry is directly or tangentially affected by borrowing costs. Higher interest rates also affect business’ cost of capital. High interest rates may restrict a business’s ability to invest in new equipment or facilities. On the other hand, low cost of capital makes it substantially easier for established businesses to borrow and invest into expanding their operations.
• Exchange rates.  Exchange rates either make imports more or less expensive for domestic consumers and exports more or less expensive for foreign consumers of domestically produced value propositions. A weak dollar makes imported value propositions more expensive and domestically produced value propositions comparatively less expensive. A strong dollar makes foreign value propositions less expensive and domestic value propositions comparatively more expensive.
• Inflation/Deflation.  Inflation is the decrease in the purchasing power of a nation’s currency over time. Inflation can destabilize an economy, slow economic growth, higher interest rates and increased currency volatility. [2]  Increasing inflation makes business planning very difficult because the future becomes less predictable. Uncertainty makes companies unwilling to invest in growing their operations. On other side of the coin is deflation. Deflation is even more potentially damaging than inflation is. If the purchasing power of currency is increasing over time, firms and consumers will hoard their cash. This will causes a self-reinforcing cycle of low or negative economic growth. Usually the best inflation formula for stable economic growth is a low, steady inflation rate.
• Wage Levels.  The price of labor from industry to industry can have a significant impacts on an industry’s costs of production. High or increasing industry labor costs can make substitute value propositions more attractive for the industry’s customers. Low or decreasing industry labor costs can make substitute value propositions less attractive for the industry’s customers.
• Level of Employment:  High unemployment levels give firms greater leverage over their employees in keeping wage increases down or in actually decreasing labor costs to the firms in an industry. This can reduce the industry’s cost structure and thus raise the industry’s average profitability.

Legal and political forces are the results of changes in laws and regulations within the country your business operates in. [3]  Political and legal developments can be both opportunities and threats. The following are the major legal and political changes that can impact the fortunes of industries.

• Current and Expected Levels of Taxation.  High tax rates can affect the decisions of entrepreneurs to engage in business activities or reduce the ability of companies to reinvest profits in expansion. But often the most important effect of taxes are not the levels of taxation, but the different effective tax rates for different activities. For example, the oil and gas industry, ecommerce businesses and the video game industry get significant tax breaks that reduces their effective tax rate. This can raise or lower the attractiveness of getting into certain industries.
• Import/Export Quotas and Tariffs.  Tariffs and import/export quotas affect the costs of value propositions imported into a country and those exported to other countries. Raising or lowering tariffs or trade quotas can cause demand for the value propositions of the industries affected to increase or decrease. An example of a broad change in trade quotas and tariffs was the implementation of the North American Free Trade Agreement (NAFTA).
• Government Grants.  Government grants are programs that can provide nascent industries with seed capital and resources. Governments (state, local and national) often provide businesses with financial support if the business pursues profit opportunities that align with a government’s policy goals. An example of a significant government grant program is the U.S. government’s Small Business Innovation Research grant (SBIR).
• War/Terrorism.  War and terrorism can increase regulations and transaction costs associated with global travel or insurance. Wars can also saddle nations with large medical costs to society. Wars and anti-terrorism efforts can also increase military related contracting opportunities.
• Quid Pro Quo.  Many industries try (and often succeed) in influencing politicians to enact laws that are favorable to their bottom line and create barriers of entry against potential competitors. A recent example of this was the influence the health care and pharmaceutical industries exerted upon the U.S. Congress during the passage of the Affordable Care Act in 2009.
• The Regulatory State.  In the U.S., most of the regulations that affect business and the general public are promulgated through various government agencies. Often, small changes in regulations can lead to desired or unintended consequences for a number of industries. Here is a small sample of legal and regulatory issues that are managed by various state and federal agencies: environmental protection, corporate governance, intellectual property rights, employment law, criminal law, tort law, food & drug regulation, public health… In the United States (and most other industrialized countries), virtually every area of commerce is affected by government regulations and laws. For any given industry, changes in these regulations and laws can be either threats or opportunities.

Social forces are changes in the social mores and values of a society and how they affect any particular industry. Social changes can create both opportunities and threats for any industry.

• Social and cultural forces specifically refer to changes in the tastes, habits and cultural norms within a significant segment of a country’s population. One example of a social trend is the growth of the organic and local food movements in the U.S. over the last thirty years. The local and organic food movements have created an opportunity for some small farmers near large population centers, but this movement has also created a potential threat to large mono-agriculture farms.
• Cultural attitudes can shift drastically over time, rendering once commonplace habits and activities to no longer be widely accepted or tolerated. An example is the decline of smoking in the U.S. Smoking used to be tolerated in most indoor spaces forty years ago. Now it is either banned or highly frowned upon and the public has become very aware of the health risks smoking causes. This has led to a significant decline in the percentage of adults in the U.S. who smoke. Conversely, marijuana use, which was highly frowned upon by the majority of U.S. society over forty years ago, has become more widely accepted among the public. As a result, many state laws are changing to reflect this increased tolerance of marijuana use.
• Changes in what society considers fashionable are in a constant state of flux. Various fads and crazes rise and fall, sparking opportunities and threats for the industries that capitalize on these trends. Examples of changes in fashion, fads or crazes are: rock n roll in the 1960s, disco music in the 1970s, the Pet Rock, the Hula Hoop, Cabbage Patch Dolls…

Technological change is a primary driver of Schumpeter’s “perennial gale of creative destruction” among business ventures. Technological forces can render established, profitable value propositions obsolete virtually overnight and usher into existence exiting new business ventures. Because of the dual role technological change (both creative and destructive) plays in our society, it can be both an opportunity and a threat.

• Technological forces can cause industries to move through their life cycles more quickly. They can also disrupt an industry in the beginning or middle of its life cycle, rendering it obsolete or changing it so radically that most of the industry’s competitors cannot keep up. Essentially, technological change makes the life cycles of industries more volatile and unpredictable.
• Technological change can lower the barriers of entry for many industries. An example is the internet made it much easier for a potential retailer to sell products to its customers through a virtual storefront versus acquiring, stocking and running a brick and mortar facility. The lowering of barriers of entry tends to increase an industry’s intensity of rivalry, leading to both lower prices and industry profits.
• Technological forces can also reduce transaction costs. Reducing transaction costs is often destructive to the industries that thrive on them (auction houses being replaced by eBay or newspaper classifieds being replaced by Craigslist). Within an industry, a reduction in transaction costs driven by technological change usually leads to an increase in the industry’s intensity of competitive rivalry.
• Technological change can either reduce or increase customer switching costs. An example of how technological forces can reduce customer switching costs are instant price comparison applications on mobile devices. These give the consumers the ability to identify which retailers offer the same value propositions at the lowest prices. Technological forces can also increase customer switching costs. An example is Facebook or eBay. Both of these websites lock in users due to their network effects – alternative market choices do not present as much value because they are not as big.
• Technological forces can unleash changes in industries far removed from the industry in which the technology originated. An example of this is the Internet. The Internet has caused massive sea changes in industries only tangentially related to it such as retail, the news industry, book publishing, and matchmaking services (online dating).

Demographic forces are changes in the characteristics of a population of people. These characteristics can be sex, age, education, race, national origin, social class… Changes in demographics can present businesses with both opportunities and threats.

• Changes in a population’s age distribution can present both opportunities and threats. For example, in the U.S., the population of elderly people is growing more rapidly than the population as a whole. This presents an opportunity for industries who provide long term assisted living, the financial industry (reverse mortgages and retirement planning), and both the health and pharmaceutical industries. It also presents a threat to certain industries like funeral and burial providers (if the general population is living longer, it means people are dying at a slower rate).
• The rapid increase of the Hispanic population in the U.S. has led to an increase in Spanish speaking music, television and news in the U.S. This represents a growing opportunity for food and media companies that market to Latinos.

Global forces are changes that occur within and beyond the borders of the country a business is operating within and affect how a company can operate on the international stage. Global forces can present both opportunities and threats to an industry.

• The economic growth rates of other countries can play important roles in determining the demand for imports and exports. As barriers to trade fall, national economies become more subject to the winds of international commerce and capital flows. This international liberalization of trading agreements can allow domestic firms greater access to foreign markets. An example of the liberalization of international trade is the outsourcing trend over the last two decades from industrial economies in the west to developing economies in Asia.
• Climate change is another example of a global force. The long term changes to the world’s climate will profoundly shape countless industries in the decades to come. Climate change can offer both opportunities and threats to different industries. For example, the wine industry in France may have to experiment with new varietals due to changes in temperature and rainfall expected by scientists in the coming decades. Climate change also presents some industries with opportunities. One example is the shipping industry. The rapidly dwindling polar ice cap in the Arctic Ocean presents the possibility that new, more efficient shipping routes might become available.

[1] Charles W. L. Hill and Gareth R. Jones,  Strategic Management Theory , Eighth Edition, Houghton Mifflin Company, pg. 66, 2008.

[2] Charles W. L. Hill and Gareth R. Jones,  Strategic Management Theory , Eighth Edition, Houghton Mifflin Company, pg. 68, 2008.

[3] Charles W. L. Hill and Gareth R. Jones,  Strategic Management Theory , Eighth Edition, Houghton Mifflin Company, pg. 70, 2008.

A good Five Forces analysis will cause you to sift through a lot of data, much of it conflicting and confusing. Below is a series of scorecards that try to condense the most important points from your Five Forces analysis and present them to you in an easily understandable format.

The scorecards rate the attractiveness of an industry’s five forces  from the perspective of a new venture attempting to enter the industry . Each force gets its own scorecard. Each scorecard has the main factors that help determine the strength the force exerts upon the industry. A factor’s attractiveness is rated on a five category scale that ranges from Highly Unattractive, Mildly Unattractive, Neutral, Mildly Attractive, to Highly Attractive. For each factors’ rating, the top line (yellow) indicates the level of the factor’s level of attractiveness at present. The bottom line (green) is the entrepreneur’s rating of what he or she thinks each factors’ level of attractiveness will be in the future. The level of future attractiveness for a factor is determined by analyzing how macroenvironmental forces will affect the industry in the future.

Directly below is a hypothetical example scorecard of an industry’s intensity of rivalry:

Remember, none of this is exact science. There is no mathematical formula that determines whether you should enter an industry or not. The purpose of this exercise is to ensure that you, the entrepreneur, have thoroughly thought about the nature and future of the competitive environment you are proposing to jump into.

Force One: Intensity of Rivalry among Industry Competitors

Force Two: Risk of Entry by Potential Competitors

Force Three: The Bargaining Power of Buyers

Force Four: The Bargaining Power of Suppliers

Force Five: The Availability and Similarity of Substitutes to an Industry’s Value Propositions

And finally, the table below is a final snapshot evaluation of the industry’s attractiveness. To fill out this table, you should look at your ratings in the tables above as guidelines. The importance of the forces, and the factors that comprise them, will change from industry to industry. It will ultimately depend upon the unique facts and circumstances of each industry being evaluated. Therefore you will have to use your best judgment.

Overall Evaluation of Industry’s Attractiveness

Porter’s Five Forces – Risk of Entry

Profitable industries are like chum in the water for new competitors. The smell of money to be made will attract potential competitors to circle an industry, try to enter it and look for an easy meal. The only thing stopping a myriad of potential competitors from entering an industry are  barriers to entry  – a business version of a steel shark cage.

Profitable industries attract new market entrants – potential competitors. Potential competitors are companies that are not currently competing in an industry, but possess the ability to do so if they choose. Theoretically, if it cost nothing to form a company and enter an industry serving a profitable market, new firms would flood into that industry until the industry’s average profit margin shrank to zero. But we don’t live in a frictionless, theoretical world and different industries have wildly different levels of profitability. Barriers of entry are what discourages new companies from entering a profitable market and making a killing.

Barriers of entry benefit established companies within an industry by protecting them from new competition and preserving their profit margins. Low barriers of entry leave an industry wide open to new market entrants. The results to an industry with low barriers of entry are lower profits for the companies within that industry will inevitably result.

Therefore, established firms within an industry have great incentive to erect barriers of entry to keep the number of potential rivals to a minimum. Some barriers of entry are passive and a natural result of the industry’s operations. An example of this is economies of scale. But companies often take active steps to discourage new companies from entering their industries. Examples of this are when companies create brand loyalty or try to purposely raise their customers’ switching costs. The reason is simple – the more companies that enter the industry, the more difficult it is for established companies to maintain their market share and protect their profits.

The risk of entry by potential competitors is a function of the industry’s profitability and the height of its barriers to entry. The higher an industry’s average profit margin, the more enticing it is for new competitors to jump into the fray and wrestle market share from the incumbent companies. High barriers to entry can deter potential competitors from trying to enter an industry and serve its market segments. The higher the cost of entry into an industry, the weaker the competitive force (the risk of entry by potential competitors) is and generally translates into higher average industry profits. Important barriers to entry include the following:

Capital Requirements  – If it takes a great amount of money or assets to enter the industry, this can be a significant barrier of entry for firms who wish to enter it. Usually industries with high fixed costs have high capital requirements (i.e. factories, warehouses, computing assets…).

Economies of Scale  – Economies of scale is where the companies in an industry enjoy diminishing per unit costs for their value propositions as the volume produced increases.

Brand Loyalty  – Consumers often have preferences for the value propositions offered by established companies due to familiarity and reputation.

Absolute Cost Advantages  – Other entrants cannot hope to match the established firms within the industry’s cost structure. Absolute cost advantages arise from three sources: 1) possessing unique and critical resources (patents, trade secrets, or accumulated experience), 2) control of particular inputs of production (i.e. fertile farm land, a prime piece of commercial real estate…), 3) access to cheaper funds because existing companies represent lower risks than new entrants.

Customer Switching Costs –  High customer switching costs occur when customers resist spending the time, money and energy to switch from the current supplier of a value proposition to one offered by a different company, even though that alternative value proposition may be of greater value.

Government Regulation –  Government regulations, and the lack of them, can be a significant barrier of entry for potential new entrants into an industry. An example of this would be environmental regulations placed on coal mining companies and their operations.

We will now dig deeper into how to identify and analyze these potential barriers of entry, and ultimately understand how they affect the competitive rivalry within an industry.

Capital costs mean the startup costs of your business idea that must be incurred before you can commence operations. Basically, this is the total amount of money you need to spend (on equipment, employees, facilities, legal, accounting….) before you can hang your “Were Open!” sign in your shop window. For some asset intensive businesses, such as a full service health club or a golf course, initial capital costs can be extensive. For other businesses that use relatively few assets, such as an internet marketing business or a hotdog stand, initial capital costs can be relatively small.

For many aspiring entrepreneurs without a lot of financial resources, capital costs can be the most daunting barrier of entry of all. Many industries are able to maintain decent profit margins simply because the capital costs required to enter the industry are significant and insurmountable for many. Also, your time can be thought of as a capital asset too. Your investment of time in pursuing a business endeavor represents an opportunity cost on your part – you are giving up time that you could be working for someone else (and the income that entails) in exchange for pursuing your entrepreneurial ambitions. For example, it may take $100,000 and one year of full time work to create and open a business. If you had to give up a $50,000 per year job in order to pursue the endeavor, the real capital cost for you to start your business would be $150,000, not $100,000.

Another example of this would be opening a law practice. Legal services, in the United States, is a fragmented industry that has an average industry profit of 19.5%. This is a very attractive profit margin. Furthermore, the capital cost required to start a legal practice – purely from creating the actual legal services business – is relatively small. A lawyer needs a laptop, access to research materials, a place to meet clients, and some office equipment. This may cost as little as $10,000 in initial startup capital. But this does not represent the actual capital cost to start a law firm. To actually open a law firm and practice law, a lawyer would have needed to: 1) obtain a law degree (lets estimate $120,000), not work for three years while going to law school (lets estimate $150,000 for three cumulative years), get a state bar card ($3,500 for the test and the study course), and not work for three months while studying for the bar (lets estimate $12,500). Then, an only then, a lawyer could spend $10,000 on opening a legal practice. The real cost of this venture, both in absolute capital costs and opportunity costs, would be $296,000.

So the real capital cost of opening a law firm and practicing law (and being in an industry with an attractive 19.5% profit margin) may be at least nearly $300,000. This capital cost represents a serious barrier of entry to many people who would want to enter this industry, but balk at the $300,000 price tag that it requires.

Key Questions:

• What are the average total capital costs for entering the industry you proposing to enter?
• Is the average profit margin for the industry you are proposing to enter enough to service the capital costs required from a typical new market entrant?

Economies of scale arise when unit costs fall as a firm expands its output. In other words, the more of a value proposition a company produces, the less per unit the company pays to produce those value propositions. Sources of scale economies include 1) cost reductions gained by efficiently creating a massed produced output, 2) discounts on bulk purchases of raw materials, and 3) cost benefits gained from spreading production costs and marketing and advertising over a large production volume. Some industries benefit greatly from economies of scale (i.e. the beer industry, the auto industry…). Other industries do not enjoy economies of scale much at all (i.e. nail salons, massage therapy, dry cleaners…).

The following are examples of economies of scale: 1) when the creator of a product gets bulk discounts on the purchases of raw materials for their products, 2) spreading fixed production costs over a large production volume, 3) cost reductions through mass-producing a standardized output, 4) cost savings associated with spreading marketing and advertising costs over a large volume of output. Most manufacturing industries, such as pulp and paper products or textiles, are examples of industries with economies of scale. If economies of scale are a factor in an industry, then many small producers are at a disadvantage because their per-unit costs will be higher than that of their larger competitors.

An industry whose rivals have significant economies of scale creates powerful barriers to entry for an aspiring new entrant to overcome. First, the established firms will have a substantial cost advantage over a new rival. Second, because high economies of scale imply high fixed costs (equipment, facilities), it is critical that these companies protect their market share at all costs. If their sales volumes decrease, this can render them incapable of sustaining their high fixed costs.

Companies, who try to match the existing industry competitors’ economies of scale, must enter the industry as a large producer to overcome this problem. But to do so, it must raise enough capital (to purchase the necessary assets and facilities) to match its competitors’ economies of scale. This becomes another barrier of entry in itself. Furthermore, if a new company enters an industry with a large capital investment (to match current industry competitors’ economies of scale), the increased supply of products the new company brings to the market risks depressing prices and may trigger a price war with established industry competitors.

• Does the industry you propose to enter have significant economies of scale (where the per-unit costs for producing a good or service decrease significantly as the volume of production increases)?
• Does the industry you propose to enter have high fixed costs (equipment, facilities, or significant R&D requirements)?
• Do the suppliers of the industry you propose to enter give significant volume discounts and payment terms to large-volume buyers?
• Within the industry you are proposing to enter, do its company’s marketing and sales budgets increase, on a per unit basis, proportionally to sales of its value propositions, or do the costs of its company’s sales and marketing budgets decrease, on a per unit basis, with an increase in the sales volume of its value propositions?

Brand loyalty is when consumers develop and hold a preference for a particular company’s brand of value propositions. Significant brand loyalty makes it difficult for new market entrants to wrestle market share away from established industry brands. Examples of value propositions with strong brand loyalty are mass consumer products such as beer (Budweiser, Coors and Miller), soft drinks (Coca Cola and Pepsi), or tobacco products (Marlborough and Winston-Salem’s).

A company can also cultivate brand loyalty by developing innovative value propositions. Probably the most successful major company over the last decade that has leveraged innovative value propositions into brand loyalty has been Apple.

A venture may be able to sidestep an industry’s brand loyalty barriers of entry by entering the premium category of product markets. An example would be Dry Soda or small craft micro-brewers.

Significant brand loyalty makes it difficult for new entrants to take market share away from established industry brands. A company faces the daunting task of not only convincing consumers to buy its value propositions, but also to choose not to buy value propositions they already like and feel comfortable with.

• Are the value propositions in the industry you propose to enter highly branded?
• How strong is the brand loyalty in the industry you are proposing to enter?

Absolute Cost Advantages are when an established venture has an insurmountable cost advantage, meaning that new entrants cannot possibly hope to match the incumbent companies’ lower cost structure. Absolute cost advantages can arise from: 1) superior production operations and processes due to access to unique assets (i.e. patents, copyrights, or fertile farmland), 2) accumulated skill and expertise, 3) exclusive or relatively favorable control of their value propositions’ inputs (labor, materials, equipment, or management skill), and 4) access to cheaper capital due to their lower business risk when compared to a new market entrant. Also, access to superior distribution channels could be considered an absolute cost advantage. If established companies have absolute cost advantages, then the threat of entry as a competitive force will be weaker.

A new market entrant must be especially careful in attempting to directly compete with entrenched industry competitors that have absolute cost advantages. If a new entrant enters an industry where there are established competitors who have lower cost structures, the established firms can lower the price of their value propositions to eliminate the new entrant. This could erase any ability for the new market entrant to ever earn a profit. If this threat is credible, it can be a barrier of entry for new market entrants.

• Do the major competitors in the industry you are proposing to enter possess absolute cost advantages? If so, will you be able to acquire these absolute cost advantages before you begin directly competing with them?
• If the major competitors within the industry you are proposing to enter possess absolute cost advantages over your business idea, are there any steps or actions you can take to mitigate those absolute cost advantages?

Customer switching costs are the time, energy, and money necessary for them to switch from the value propositions offered by an established company to those of a new market entrant. If switching costs are high, customers will be unlikely to change even if the new product is superior to other market substitutes and alternatives. An example would be the switching costs associated with leaving the Microsoft Windows operating system or the QWERTY keyboard. Other value propositions in the market may be better/faster, but consumers often find themselves resistant to change because the time or hassle of switching to a better product or service proves prohibitive.

 K ey Questions:

• In the industry you are proposing to enter, do the value propositions the industry produces have high switching costs? If they do, can you think of a way your business idea can mitigate this obstacle?
• If the industry you are proposing to enter doesn’t typically have high switching costs, can you think of a way for your business to raise the switching costs for your proposed value propositions?

Government regulations create politically and legally defined barriers of entry for many industries. Government regulations can increase barriers of entry for market entrants and potentially reduce competition. An example would be food safety regulations or anti-pollution laws. Also, in industries where economies of scale are a powerful force, the absence of regulations can lead to an intense concentration of market share in the hands of a few firms. This can create barriers of entry that are extremely difficult for a new market entrant to overcome. To sum up, high regulation within an industry usually leads to higher barriers of entry, but not always.

• Does the industry you propose to enter require government licenses or strict adherence to statutory codes (construction, health care, lending money, real estate rental, restaurant & food preparation…)?
• To what degree are the industry’s regulations beneficial to the incumbent industry competitors?

Below is a chart that summarizes how the six types of barriers of entry affects industry attractiveness from both the perspective of a new market entrant and an industry incumbent.

Estimating Market Size

Estimating the size of the market you want to enter is the first critical step in testing the feasibility of your business idea. This is a lot like cliff diving. If you are going to jump off a cliff into a pool of water far below, it’s a really good idea to know beforehand just how deep the water is. If you jump without finding out (or at least making an educated guess based on objective facts), you run the very real risk of getting hurt. Bad.

The first order of business in determining the sizes of the various market types for your business idea’s value proposition(s) is to correctly define the parameters of the market types you are trying to measure.  This may sound rather simple, but it is honestly the hardest and most frustrating part of this process. Estimating a market size is the epitome of the phrase “garbage in – garbage out.” If you incorrectly define the boundaries of the type of market you are trying to size up, your entire estimate (and the basis for all of your future financial projections) won’t really be worth the paper it is printed on.

So, creating a quality market size estimate that’s based upon good, logical assumptions, is the first step in determining if your business idea can support a potentially successful business model. To make a quality market size estimate, you should roughly measure the size of each relevant market type for your business idea’s value propositions. By understanding the rough size of each of these market types, you can roughly gauge how much revenue (based upon your market share assumptions) your business idea could generate in the present and going forward into the future. Determining which market types to estimate the size of depends upon the type of market your business idea is attempting to serve. These general market types are Defined Exiting Markets, Cloned Markets, Re-segmented Markets, or a New Markets.

A market is a group of customers that have the willingness to buy a particular type of value proposition. When determining the size of the markets for your proposed business idea’s value proposition(s), you may use all or some combination of the following market type definitions.

• Examples: the car market (supplied by the car industry), the personal computer market (supplied by the personal computer industry), and the athletic shoe market (supplied by the athletic shoe industry).
• Examples: the total market for electric cars, the total market for tablet computers, the total market for running shoes.
• Examples: the market for electric cars in the United States sold through dealerships, the market for android compatible tablet computers sold through big box stores, the market for athletic shoes sold through e-commerce websites .
• The TM is comprised of one or more customer segments , each of which are offered a unique value proposition by your proposed business idea. For a comprehensive explanation of what comprises a customer segment, please refer to the following section.
• The TM is a measurement dependent upon the definition and size of the SAM (because it is a portion of the SAM), but independent of the SOM. Both the TM and the SOM are portions of the SAM that measure different things.
• Examples: Upper-middle class, educated, ecologically conscious automobile customers, early adopter electronics consumers who use their personal computers and laptops mostly for entertainment and not work, high school and college athletes who buy high performance running shoes to gain an edge on their competition.
• Like the TM, the SOM is dependent upon the definition and size of the SAM, but is independent of the TM. Both the TM and the SOM are portions of the SAM that measure different things.
• Examples: the portion of the market for electric cars sold in the United States through dealerships that your business idea can realistically capture, the portion of the android compatible tablet computer market in the United States sold though big box stores that your business idea can realistically capture, the portion of the market for high performance running shoes for athletes in the United States that are sold through ecommerce websites that your business idea can realistically capture.

For practical purposes, you can think of both the SOM and TM as a portions of the SAM, the SAM as a portion of the TAM, and the TAM as a portion of the TID. Both the SOM and TM are separate business concepts that measure different things. The SOM estimates your proposed value proposition’s penetration of the SAM. The TM estimates the size of the group of people for whom your proposed value proposition is specifically designed for.

I know, it’s a lot of acronyms to keep straight. But estimating the sizes of the TIM, TAM, SAM, TM and SOM are important for determining if the market size for your business idea’s value proposition(s) can support your entrepreneurial ambitions and business goals. The following are three generalizations – rule-of-thumb explanations – of what market sizes are necessary to support a particular business type, development path and outcome.

This type of company is usually entering a cloned, re-segmented, blue ocean or new market, or a defined existing market with a new product. They usually seek traditional angel investor and venture capital funding. Rapid scalability an achieving high market share is the key to this type of company. Often the founders of scalable, high growth companies have either an Initial Public Offering (IPO) or the sale of the company to a Fortune 500 corporation as their exit strategy .

These companies require a SAM large enough to support potential company EBITDA (after the company has successfully scaled its operations) of at least somewhere between $10 million to $20 million per year. Publically traded companies, on average, often trade for 10x their annual EBITDA or greater. This, depending upon the company’s industry and whether or not its founders and investors want it to have an IPO, would probably put the company’s valuation at greater than $100 million. A $100 million valuation is a safe rough estimate for whether a company will be able to both afford to go public and financially benefit from an IPO.

So, armed with these rough guidelines, to create a scalable, high growth company that proposes to enter an industry with a 10 percent average EBITDA and capture 10 percent of that industry’s market share, would need to at least generate $100 million per year in revenue ($10 million per year in EBITDA divided by the industry EBITDA average of 10 percent). To achieve this annual EBITDA target and a 10 percent SAM penetration, the overall SAM size would need to be $1 billion ($100 million per year in revenue divided by a 10 percent penetration of the market by the company).

This type of company can be entering a Defined Existing Market, Cloned Market, Re-segmented Market, or Blue Ocean Market. They do not enter New Markets with New Products due to the incredible amount of time, business risk and resources that would be required. These businesses usually seek capital from the founders, founders’ friends and family, non-bank lenders, bank and institutional lenders, and some angel investors. Rapid scalability is usually not a primary goal for these business ventures. They often prioritize strong, stable profits and cash flow for their owners above all else. Exit strategies for these companies’ founders include selling the company to a third party such as another privately held business or private equity group, passing on the business to heirs, or simply holding on to the business. These types of businesses often make excellent cash cows.

Successful, mid-sized privately held businesses are usually valued between $5 million and $50 million. These businesses, as a rough rule of thumb and depending upon the industry, are usually valued at 3x to 5x their average yearly EBITDA. So, a $30 million dollar privately held business would need an average yearly EBITDA of between $6 and $10 million per year ($6 million per year if the business valuation ratio would be 5x; $10 million if the business valuation ratio would be 3x).

Lifestyle businesses are undertaken by entrepreneurs who want to create their own jobs and/or to support the conscious lifestyle choices of the entrepreneur (hobbies, schedules, living location…). This type of company usually solely enters Defined Existing Markets. Many, if not most, of the entrepreneurs who start lifestyle businesses do not begin their business ventures with any particular exit strategy in mind. Instead, the primary financial goal of these entrepreneurs is usually to generate enough cash flow to support their lifestyle needs. These businesses usually seek capital from the founders, bootstrap financing, and the founders’ friends and family. Rapid scalability is usually not a primary goal for these business ventures.

The market size necessary to support a lifestyle business really depends upon the needs and wants of each individual entrepreneur. The variables used to determine a rough estimate of the minimum market size needed to support a lifestyle business are: 1) the entrepreneurs’ desired minimum yearly EBITDA (include the entrepreneurs’ salaries in with EBITDA), 2) the average EBITDA ratio for a firm competing within the industry you are proposing to enter, and 3) the entrepreneurs’ assumption of how much of their proposed business idea’s SAM they will be able to capture.

For example, if an entrepreneur’s goal is to earn at least $120,000 (in EBITDA and salary) from the lifestyle business per year, the average EBITDA ratio for the proposed business idea’s industry is 15 percent of annual revenue, and the entrepreneur assumes she can capture 10 percent of the SAM she proposes to enter, then the minimum necessary SAM size needed to support the business venture would be $8 million ($120,000 divided by a 15 percent EBITDA ratio divided by a 10 percent SAM penetration equals $8,000,000).

The following chart summarizes the rule-of-thumb market size needs of the business types analyzed above:

Targeting a specific audience is most effective strategy when creating a marketing campaign. The more specific of a customer base a campaign can reach, the more dollars per potential customer a campaign will make. This is why companies will allocate a large amount of resources in order to find the audience that they are looking for. By doing this, you can create a marketing budget as effectively as possible and maximize your results. Knowing or choosing exactly who you are getting your message to has proven to be the most effective method of forming a marketing campaign. Once you have identified your target audience, the hard part is figuring out how to reach it. Below, we will discuss ways to do so.

The goal of any marketing campaign is to give the most amount of information about a product or service to the prospective customer possible. The more the customer knows, the more likely they are to take action. The more that is known about that customer, the more likely it is that you can communicate that information effectively. Using information about your customer base will help you make connections that they can relate to and in turn, they will be more likely to respond to your campaigns call to action.

There are four main ways that are commonly used in identifying targeted markets.

Geographic:  This includes the location, the geographical size and makeup of the area and other environmental factors such as climate.

Demographics:  This includes age, gender, income, average family size, average education, and the types of jobs that are in the geographic area.

Psychographics:  This involves factors such as the personality that you area tends to take on, what and how people behave that live in that area and also factors that will affect the way your potential customers will use your product or service. Will they use it often not so often? Is it a necessity or luxury?

Behaviors:  This has more to do with how your potential customers will react to things such as price changes and price points, how they will react based on what information is given to them, and what types of marketing campaigns they are most likely to respond favorably to. All of these factors can be used to help determine how a population will respond to a specific marketing campaign. Likewise, you can a marketing campaign that will increase conversions based on the information gathered above.

One of the fundamentals of marketing focuses on the benefits to cost trade-off. Understanding how customers will weigh the potential benefits of a product or service versus the costs to obtain that product or service is critical when designing a marketing campaign. Ask yourself, how will your customer gain monetarily or in other ways from purchasing your product or service? Though it is not always achievable, satisfying this is the most effective ways to create sales.

To better understand how they will you this trade-off, ask yourself the following questions.

• How much will it save them? Is this a product that can potentially pay for itself?
• Are there any intangible benefits to this particular product or service that a customer may ignore or find appealing?
• Will this product or service save the customer money, time, effort, or resources?
• Will it increase the customer’s income, investments, future, or personal relationship will it reduce a customer’s expenses, taxes, liabilities, or work?
• Will it improve that customer’s abilities, productivity, appearance, confidence or peace of mind?

Understanding the effect that your product or service will have on the customer will serve as an invaluable tool when designing an effective marketing campaign.

As mentioned in the beginning, understanding, identifying and reaching a target audience is the most effective way creating a marketing campaign that will give you the best results possible relative to the budget and time you are allotted. Ignoring these factors can costs you money and can be the difference between a successful and unsuccessful marketing campaign.

It’s important to define the nature of your involvement, in both depth and scope, in the business you are founding.  An entrepreneur’s involvement in his own business can range from being a full-time manager/employee (active ownership) to that of a hands-off investor (passive ownership).

An active owner materially participates in the day-to-day activities of the business. Most business owners and entrepreneurs actively participate in their businesses in some way, shape or form. Many work full-time in their businesses as employee/managers, drawing both a paycheck and profits (if there are any).

The definition of a passive owner is a little trickier to nail down. A passive business owner does not participate in the day-to-day activities of the business he or she owns. The IRS states that passive income can only come from two possible sources: rental activities or “ trade or business activities in which you do not materially participate .” Within the context of entrepreneurial endeavors some examples of passive income are:

• Earnings from a business from which you, an owner, are not required to be directly involved with (neither labor nor day-to-day management)
• Rent from either tangible personal property or real estate
• Royalties from intellectual property (patent, copyright, trademark…)

Receiving passive income is delightful. The hard part is usually accumulating enough assets in the first place to begin receiving passive income from them (rents or passive business activities). Examples, where an entrepreneur can derive passive income from her investments, are:

• A landlord rents an apartment building to tenants and uses a real estate management company to collect rents and make repairs.
• A passive investor invests capital into a partnership where others manage the business, and in return for his contribution of capital, the passive investor receives a portion of the business’s profits.
• An entrepreneur builds a successful business from scratch. She then hires a manager to manage the day-to-day affairs of the business. She then receives the profits from her business even though she is no longer actively involved in it.

Most entrepreneurs who start businesses have one of two basic plans for their involvement in their enterprises.

1. The entrepreneur(s) plan to be heavily involved in the lean startup plan and operations over a period of a couple of years. Then, at some undetermined point in the future, they plan to hire a manager and then run the company as a passive investment.

2. The entrepreneur(s) are essentially creating a job for themselves. They plan on working in the enterprise as an open-ended, long-term committment.

Starting and/or running a business is a complex and daunting task. Identifying both potential roadblocks and opportunities well in advance is essential for businesses of any size to outmaneuver the competition and gain a foothold as a dominant market leader. But over one-half of all new businesses will fail within five years of their founding. The vast majority of all new businesses never achieve the financial success originally envisioned by the founders. These new businesses and start-ups begin with energetic enthusiasm, but unfortunately, many business plans fall short due to various reasons: lack of capital, a flawed business strategy, unrealistic expectations, or they lack the people with the required skills and expertise to succeed.

Business plans may be required for any number of reasons. Here are a few of the most common business plan needs.

• To Obtain Debt Financing . A company may be required by a bank or other financial institution to provide a detailed, professional business plan in order to secure debt financing. Examples would be bank business loans or a line of credit.
• To Obtain Equity Financing . Start-ups and other new businesses often must sell equity (stock or membership units) to investors to raise capital for new business ventures. Investors can range from friends and family to angel investors to venture capital firms.
• For Internal Company Planning . Companies often need business plans to compare the relative viability between competing potential business projects. This can give those companies a clearer perspective on where to invest limited resources within the organization.
• Joint Ventures and Partnerships . When entering a strategic JV or partnership with another firm, a business plan works to outline the objectives of the two firms working in tangent.
• Mergers, Acquisitions and Corporate Divestiture . Detailed plans are needed when businesses change hands in order to help new owners see details in the industry and the enterprise itself. An expert plan can also serve as part of the marketing material to get the business sold.

The reasons for creating a business plan can be as varied as the businesses themselves. Each plan requires a unique approach to the industry you are in, the market you intend to serve, and your financial needs. That’s where we come in.

Creating a professional business plan can help mitigate these risks, raise capital from potential investors and put the company on the path to success. A good business plan helps to focus an entrepreneur’s mind on accomplishing the tasks necessary to make his or her business succeed. A business plan is not a static document. It is a logical series of informed assumptions that are relevant at the time the plan is written. As soon as market and industry conditions begin to change (which usually happens about five minutes after the plan is written), the plan begins becoming obsolete. For the entrepreneur, the value in the business plan isn’t necessarily the plan itself. Instead, its real value lies in the process – the research, thought and inquiry – in creating it.

We will work with you from start to finish to create a professional business plan that will help you accomplish your objectives. We will ask the necessary questions, help you find the answers, and organize your ideas into a coherent plan. From researching your market and industry to producing realistic, justifiable pro forma financial statements (cash flow, income statements & balance sheet), we will craft a document that can help you accomplish your business objectives.

So your business needs a plan. The question is, what kind of plan does it need? Please check out our business plan menu options and pricing here.

Business Plan Review & Evaluation

If you already have a business plan and would like to have it reviewed by a professional business plan consultant, then this is the right service for you. We will review and critique your business plan with an investor’s eye, scrutinizing it for financial errors, grammatical errors, and weak or unrealistic assumptions. We will also point out what you did right. Our business plan review service is an efficient and affordable way to ensure that your business plan is as good as it can be. Our business plan review services are provided at a substantial discount to our normal hourly rates. Depending on your needs and budget, we offer three levels of business plan review services:

– We will spend 2 and 1/2 hours reviewing your materials. We will then provide a written evaluation and critique your plan and financial model.

– We will spend 30 minutes consulting with you on the telephone, answering any questions you may have and offering additional guidance.

– Optional: if you have made any changes to your business plan, based upon the evaluations and critiques we made in our first examination of your materials, we can offer subsequent reviews of the improvements you have made to your plan. In these subsequent reviews, we will spend up to 2 hours examining your materials again.

–  Flat Rate Price:  $297 for first review; $147 for subsequent reviews

• Once you place your order, we will provide instructions for sending us your business plan. Your plan must be sent to us in Microsoft Word format so we can use the Track Changes feature).
• Your review will generally take place within 3-5 business days of you sending us your business plan.
• When our review of your business plan is complete, we will send you the redlined/track changes version of your business plan with our critiques and suggestions.
• After you receive your reviewed/critiqued version of your business plan, we will work with you to schedule a mutually convenient time for the telephone portion of the review service.
• Optional Subsequent Reviews: After you make changes to the critiqued version of your business plan that we sent you, you may send us your new version for further critiques/comments. Please allow 3-5 business days to complete the evaluation.

– All information you provide will be treated confidentially.

– Fees are payable in advance and are non-refundable. If you decide you no longer want a business plan review after you have made payment, we will provide an equivalent amount of consulting firm services of your choosing (3 hours for the Standard Evaluation and Review).

– Once you submit your plan for review, please allow two business days to schedule an initial discussion so that we can understand your needs and tailor our review for your specific situation. This allows us to make sure you get the most out of this process.

– Depending on our existing workload, please allow up to 5 business days for us to complete the review following this initial discussion.

– All reviews are provided on a best efforts basis. You are ultimately responsible for the accuracy of the information in your business plan (and related materials).

– You agree to defend, indemnify, and hold us harmless from and against all third party claims, losses, or damage which we incur and which arise from or are attributable to our role in this business plan review.

We believe that we have the most transparent and customer friendly pricing strategy on the market.

For someone writing their first business plan, even for simple small businesses, the process can take upwards of 100 hours of time. Often, it takes more than 200 hours . For complex business plans (business plans for unproven business models and undefined markets), the process can often take more than 400 hours. Because we have considerable experience and skill at writing plans, we estimate that, on average, that we can complete an average business plan (depending upon its type, audience and complexity) in the range of 30 to 120 hours.

The range between 30 and 120 hours depends upon three general factors that contribute to a business plan’s complexity. The first factor is whether the plan is for a new business or a business already in existence, The second factor is whether the business’s industry and market are well defined (for example: dry cleaners, dollar stores, organic vegetable farms, family restaurants…) or if the market or industry is new and untested. The third factor is who is the audience for the business plan: equity investors, debt lenders or the internal management of an existing business.

Note:  unless your business idea is exploiting a new market or market niche, or offering customers a product or service that is radically different from what is currently offered to the market, then only on rare occasions will your business plan require longer than 70 hours to complete.

From three factors above, we can generally estimate the average number of hours the plan will take to complete, and therefore we can charge a base flat fee for the project. We Our base flat fee rates are the product of our estimated number of hours times our business plan writing hourly rate. For our business plan writing, we charge $75 per hour.

The business plans we produce fall into the following six general categories:

But often, due to unseen factors (a change in the business plan format scope and direction), a plan may take longer than the anticipated range. Often project extensions occur when it becomes necessary to modify or change the focus of the business plan due to unforeseeable factors (i.e. new market research, assumptions are proven wrong, the founders choose to shift or expand the scope of the business…). So, if your business plan takes longer than the anticipated number of hours to produce, we will charge you at only $20 per hour beyond the original estimated time frame.

This ensures the following:

– By using our pricing formula (flat fee plus $20 per hour beyond the estimated project timeframe) versus using only a fixed billable hour rate, we mitigate any incentive to “run the meter” and unnecessarily inflate the price of your solid business plan. Our goal is to maximize our income per hour for each plan that we produce. Therefore, if we end up going beyond the project’s estimated timeframe, this means we will be working at a significant discount ($20 per hour after the end of the project’s initial timeframe estimate).

– We use our pricing formula also gives us some measure of protection against unforeseen changes to the project’s scope or direction. Creating a lean business plan is a dynamic process. Information discovered or uncovered during the plan writing process can change the focus, scope and goals of the project. Also, by charging a modest hourly rate beyond a predetermined period, helps to focus and frame exactly what you want in your business plan.

– Ultimately, our system encourages both you and us to remain disciplined, efficient and to maximize the value of each other’s time.

For example:  You task us with writing a Type 1 business plan. The project takes 50 hours to complete because the scope changed in the middle of the project. Under these circumstances, the final price for the project would be the Type 1 business plan flat fee ($2,250) plus $20 per hour for every hour spent on the project over 30 hours (20 hours x $20/hour = $400). Therefore, the final complete price for the project would be $2,650 ($2,250 + $400 = $2,650).

• One half (50%) of the project’s flat fee price is required to be paid up front.
• 30% of the project flat fee is due upon completion of the business plan’s Executive Summary (the last plan component to be completed).
• Upon completion of the business plan’s final draft and its approval by the client, the remaining 20% of the project’s flat fee is due  plus  any extra hourly charges if the project goes beyond its initially estimated time.

Preparing an expert business plan can be extremely time-consuming. While the process of mastering and completing your plan may be helpful in understanding the business dynamics, corporate strategy and overall financial and marketing model, it can take you away from operational support that is vital for day-to-day operations. That is where our business planning services come into play. We help business owners in crafting expert MBA-level business plans for internal management buy-in as well as external business funding needs.

Companies often create business plans to obtain financing from venture capitalists, private equity groups and angel investors. Your particular plan will be dependent on the industry you play in, the financing you are seeking to obtain and your overall strategy for execution. Finding the key strengths, knowing potential flaws and being conversant with competitive forces in the industry are only a few of the necessary components of your completed plan. In other words, a full SWOT analysis may be necessary.

Regardless of whether you write a business plan yourself or outsource it to one of the expert members of our qualified MBA team, it is helpful to have a second pair of eyes to edit and provide constructive feedback. You plan and pitch will help to make or break your financing efforts. Don’t skimp on quality. You need to show off your financial health.

Being conversant in finance is certainly not a requirement to operate or be successful in business. Having great financials, including thoughtful projected and proforma financial statements is a must for any entrepreneur seeking to secure funding or internal management buy-in. We help to craft properly-structured financial plans for your business using historical data and realistic assumptions.

Obtain financing for your business with an professionally crafted financial plan as part of your overall strategy.

Business plans are great, but execution is the name of the game. Without a proper marketing plan coupled with flawless execution, your business may eventually disappear.

We work directly with the entrepreneurs themselves to craft detailed, specific and attainable goals and strategies to take your product or service to market. For the seasoned entrepreneur, this may be “old hat,” but having an expert business plan consultant in your corner is helpful to the proper execution of your overall strategy. While there are many business plan software providers on the market, you will still need the human-touch element to really make business plan sing.

If you are seeking funding from any number of sources or simply need help crafting a plan to help you take your business to the next level, we can help. Contact us today to find out more.

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How to Write a Business Plan That Attracts Investors

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Purpose of a business plan

Business model vs. business plan vs. strategic plan, types of business plan, how to write a standard business plan, benefits of writing a business plan, challenges of writing a business plan, best practices for creating a business plan, top 3 business plan software.

Successful businesses are built on paper before they set foot in the real market. 

Building a business requires working simultaneously on multiple projects, and it’s easy to get overwhelmed. When that happens, a business plan becomes a guiding light, helping entrepreneurs and leaders work from chaos to clarity. 

A well-written business plan precisely details every aspect of your business, identifying opportunities and challenges before they emerge. Many organizations use business plan software to make their business plans. 

New companies use the software to make future projections and ensure that a business idea is viable. It allows them to tweak ideas ahead of time and see where they might face challenges. Established businesses take advantage of business plan software to explore expansion opportunities.

What is a business plan?

A business plan is a comprehensive written document that contains core business objectives and operations that will achieve business goals. It aligns business operations with strategic objectives and goals. 

A business plan is a fundamental requirement for business leaders seeking to secure bank loans or investments.

Writing a business plan guides companies through each stage of the business so they can understand if their idea can become a viable reality or not. Entrepreneurs can be biased toward their idea or be guilty of wishful thinking. When leaders write a business plan objectively, they see the reality of their success potential.

Companies in the same industry or those who sell the same products or services can have different business plans. However, some fundamental elements are common in every good business plan template. 

A business plan serves as a roadmap for navigating a business’ future. Developing this crucial document requires a thorough analysis of a business's operations and the whole industry to accurately represent its internal and external situation.

Despite being time-consuming and laborious, developing a business plan is essential. It forces entrepreneurs to think critically about every aspect of the proposed venture and all of its chances for success while also serving as a guide during the starting years of a venture. Potential lenders and investors use the business plan to determine whether they want to finance an enterprise.

New ventures or running businesses create a business plan while:

• Seeking funds
• Searching for a co-founder or new founder
• Attracting, acquiring, and retaining top talent
• Exploring and analyzing new growth opportunities

Want to learn more about Business Plan Software? Explore Business Plan products.

A business model is a mechanism through which a company creates, delivers, and captures value in social, economic, and cultural context, resulting in profits. Leaders use a business model to create and manage strategies for recruitment, customer acquisition, partnership, and business development.

A business plan is a written document that describes a business’ strategy and its predicted financial performance in the foreseeable future. It’s a roadmap to achieve strategic business goals and get closer to the company’s vision. 

A business plan maps out a business’s profitability in a given time frame. A business model is a vehicle that enables ventures to get there.

A strategic plan is more concerned with competition. This document looks at the current and potential markets and assesses which products or services will succeed in those markets. It also identifies how the company will perform better than its competitors to win over customers. 

The strategic plan does not just look at making the most money; it also looks at how the company should deal with potential problems such as low morale among employees or low customer satisfaction.

New business owners aren’t the only people who create business plans. A variety of leaders in different stages of development make business plans for specific purposes. Below are some common business plans that leaders or management teams create. 

Standard business plan

A standard business plan goes into minute details of the business and is around 30 - 50  pages long. When companies seek investment or financing through traditional methods, making a business plan traditionally goes a long way. It requires much work and can be lengthy but will help leaders cover most of the points an investor or lender would be interested in.

New businesses should convey these details  while writing a standard business plan:

Executive summary

An executive summary provides information about a company and why it will be successful. It covers details on the following aspects of a business: 

• Mission statement
• Product or service
• Leadership team
• Financial information
• Overview of growth plans

Company description

A company description covers detailed information about the company and the opportunities or problems it’s solving. It describes the following aspects:

• Problem statement
• Gaps in the market
• Target consumers or companies
• Competitive advantage

Market analysis

Market research and analysis help a company understand the target market and industry outlook. It answers the following questions:

• What are competitors’ strengths and weaknesses?
• What are the trends and themes in the industry?
• Why does a competitor strategy succeed or fail?
• Can the new venture address gaps or leverage opportunities in the market better than competitors? 

The management section talks about company structure and who will be leading it. It describes the following elements of a business:

• Legal structure
• Type of company registration – C or S corporation, or general or limited partnership.
• Organizational chart
• Individual expertise
• Resume or CVs of key members of the team

C and S corporation: A C corporation comes under standard Internal Revenue Service (IRS) rules. An S corporation elects special tax status with the IRS and benefits from tax advantages. 

Service or product

This section informs the reader about the services and products a company offers. It includes details on:

• Benefits of a product or service
• Product lifecycle
• Intellectual property such as patents or copyrights
• Research and development of products or services

Sales and marketing

In the sales and marketing section, a business plan creator can describe the following: 

• Customer attraction and retention strategies
• Sales process
• Sales strategies 

Marketing and sales strategies will likely evolve and be tailored to fit unique business needs.

Investment or funding requirements

This section outlines a company’s fund requirements over the next five years. It includes the following details: 

• Equity or debt needed
• Terms and conditions
• Time duration in which these funds will be utilized
• Investment usage
• Future strategic financial plans
• Financial projections

The financial projections section includes objective details about company financials and projections, showing that the business is stable. Companies can provide the following financial statements: 

• Income statements, if available
• Balance sheets
• Cash flow statements
• Prospective financial outlook for the next five years
• Forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. 

New businesses can use the appendix section to provide additional documents requested by the investor or lender. It can include:

• Product pictures
• Letters of recommendation
• Legal documents

A standard business plan aggregates some or all of the above sections. Entrepreneurs can decide to keep, add or remove sections based on their business’ specific requirements.

Startup business plan

Many entrepreneurs prefer to use the startup business plan format, which is comparatively easier and faster to explain. New business owners use this format to regularly change and refine their plans.

There are multiple ways to develop a startup business plan template . Below are some common elements businesses find helpful in their startup business plan. 

Partnerships

The partnership section includes detailed information on: 

• Manufacturers
• Subcontractors
• Other strategic partners

This section will include operations that a company would conduct to gain a competitive advantage—for example, implementing direct to consumers (D2C) strategy in which a business can enjoy higher profit margins, leveraging technology to automate and increase operational efficiency and more.

All resources that create value for consumers are listed under this section. It includes the following assets: 

• Intellectual property

Value proposition

A value proposition explains the distinct value that a company brings to the market. It can be about solving a problem, leveraging an opportunity in the market, catering to customer needs, or providing a benefit. 

Customer segments

Customer segments cover a company’s target audience and describe an audience group that a business wants to service. This can include target market demographics and communication channels relevant to target consumers.

Cost and revenue structure

A cost structure will include recurring expenses, one-time costs, and more. The business defines its strategy to control costs in this section. Additionally, revenue structure covers how a company earns money. It includes techniques like direct sales, subscription models, or advertisements on the website.

Feasibility plan

A feasibility plan is a decision-making plan that explores and evaluates companies’ growth opportunities, new product lines, and new markets.

Below are some of the common elements of a feasibility plan.

• Proposed growth method
• Target demographics
• Market analyses
• Capital requirements
• Objective standards

Feasibility plans are primarily for an internal audience. But if a company seeks external funding, this type of business plan would include a company description, financial analysis , and other product and service specific sections

One-page business plan

A one-page business plan covers highlights of a lean startup business plan. It’s also called a business pitch as it gives a snapshot of the business to vendors, partners, and investors. 

Below are some common elements in a one-page business plan.

• Company brief and description
• Target market
• Current and future sales projections

Growth plan

A growth plan can focus on an internal or external audience. Business leaders create a growth plan to evaluate and present growth opportunities in new segments for a running business. 

A growth plan consists of the following things:

• Specific growth opportunities
• New segment description
• Budget analyses

An external growth plan includes a business description, product or service, market, management, an overview of the financial aspect, and the points mentioned above.

The audience of your business plan plays a significant role in deciding an ideal way to create it. You should understand your audience’s needs in order to cater to them in your presentation. For example, the needs of an angel investor or a lending institution vary from those of employees or senior leadership.

When you define your audience, it helps you write a business plan in a way that resonates with the reader and supports due diligence.

Below are some standard steps for structuring your business plan.

1. Write an executive summary

An executive summary summarizes the key information from other business plan sections. If you plan to identify the most vital points in writing a business plan, it’s advisable to write this section last. 

On the other hand, if you’re confident that you can effectively summarize the business on one page, get started with these tips:

• Focus on the value proposition or the special selling point of your business.
• Use a problem-solution format or fill-in-the-blanks framework.
• Concentrate on your customers and how your product solves a problem or provides an exciting and better alternative to a present option.
• Don’t go overboard with the details in an executive summary.
• Keep the summary crisp and to the point.

2. Create a company description

Mission statement, history, and objectives are the three pillars of a good company description. They contextualize the bigger picture so investors know your company’s purpose and goals.

A mission statement looks like a simple sentence, but it holds many thoughts associated with the company’s existence. It often has inspirational and emotional elements that encourage others to believe in a mission.

Tip: Ensure your mission statement evolves with your company’s growth. Review it often to support your marketing efforts and maintain credibility.

Writing a company’s history is comparatively simpler. It requires facts such as the founding date and team, number of employees, locations, flagship products, and milestones aggregated in a simple list or a paragraph.

Objectives mention a company’s goals. These goals are often tied to expected results, providing a clear overview of the goals and helping employees work toward a common purpose.

3. Showcase market research and potential

Build up your business plan by summarizing your market research. Define target customers, market segment, size, and competition. If you target a broad market, describe how your company has the competitive advantage. For example, if you say a product caters to anyone who has a four-wheeler, it might pose a red flag for investors. Investors generally look for a precise target market to evaluate a product’s success potential.

Present your market analysis with details about potential customers’ age, income, location, education, profession, hobbies, and more. When estimating a market size or forecasting its potential, look out for being overly optimistic. You want the big numbers to be realistic. If they’re not, or you think investors would need further convincing, it’s better to have solid and practical reasoning handy to support your analysis.

4. Perform competitive analysis

Understanding what your competitors are doing and what’s working for them can benefit your company’s growth. You can take inspiration from them and innovate to create a strategy fit for your business. It helps you locate gaps in the market that you can address while learning about the target market you will enter.

Understanding competitors' strategies around advertising, communications, customer service, sales, and pricing is advantageous, but it isn’t necessary to use their same methods. Although competitive analysis helps you create a benchmark, you should plan an approach that helps you grow beyond it. 

You can research their customers’ reviews on G2 to identify customer pain points and come up with ways to address those issues before they happen.

If you don’t find a competitor for your product or service, research better because a similar business entity is likely a few clicks away. However, if there’s no direct competitor, you can research other companies that offer a product or service close to your offering to understand their market.

5. Explain your product or service

This section details your products or services. Cover the benefits, manufacturing process, product lifecycle management , and distribution. You can concentrate on the unique features of your product or how it’s better than others on the market. Cover how your customers perceive your product, both emotionally and practically. List any patents or intellectual property rights you own.

You can briefly explain how your products are created, the raw materials involved, and how you ensure their quality. Supply chain logistics and inventory management are also important parameters to discuss in this section. You can also share your knowledge about potential cross-selling or up-selling opportunities that might show up after purchase. 

6. Create a sales and marketing strategy

Growth strategies are as critical to a business’ success as water is to humans. You should develop a strategy around how your sales and marketing will grow your business. Reiterate a few points around value propositions, ideal target market, and existing customer segments in this section.

Next, mention your product launch plan and different approaches to attracting potential customers. You can share your expansion plans, and retention strategies. Mention ways you’re going to leverage different channels such as SEO, social media, display and print advertising, and word of mouth.

Summarize what you have done, what you’re going to do, and the results you expect to achieve. Your strengths in this section will help you stand out from the competition in the market.

7. Prepare a financial plan

You need to document your budget and financial plan even if you’re just starting. If you've been operating for a while, list financial statements such as cash flow statements, income statements, profit and loss statements, and balance sheets. 

Provide a report of close to three years of operation and be as accurate as possible. If you presume there will be some gray areas for your investors, it’s better to prepare a justification around it beforehand. Make sure you aren’t underestimating any business costs or overheads because this might cause investors to doubt your business skills. 

8. Highlight organization and management

Introduce your team with their experience and expertise, justifying how they can transform your idea into a successful business. Describe your management team’s qualifications and responsibilities in this section and make a strong case for your investors to trust their leadership. 

You can also talk about future hiring plans and the roles that will be critical in supporting future growth. Ensure you have the support of relevant legal and finance departments  to advocate for your future hiring plans.

9. Describe investment requirements

When you explain your funding requirements to angel investors or lending institutions, support it with reasoning. Be clear about why you need funding, where you’re going to invest it, and what expectations you have after directing the funds to set departments. 

Be realistic, and show value to your investors to get them excited about collaborating with you.

If you don’t arrive at a precise number, it’s better to fix a range. Have a best and worst-case scenario around your funding requirements. An investor may expect a dividend, which is a share of profit that the company generates. If it’s a lending institution, they will expect the principal and debt to be paid around a specific time frame. Plan well in advance to prepare the most suitable funding request.

10. Support the plan with an appendix of additional documents

Create a well-organized appendix with other documents that support your business case. These documents will help investors conduct due diligence and provide context for your plan. Include legal documents, deeds, permits, and other certificates.

 While you create an appendix, add a table of contents and footnotes throughout the plan to attract readers' attention.

Creating a business plan in the early days helps leaders make informed and calculated decisions. It provides an essential roadmap to achieving goals and highlights all important aspects of a business. 

Below are a few expected benefits of making a business plan. 

• Enhances clarity. Companies enjoy increased clarity in decision-making after writing a business plan. It helps leaders remain accountable for key decisions and also identifies critical priorities to reach milestones and achieve business goals.
• Conveys investment worthiness. A business plan answers critical questions about profitability, sustainability, scalability, and revenue generation. Entrepreneurs use a business plan to make a strong case for securing investment or loans.
• Supports top talent acquisitions. A business plan explains a company’s long-term vision to potential partners and employees. It describes how a business will achieve its goals and the ways employees will contribute to their role. This encourages the right people to be a part of the mission, empowering leaders to hire top talent.
• Establishes a structure. A business plan defines management objectives and acts as a reference to track and measure revenue targets and activities.
• Creates a baseline for marketing. A business plan describes the target audience or markets and various ways to promote its products and services. It builds a foundation for marketing to strategize their operations accordingly.

When writing a business plan, it's essential to keep your target audience in mind. As the founder, you’re likely the most invested person in your business idea and therefore, the most knowledgeable. 

You will probably have to remind yourself to explain things that seem obvious or second nature to you but may not be obvious to other people. Find ways to effectively communicate why your business is a good idea to convince your reader that it is a business worth investing in.

Another challenge of writing a business plan is ensuring that the text is engaging and easy for readers to understand and follow. You want your audience to be interested enough and engaged enough to continue reading the document all the way through, rather than skim over it or lose interest along the way.

To combat this challenge, use storytelling techniques and try to take an informal tone throughout the document. This will make it feel more relatable and engaging for your readers.

When you're emotionally connected to your business idea, it can be difficult not to project unrealistic expectations about its success. Don’t fall into the trap of projecting hope rather than reality regarding future growth. 

Adopt these best practices to create an effective business plan for a new venture.

Understand the reason

Creating a business plan requires a lot of effort and focus from entrepreneurs to get investors, bankers, employees, and partners excited about the company’s vision and obtain buy-ins. 

Business leaders should understand why they’re writing a plan and consider the following  aspects:

• Business promotion: A business plan helps leaders communicate their vision and roadmap effectively to get investors or banks interested in becoming a part of the mission.
• Effective negotiation: A business plan conveys the leaders’ commitment to the company’s vision and supports granular evaluation of their new venture. It provides them a robust foundation to support their business idea while negotiating with external or internal parties.
• Strategic operations: A business plan enables leaders to direct the right amount of time, capital, and other resources to specific activities that help them achieve their strategic goals. 

Identify the audience

Businesses should understand their audience and tailor their language and level of details accordingly. For example, traditional investors or bankers would need a standard business plan with detailed descriptions of every component. On the other hand, a growth plan would serve internal stakeholders better.

Divide responsibilities

Writing a business plan is a time-consuming process. It’s better to divide its components among trusted team members. Leaders can hire a professional writing consultant to edit the draft thoroughly.

Maintain readability

A business plan holds a lot of information. Entrepreneurs should write it so that it’s easy for investors or bankers to comprehend. The size of a business plan depends on the intended audience. Most business counselors and experts recommend keeping it in 30 to 50 pages.

U.S. Small Business Administration (SBA) recommends lengths of various components of a business plan as follows:

• Introduction: 3 to 5 pages
• Market analysis: 9 to 22 pages
• Company description: 1 to 2 pages
• Organization and management: 3 to 5 pages
• Marketing and sales strategies: 4 to 6 pages
• Product or service description: 8 to 10 pages
• Equity investment and funding request: 2 to 4 pages
• Financial information: 2 to 25 pages 

Business plan software helps users manage and share business plans while identifying goals, strategies, and financial needs for new companies or major projects. It describes opportunities and risks related to starting a new business or launching a major project. 

To qualify for inclusion in the business plan software list, a product must:

• Allow users to customize business plan templates and samples
• Enable users to modify a business plan using the drag and drop feature
• Offer business plan customization for branding purposes
• Define and evaluate goals, opportunities, and risks
• Provide documentation related to the business plan such as financial statements

*This data was collected from G2’s business plan software category on April 1, 2022. Some reviews may be edited for clarity.

1. LivePlan

LivePlan is a software application that helps businesses and startups perform business plan development, budgeting, forecasting, and performance tracking tasks. Business owners use it to plan, fund, and grow their businesses.

What users like:

“It allows us to simplify how we carry out our business plans in a much simpler and easier way. The ease of configuration and use is perfect for me and my business since we can simply design all our plans and strategies.

- LivePlan Review , Samantha C.

What users dislike:

“Sometimes, it doesn't have enough options in the forecasting area to include a projected revenue or volume increase by a percentage month over month. 

- LivePlan Review , Daniel J.S.

Cuttles helps entrepreneurs and business owners plan and grow their businesses using a fully interactive and guided business plan software. The software provides features and guides to create a startup pitch, write a business plan, define a startup team, and do budgets and financial projections.

“It's simplicity and ease to understand and implement. In the end, you have a great plan and become ready to go for pitches and gather investment.”

- Cuttles Review , Yves Y.

“So far, nothing major. Perhaps having a proof-of-concept kind of template would be nice to get some ideas.”

- Cuttles Review , Aizat H.

3. IdeaBuddy

IdeaBuddy allows organizations to develop ideas, create a business plan, validate business concepts, and create an impressive plan. The software provides a step-by-step guide, and editable business plan templates to create a plan in a simple way. 

“IdeaBuddy is a one-of-a-kind tool. It helps you develop every aspect of your business plan from the start. The software is easy to use and has a good UI. The tool also has built-in chat support to get your queries answered quickly.”

- IdeaBuddy Review , Hemant S.

“Need a roadmap where users can upvote features. There are limitations on ideas and collaborators, while some important features are still coming soon.”

- IdeaBuddy Review , Phuong N.

From chaos to clarity

Create a business plan even when you’re confident your idea will work in the market. You’ll discover many things that would motivate you to tweak your strategy and execute it differently. This knowledge is crucial as it shows you a bigger picture and helps you think of long-term instead of short-term benefits.

Building a business is like raising a child. You need to plan properly to ensure that your family has the right support so the child flourishes. A business plan provides that support, so the company thrives and prospers.

Learn more about how strategic planning software can help you accomplish your business mission and track progress.

Sagar Joshi

Sagar Joshi is a former content marketing specialist at G2 in India. He is an engineer with a keen interest in data analytics and cybersecurity. He writes about topics related to them. You can find him reading books, learning a new language, or playing pool in his free time.

Explore More G2 Articles

How to Write a Business Plan for Raising Venture Capital

Written by Dave Lavinsky

Are you looking for VC funding or funding from other potential investors?

You need a good business idea – and an excellent business plan.

Business planning and raising capital go hand-in-hand. A venture capital business plan is required for attracting a venture capital firm. And the desire to raise capital (whether from an individual “angel” investor or a venture capitalist) is often the key motivator in the business planning process.

Download the Ultimate VC Business Plan Template here

Writing an Investor-Ready Business Plan

Executive summary.

Goal of the executive summary: Stimulate and motivate the investor to learn more.

• Hook them on the first page. Most investors are inundated with business plans. Your first page must make them want to keep reading.
• Keep it simple. After reading the first page, investors often do not understand the business. If your business is truly complex, you can dive into the details later on.
• Be brief. The executive summary should be 2 to 4 pages in length.

Company Analysis

Goal of the company analysis section: Educate the investor about your company’s history and explain why your team is perfect to execute on the business opportunity.

• Give some history. Provide the background on the company, including date of formation, office location, legal structure, and stage of development.  
• Show off your track record. Detail prior accomplishments, including funding rounds, product launches, milestones reached, and partnerships secured, among others.
• Why you? Demonstrate your team’s unique unfair competitive advantage, whether it is technology, stellar management team, or key partnerships.

Industry Analysis

Goal of the industry analysis section: Prove that there is a real market for your product or service.

• Demonstrate the need – rather than the desire – for your product. Ideally, people are willing to pay money to satisfy this need.
• Cite credible sources when describing the size and growth of your market.
• Use independent research. If possible, source research through an independent research firm to enhance your credibility. For general market sizes and trends, we suggest citing at least two independent research firms.
• Focus on the “relevant” market size. For example, if you sell a portable biofeedback stress relief device, your relevant market is not the entire health care market. In determining the relevant market size, focus on the products or services that you will directly compete against.
• It’s not just a research report – each fact, figure, and projection should support your company’s prospects for success.
• Don’t ignore negative trends. Be sure to explain how your company would overcome potential negative trends. Such analysis will relieve investor concerns and enhance the venture capital business plan’s credibility.
• Be prepared for due diligence. It’s critical that the data you present is verifiable since any serious investor will conduct extensive due diligence.

Customer Analysis

Goal of customer analysis section: Convey the needs of your potential customers and show how your company’s products and services satisfy those needs.

• Define your customers precisely. For example, it’s not adequate to say your company is targeting small businesses since there are several million of these.
• Detail their demographics. How many customers fit the definition? Where are these customers located? What is their average income?
• Identify the needs of these customers. Use data to demonstrate past actions (X% have purchased a similar product), future projections (X% said they would purchase the product), and/or implications (X% use a product/service which your product enhances).
• Explain what drives their decisions. For example, is price more important than quality?
• Detail the decision-making process. For example, will the customer seek multiple bids? Will the customer consult others in their organization before making a decision?

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Competitive Analysis

Goal of the competitive analysis section: Define the competition and demonstrate your competitive advantage.

• List competitors. Many companies make the mistake of conveying that they have few or no real competitors. From an investor’s standpoint, a competitor is something that fulfills the same need as your product. If you claim you have no competitors, you are seriously undermining the credibility of your business plans.
• Include direct and indirect competitors. Direct competitors serve the same target market with similar products. Indirect competitors serve the same target market with different products or different target markets with similar products.
• List public companies (when relevant, of course). A public company implies that the market size is big. This gives the assurance that if management executes well, the company has substantial profit and liquidity potential.
• Don’t just list competitors. Carefully describe their strengths and weaknesses, as well as the key drivers of competitive differentiation in the marketplace. And when describing competitors’ weaknesses, be sure to use objective information (e.g. market research).
• Demonstrate barriers to entry. In describing the competitive landscape, show how your business model creates competitive advantages, and – more importantly – defensible barriers to entry.

Marketing Plan

Goal of the marketing plan: Describe how your company will penetrate the market, deliver products/services, and retain customers.

• Products. Detail all current and future products and services – but focus primarily on the short-to-intermediate time horizon.
• Promotions. Explain exactly which marketing/advertising strategies will be used and why.
• Price. Be sure to provide a clear rationale for your pricing strategy.
• Place. Explain exactly how your products and services will be delivered to your customers.
• Detail your customer retention plan. Explain how you will retain your customers, whether through customer relationship management (CRM) applications, building network externalities, introducing ongoing value-added services, or other means.
• Define your partnerships. From an investor’s perspective, what partnership you have with whom is not nearly as important as the specific terms of the partnership. Be sure to document the specifics of the partnerships (e.g. how it will work, the financial terms, the types of customer leads expected from each partner, etc.).

Operations Plan

Goal of the operations plan: Present the action plan for executing your company’s vision.

• Concept vs. reality. The operations plan transforms business plans from concept into reality. Investors do not invest in concepts; they invest in reality. And the operations plan proves that the management team can execute your concept better than anybody else.
• Everyday processes. Detail the short-term processes and systems that provide your customers with your products and services.
• Business milestones. Lay out the significant long-term business milestones for the company, and prove that the team will execute on the long-term vision. A great way to present the milestones is to organize them into a chart with key milestones on the left side and target dates on the right side.
• Be consistent. Make sure that the milestone projections are consistent with the rest of the venture capital business plan – particularly the financial plan.
• Be aggressive but credible. Presenting a plan in which the company grows too quickly will show the naiveté of the team while presenting too conservative a growth plan will often fail to excite an early stage investor (who typically looks for a 10X return on her investment).

Financial Plan

Goal of the financial plan: Explain how your business will generate returns for your investors.

• Detail all revenue streams. Be sure to include all revenue streams. Depending on the type of business, these may include sales of products/services, referral revenues, advertising sales, licensing/royalty fees, and/or data sales.
• Be consistent with your Pro-forma statements. Pro-forma statements are projected financial statements. It is critical that these projections reflect the other sections of your newly formed business plan.
• Validate your assumptions and projections. The financial plan must detail your key assumptions, and it is critical that these assumptions are feasible. Be sure to use competitive research to validate your projections and assumptions versus the reality in your marketplace. Assessing and basing financial projections on those of similar firms will greatly validate the realism and maturity of the financial projections.
• Detail the uses of funds. Understandably, investors want to know what, specifically, you plan to do with their money. Uses of funds could include expenses involved with marketing, staffing, technology development, office space, among other uses.
• Provide a clear exit strategy. All investors are motivated by a clear picture of your exit strategy, or the timing and method through which they can “cash in” on their investment. Be sure to provide comparable examples of firms that have successfully exited. The most common exits are IPOs or acquisitions. And while the exact method is not always crucial, the investor wants to see this planning in order to better understand the management team’s motivation and commitment to building long-term value.

Above all, the business plan is a marketing document that helps to sell the investor on the business opportunity, the team, the strategy, and the potential for significant return on investment.

How to raise venture capital is a difficult and time-intensive challenge. There is no easy shortcut or silver bullet. However, you can greatly improve your chances of raising venture capital by writing a business plan that speaks directly to the investor’s perspective. A VC business plan template will significantly help in cutting down the time it takes to complete your plan.

Finish Your VC Business Plan in 1 Day!

Raising venture capital faqs, what is the purpose of a business plan for raising venture capital.

The purpose of writing a business plan for raising venture capital is to convince investors that the proposed new or existing company has a good chance of being successful and can earn them a favorable return on investment (ROI).

A VC Business Plan Template will help you in creating an investor ready plan quickly and easily.

What Does VC Funding Entail?

VC funding is a type of financial transaction in which the venture capital firm invests in startup companies or early-stage companies. The firm invests its own capital (which it receives from other entities that invest in the VC firm) in these nascent companies with the goal of rapidly expanding them. Generally, early-stage companies use bootstrapping, self-funding, bank loans, and/or angel investment before raising their first round of venture capital. Companies might receive several rounds of VC funding.

What is a Typical Amount of Capital to Raise?

Typically, the first round (Series A) of venture capital amounts to $2-10 million. To raise that amount from VCs at the very start of your company is often very difficult. Rather, you should consider approaching angel investors and banks to provide initial financing to get you to the point at which venture capitalists are interested in providing funding. Gaining customer traction is generally the point in which VCs are ready to provide Series A financing. VCs will provide Series B funding, Series C funding, etc. to help continue to fund a company’s growth if the company seems poised for success. These funding rounds are usually much larger than Series A rounds.

How Long Does It Take For Investors To Decide If My Business Is Worth Investing In?

It varies from investor to investor, but prepare yourself to wait up to three months before receiving a check from a VC. The process typically includes sending the VC a teaser email to get their interest, following up with a business plan, giving a pitch presentation, and negotiating the terms of the funding round.

How Do I Find Venture Capitalists?

There are many venture capital firms and virtually all of them have websites and are thus fairly easy to find. There are also directories of them available on the internet. You may also be able to find VCs through personal introductions or by attending industry events. 

Look for VCs that have funded companies in your industry/sector, at your stage of development and in your geographical area.

What Capital Raising Options are Available For a Business?

There are four broad options for raising money or venture capital when you run a business. These include venture capital firms, angel investors, loans and venture debt, or bootstrapping.

Venture Capitalists

A Venture Capitalist is an investor that provides equity financing for companies that have already achieved some traction but lack the financial resources to scale up their operations. Their investment objective is typically to grow the company so it can be sold or go public at a later date so the VC can exit or cash in on their success.

Angel Investors

Angel investors are wealthy individuals who invest their own money into startup companies because they believe they will get an above-average return on their investment. They also invest if/when they like the entrepreneurs and/or management team, they are passionate about the concept, or if they’d like to get involved in an exciting new venture.

Loans and Venture Debt

Business loans or venture debt is money given to a company in return for interest and principal payments over time, but without the investor taking an ownership stake in the company. Such funding is typically issued by local banks. Debt funding is typically less expensive than equity financing, but it is much harder for early-stage companies to raise significant amounts of debt capital.

Bootstrapping

Bootstrapping is the process of a startup company funding its own growth from internal sources such as the founder's savings, loans from friends and family, or credit card debt.

Firms that are bootstrapped can grow at a more controlled rate while they achieve product-market fit before an angel investor or venture capital firm injects their money to scale up the company.

Bootstrapping is best for companies with low capital needs because there’s only so much you can raise in this manner. If you need millions of dollars, bootstrapping just won’t work and you’ll need to tap venture capital.

How exactly will your small business persuade these potential investors to sign a check? Once you know what type of capital you are trying to raise, you can develop business plans to suit their exact requirements.

Need help with your business plan?

Speak with one of our professional business plan consultants or contact our private placement memorandum experts.

Or, if you’re developing your own PPM, consider using Growthink’s new private placement memorandum template .

Other Helpful Funding & Business Plan Articles

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7 Things Investors Are Looking for in a Business Plan

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A business plan is a comprehensive document that outlines a company’s mission, goals, finances, revenue, and market data.

The primary purpose of a business plan is to convince banks and/or investors to loan you money, but there are several other benefits.

Business plans help create accountability within an organization, offer a holistic view of the company, and can repeatedly be used as a frame of reference.

Ultimately, a business plan mitigates risk. It summarizes all business areas and details how those areas ( marketing , operations) impact growth.

And there’s no way around it; if you want to fund from an investor, especially if you’re just starting your business , you need a business plan.

Any entrepreneur would be lucky to meet with an angel investor or venture capitalist. But the initial pitch, meeting, and presentation are all the tip of the iceberg.

What comes next is most important.

The potential investor will want a detailed business plan and will conduct due diligence to ensure you’re a worthy investment. With that in mind, here’s what investors are looking for in a business plan:

Strong Executive Summary

The executive summary is the first portion of your business plan and should be captivating enough to give a solid first impression.

Think of your executive summary as your website landing page. If visitors come to your website and can’t find what they’re looking for, they’ll move on to the next best thing.

Your executive summary should introduce the company and explain what you do and what makes you unique. It gives investors a complete overview of your business and should summarize key details in other business plan sections. This section is typically one page long and should be written last.

Start your executive summary by introducing yourself; follow up with an explanation of why your business matters and how it fills a gap in the market or solves a particular problem. Take a business plan example for inspiration for writing a practical executive summary.

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Complete Financial Forecast

Whether you have no sales or are generating revenue in the hundreds of thousands, every investor will scrutinize your financial plan to determine financial feasibility accurately. This section of your plan needs to be fully fleshed out and leave no grey area or room for further questions.

It’s essential to put yourself in the shoes of an investor. Based on your financial outlook, do you see yourself as a risky or promising investment? Your financial forecast should include the following:

Projected profit and loss statement Projects how much revenue you’ll generate and the profit you’ll make on those sales

Break-even analysis A detailed look at how many products you need to sell to cover fixed and variable production costs

Projected balance sheet Estimate of total assets and liabilities

Cash flow statement Details all cash inflows and outflows

Business ratios Calculations that illustrate the relationship between items (i.e., total sales and the number of employees).

To accurately build out your financial forecast, you must assess your market share (your market research section is also crucial to investors). Start from the bottom by highlighting your total addressable market and the percentage you’ll be targeting. Then you can dive a little deeper by outlining your segmented addressable market and share of the market. Investing sites can also help you better perceive the state of the market and other data for a more accurate forecast.

Want free financial templates for your business plan?

You will find a terrific collection of important templates, including a SWOT analysis, sales forecast template, profit and loss template, cash flow template, and balance sheet template, in this comprehensive guide on how to write a business plan.

Customer Acquisition Costs

Investors want to know how much it will cost to acquire new customers.

Understanding your customer acquisition costs (CAC) helps you grow healthy and scalable and shows investors that you know exactly what it takes to get a customer on board.

Knowing your CAC is more important than ever; the cost of acquiring new customers has increased by 60% over the past five years .

Customer acquisition costs are determined by examining the total cost of sales and marketing necessary to acquire new customers. You can calculate your CAC by dividing the total cost of marketing and sales by the number of customers acquired.

Your CAC can also help simplify your decision-making process, optimize your marketing strategies to focus on customer lifetime value, and paint a complete picture of your payback period (the amount of time it takes to recover the cost of an investment).

Strong Execution

A business plan is like an image. And as the age-old saying goes, “An image is worth a thousand words.”

Similarly, your business plan reveals much about who you are as a business owner. Let’s say that you have strong sales and an optimistic financial forecast. Is your business plan missing the necessary documentation and data points that support this? Is it rife with grammatical errors and improper formatting?

Execution is telling. How you communicate your business and your mission is just as important as the details within the plan. A hastily written or ambiguous business plan will result in more questions and hesitance.

If you can’t take the time to write a solid business plan, what else will you take shortcuts on?

The Financial Ask & Answer

The financial ask and answer addresses two crucial questions: How much money are you asking for, and what will you do with it?

The investment you’re seeking should be clear in your business plan (typically mentioned in the executive summary and expounded upon in the financial plan). How you intend to use the money should also be clear and logical.

Investors need to know that you’ll spend their money responsibly and that there’s proof that how you spend the money will result in revenue growth. Every dollar should be allocated to a specific destination for a good reason.

For instance, you cannot ask for a $500,000 investment without explaining how and why you arrived at this number. The business plan in the below example of a functional company called Culina states how much they’re asking for and why. In this case, Culina is raising $15 million to ramp up hardware manufacturing, improve UX and UI, expand marketing efforts, and fulfill pre-orders before the holiday season.

Strong Management

Your business plan should prove that you have a strong management team.

Many investors run their portfolios with a people-first mentality. This means that who you are is just as important as what you offer. Your business plan’s “Management” or “Team” section is great for humanizing your company and highlighting your strengths.

What makes your team especially capable of running and guiding this business toward profitability? What’s your background? Have you won any awards or participated in any incubator programs? Do you have relevant experience (either in running a business or working in the industry)?

Answer these questions to show investors that you’re uniquely qualified to lead.

Thorough Understanding of Your Market

Is there a market for your product or service, how can you reach your market, and what share of the market do you have a stronghold on?

Demonstrating a thorough understanding of your market and target demographic is crucial. Many businesses have failed because they didn’t conduct market research or speak to their customers and clients. Product validation should precede fundraising efforts.

“Market size” is a basic number that every investor looks for. Your competitive analysis , market research, metrics, and customer surveys should all be factored into the equation.

If you’re struggling to understand your market and position, you can start by gathering primary data from the Census and Labor Bureau. Many industries also have formal associations and publish their research online. You can purchase these studies or commission a market research firm to spearhead your research.

An interested investor can make or break your business and should be taken seriously. You wouldn’t rush through an Ivy League college application and shouldn’t submit a hastily written business plan.

Take the time to detail every aspect of your business and consider working with a business plan writer to ensure you communicate your message effectively. If an investor is impressed with your business plan, chances are you’ll score pivotal funding.

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Investor Ready Business Plan: How to Prepare And Implement (10 Steps)

Not all casually created business plans can help you reach potential investors. And as we all know, investors are the main source of the continuous success of any business idea.

So, if you want to get that recognizable amount of investors, there is no other way left than to prepare a practical business plan.

In This Article

Steps to Prepare an Investor-Ready Business Plan

Step 1 – researching.

A written business plan is always necessary where there should be research. Researching is important for all kinds of businesses, from small to large.

Business researches help to find out the profits and losses. Spending good hours of time researching is effective. It includes the evaluations.

You must think properly while writing a business plan. Before writing, you have to understand your business, its products and services, your goals and objectives, your competitors, and so on.

Researching also includes reading everything from top to bottom about the industry world, visiting the market, and trying to connect with your consumers by talking.

While conducting business research, there are several steps to follow, such as market analysis, financial analysis, growth analysis, competition analysis, and so on.

Step 2- Understanding the purpose of your business plan

Business plans can include various purposes, but a definite business plan should be there, which will describe the kind of business you are doing, the marketing techniques and selling strategy, the profit and loss statement along with the financial position.

A business plan has a copulative thought to deal with a business, like a mapping which includes analyzing for marketing, manufacturing, website designing, sales, etc.

This is important because you are self-investing and accomplishing a business by yourself. On the other hand, if you are concerned about attracting your investors, then you have to have a vivid and summarized plan, and also, you have different purposes for attracting your investors.

You should personally delimit the goals yourself before you define your plan to others.

Step 3 – Company Profile

Having a company profile means complete information about your company is there, or we may call it your organization’s history.

This is important to impress and attract the customers and also to able them to know about your company, its product and services, your resources, quality, and so on.

A company profile also shows the way your business is identical to the customers. A business profile must include your target market, offered product and services, targeted audiences, resources, and how you will overcome the bumps in your business.

A company profile is available on the company’s official website. A company profile is a very first introduction to business.

The advantages of having a company profile are: to get tenders and contracts, get listed as a service provider, and also to achieve financial loans from banks, and also getting grants. 

A company profile should be designed with a logo and profile page, introductions, backgrounds, techniques, views, products and services, ownership and management, and evidentiary.

Step 4 – Clear documentation of your business

Every investor wants a complete profile and fair business documents while investing, as their ultimate aim is to achieve cash from a business. Fair documents are very important for investors, banks, and other financial issues and official purposes.

Hence you must make clear documents regarding your industry projection, cash flow, expenses, financial statements, and so on.

You must be careful regarding your legal papers, like business licenses also. Types of business documents are business letters, business reports, emails and memorandums, transactional documents, financial documents, etc.

Business documents give information about contractual terms and conditions, locations of the company, VAT no, corporate identity no, invoices, offers, and price lists. Financial documents are also important for budgeting, tax file returns, and proposals for budgets.

Business documents are prepared by the company’s accountants, including the income statement, balance sheets, pay bills, payroll reports, receipt records, etc.

Business documents play a vital role while you do your business as they gradually increase your confidence in your business among your customers and potential investors and represent the authenticity, history of its journey, etc.

Step 5 – Adaptable business plan that can relate to audiences

A business plan must be adaptable for all kinds of potential readers. What you have planned, your business strategies, your goals, and objectives, your previous history, etc. And everything should be vivid. Your readers include bank employees, investors, capitalists, venture, etc.

So your business plan should be adaptable as different readers can have different views, interests, and conditions of their own.

While planning, if you keep in mind the different interests of your potential audiences/readers, then your planning will be easier and clear as you would make it adaptable according to them.

Your business plan can be fluctuated and be modified depending on your target audiences, but you must keep the changes up to a limit while modifying the plans, keeping the main data stable while you talk about your projection of finance.

The interest and demands from your business plans vary. Forex- the venture capitalists are concerned with your management process and your authentic business concepts and objectives, while the banks would ask for cash flow statements and balance sheets.

Step 6 – Caring For Your Business Plan

No matter with whom you share and discuss your business plan, you must show your seriousness, care, support, and devotion toward it.

Your passions mean a lot for your business plan for your team members, customers, investors, venture capitalists, and everyone in your business.

Your discussion should include your learning, your previous mistakes, the upcoming obstacles you want to overcome, how you would solve your regular problems, your defeating techniques for your competitors, and what would make you unique.

You must set your goals and how to reach them, which means you have to create tasks. Also, there should be a time limit and a deadline while you set up a goal to execute it.

There should be no compromise. All these things should reflect in your business plans. If you include this part of the explanation in your plan, it will eventually develop a sympathetic and emotional bond between others and you.

Hence your business will get support to help it become more successful in the future.

Step 7 – Having A Marketing Plan

Whether you are an entrepreneur or a business owner, the market analysis should be there, describing the understandability, the market demands, and the price of potentiality in the market.

There is a famous saying that “ The only thing that matters is getting to the market fit” Moreover, understanding and knowing the market properly is very important regarding customer demands for products, market research , evading, classifying, quality, and so on.

In a business marketing plans include various important points. Various goals have to be there in marketing objectives, and also techniques to achieve them should be there.

Your marketing objectives should put focus on why and what you are going to do for your marketing activities, implementing and executing; to whom and how your business plans should go on.

In your planned business marketing, you must have financial budgets to execute your planned tasks.

Your budgeting should be divided between external and internal hours. External means cost of pocket money, and internal means labor/ staff hours. Doing these will make you attain costs, which are essential for a business plan.

Step 8 – Analysis of competition

In a business plan, analysis of competition is a big deal. Competitors are the rivals whom you have to beat always. In order to do that, you have to ordain the strengths and weaknesses of the competition.

This would help you be benefited. In this way, you can understand and can protect your business from the competition and keep your business safe.

Also, analysis of competition can determine the negativities that can utilize your business productions. It is a critical side of a business plan to make a competitive analysis.

Through its evaluation, you can show what makes your products and services identical among all.

To make a competitive analysis, you have to determine who your competitors are, their products and services, their current situations and strategies, their share in the market, what is both of your weaknesses, their threats towards you, the positive opportunities they made for available for your benefits and so on.

Step 9 – Having Love Toward Your Enemies

The closer you are to your enemies/ competitors, the more you can understand their strategies. Your good and balanced relationship can help you learn more about their businesses. Hence understanding the competition would be easy for you.

Their way of doing business,  their successes, their number of customers, their techniques, etc. All these would help you to compose and compete with your enemies and find ways to compete and make plans, helps to modify your business strategies and techniques, and help you compare.

Loving and being with your competitors help you learn a lot from them, like studying their websites and their behaviors toward customers. Hence these ideas and learnings help in making business plans successful .

Meeting competitors at conferences and events and discussing and talking to them helps to develop your knowledge.

Step 10 – Knowing and understanding your business properly:

Before entering into your business, comprehending your own business is important a lot. If you want to make a business plan, you must read the previous records and histories of the business, its pros, and cons, profits and losses, etc.

Knowing what your business is offering is essential. Understanding the objectives and goals, the competitions and competitors, and the payment of buying and selling.

You must know the weight of your own business. This is important as it will influence your business in the future. Your business may contain many valuable assets, so it’s important to know its value.

If you have this knowledge, you can make a real plan for your business. It also helps make plans effectively for business growth, the running of the business, the ways of success, and the right time for retirement. There are certain times when business relations valuations are complicated.

So there are few business valuations like finding, buying, and selling agreements, evaluating retirement incomes, and estimating potential estate tax obligations. Hence to run and make a proper business plan, all these points help to make one.

Step 11 – Management team and organizations:  

Business management is important to run and should be included in a business plan. A strong and good management team helps to run and execute business plans successfully and effectively.

A company’s management should deal effectively with a business’s organizational structures. There should be a directory of the number of departments, descriptions, staff, and employees.

Owner’s information, their ownership, and percentages of share in the business and about the board of directors. Owners’ biography, skills and experiences, knowledge, and involvement in the business.

How management teams work, their profiles and experiences, and their work. Also, if there are advisors like accountants, attorneys, members of the board, etc.

Step 12 – Writing the details of how you plan to spend money in your business

It is very important to write about the source of money you would spend while doing your business.

You must include your costs, like advertising, employee and staff salaries, rent, delivery costs, offices, and other expenses, insurance, raw materials, and purchasing new equipment while opening up a new business.

These costs are obviously hectic and stressful to carry out. Before thinking about profits, the actual cost of business to start is a matter of concern and can lead to a big deal.

So, you must calculate these costs and the consequences that would occur when you plan the expenditures while planning your business.

This will reduce your risks and stress after you plan it properly and can meet up the costs as budgeted.

Step 13 – Financial planning

The ultimate concern is definitely the financial plan while writing a business. This is the most complicated and serious concern in a business, as it is a must to show the source of money, how and what it is used for, and where it goes.

Capital is the key component of a business. Your business plan must show the amount you invest and contribute to a business.

This is because if you show it, you will earn bank appreciation as personal funding backs up to get new loans for business. There are certain funds that take place by investors or bank loan providers.

There are also public subsidies that are included in the external funds. All these should be noted down in your business plan.

Step 14 – Studying Risk factors and their chances

Risk factors are delicate issues and should be included in a business plan. This is the most important issue as these are related to loan creditors, investors and bankers.

Taking these risk factors into account while writing a business plan in the upcoming future won’t make you face problems.

In fact, risk factors create financial obstacles in the business.  Facing risks is obvious for all businesses. Fluctuations in profit and loss and other factors cause business failure.

We can conclude by saying that risk factors are the possibilities a company may face less than its expected profitability.

Final Wordings

These are the fundamental steps that you can follow to write an effective business plan. Keep the incoming barriers and profits in mind and implement them accordingly.

Always try to create a situation where the investors will be more willing to be engaged with your business plan.

Otherwise, it would be hard to survive with the losses that may follow if investors become confused and deny showing any positive involvement.

Overall, these steps can be your roadmap to land more and more investors who will have a clear idea about you and will be more interested and show more enthusiasm and spontaneity toward your business plan.

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Business, marketing, and blogging – these three words describe me the best. I am the founder of Burban Branding and Media, and a self-taught marketer with 10 years of experience. My passion lies in helping startups enhance their business through marketing, HR, leadership, and finance. I am on a mission to assist businesses in achieving their goals.

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What Investors Want to Learn From Your Business Plan — CEO Insights

Posted march 23, 2021 by bailey koharchick.

You’ve built your business idea into a scalable, high-growth potential startup. You’ve demonstrated some initial traction in the marketplace, and now you’re seeking your first round of funding. 

So, how do you ensure that your business plan is investor-ready? Start with a Lean Plan.

The best investor-ready business plan is a Lean Plan

When writing a business plan for investors, focus on developing a strategic lean business plan . 

This type of business plan is shorter and more flexible than a traditional plan . Similar to the executive summary, your Lean Plan will help keep the necessary information about your business concise and easy to review. This makes it perfect for presenting to investors, but removes the limitations of a traditional business plan format. 

Aside from being easy to review, it’s also much easier to update, expand on necessary section and actually use outside of being a presentational document. Think of it as a tool for gleaning valuable insight into your company, its potential for success, and the areas where you may want to fine-tune your business model. Things that any investor will want to know and confirm that you know as well.

What should go into your investor-ready business plan?

Before you send over your executive summary and financials, make sure you’ve already completed your full Lean Plan. It will share some common topics with your executive summary, but it should go into more detail—and it should still be fairly brief. Here’s what you need to include in your Lean Plan:

• The problem or need that you’re solving for your customers
• Your product or service—how you’re solving the problem
• The target market size and demographics
• Your sales channels
• A basic marketing plan (the results of your market research)
• Competitor analysis and your competitive advantage
• Real financial projections including a full cash flow forecast
• Key milestones in your business to date and a timeline of expected milestones to come
• Key team members , business owners, and advisers championing your success

For more on how to write your Lean Plan, check out our introduction to Lean Planning .

Key elements to focus on with your investor ready business plan 

It’s true that the angel investors or venture capitalists that you pitch to may never read your whole plan, even if it is a Lean Plan. However, anyone interested in handing you thousands or even millions of dollars will want to do due diligence before they invest in your venture. They’ll be especially interested in your strategic roadmap , your business model , and a solid financial plan . You can cover all of these elements with the following sections.

Executive summary

The executive summary you share the first time you reach out to an investor should be short—one to two pages. It doesn’t include any unnecessary details, but it should support and outline the financial forecast you present. In short, this should provide a summary of your business model, your strategy and what research led you to that specific structure.

Make sure your executive summary covers:

• Who you are—your name, your business name, your contact information
• What you offer and the problem your business solves
• Your target market
• How much startup funding you’re seeking
• The size or scale of your business
• Any remaining critical details that investors definitely need to know

A full financial forecast

No matter who you pitch to, investors will want to know if you’ve thought through the financial feasibility of your business. You can explain this using your financial forecasts within your full financial plan. 

Your full financial forecast should include a projected profit and loss statement , a projected cash flow statement , and a projected balance sheet .

The easiest and most accurate way to do this is to build the financials from the bottom up, starting with identifying your share of the market. First, figure out your TAM, SAM, and SOM . That is, your total addressable market (TAM), then what percent of that market you are going to go after, or your segmented addressable market (SAM), and your realistic share of the market (SOM).

Make sure you answer the following questions with your financial forecasts

• What’s the average lifetime value of your customers?
• How much is it going to cost you to get them (acquisition costs)?

If you’re seeking investment, you’ll have to prove that you’ve had some initial traction. So, as you build out your forecasts, use your actuals to help model what you expect to see for the next few years. Even if you don’t have robust financial results, you can still develop extensive forecasts and explain how you’ll continue to review and refine them as your business launches and grows.

How to develop your pitch presentation 

When you first reach out to an investor, plan to share solid financials and an impressive executive summary that piques their interest. They will ask you for whatever additional information they’re interested in. When your Lean Plan is finished and your executive summary and financials are ready to send, prepare your pitch deck and presentation. Here are a few things to keep in mind before you start the conversation with potential investors.

Do your homework

You’ve likely conducted plenty of research around your available market, potential competitors and the customers you intend to serve. But, before you pitch your business, you’ll also want to research who you’re pitching to. You want to be sure that you know who you’re speaking to and have a sense of who they’ve funded before and what they really want to get out of your presentation. 

The key here is that by the time an investor says “yes” to the pitch meeting, you’ve already done all your homework, have a thorough plan in place, and you’re prepared for whatever investors want to know. 

Craft a story

Your pitch will include many of the same elements as your Lean Plan, but don’t just read your executive summary to investors when you have them in the room. Use storytelling to your advantage, craft a tale around who your customers are, and how your solution serves them better than anything currently available. 

You can even focus on your company mission, culture or anything else that sets your business apart and helps reinforce the viability. If you can, make this part of your investor research to be sure you know what elements of your business they care more about.

Practice your pitch 

Keep in mind that just like your Lean Plan, your pitch should be brief. Brevity and knowing how to answer specific questions only comes from practicing what you intend to cover and how you’ll use your pitch deck as a resource. 

Practice your pitch on your family and friends so you get comfortable with the delivery. Ask them to ask you questions about things they’re not clear on so you can start to anticipate and prepare for the hardest questions investors will ask. Here’s a guide to pitching to help you get started.

Keep your business pitch lean

When you’re ready to seek funding for your startup, resist the urge to send over a 200-page business plan to a potential investor. Keep in mind that investors get piles of pitches just like yours every day. Make it as easy as possible for them to digest who you are and the opportunity your business presents. Just make sure that when you get that callback, you have a strong financial plan, and a well-thought-out Lean Plan in your back pocket, so you’re not scrambling.

Editor’s note: A version of this article by Palo Alto Software CEO, Sabrina Parsons, originally ran on the MyCorporation blog . This article was originally published in 2013 and updated for 2021.

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How to Write a Business Plan For Investors (That They Will Love)

• August 22, 2022

If you’re an entrepreneur who likes to forge ahead without putting too much thought into the future, writing a business plan is crucial to starting your company.

After all, it’s hard to get funding without one, and if you fail to provide investors with all the information they need upfront, they might not want to invest in your company at all.

What is a Business Plan?

A business plan is a written document that lists business goals, stages of business development, and how you tend to achieve these goals and objectives. This document provides a snapshot of your business to potential investors. In modern terms, we can also call it a pitch deck.

Since a business plan is the foundation of your business, it will determine how investors perceive your business and provide you with the necessary funding to kickstart your idea.

If you want your business plan to be compelling that investors can’t say no , check out these seven steps to writing a business plan that investors will love.

Step 1: Research your industry

When it comes to writing a business plan, research is key. You need to have a clear understanding of your industry, your target market, and your competition.

Entrepreneurs tend to focus on the “right format” for writing a business plan. However, there is no such thing as a right or wrong business plan format. What matters is how you cover key aspects of your startup in the plan.

This will not only help you create a more comprehensive business plan but will also give you the opportunity to address any potential concerns that investors may have.

Step 2: Define your goals

When you’re thinking about your business goals, it’s important to be REALISTIC . Write down what you want to achieve in the short-term and long-term, and make sure that your goals are specific, measurable, achievable, relevant, and time-bound (SMART) .

Doing this will give you a clear idea of what success looks like for your business, and will make it easier to create actionable steps that will help you get there.

Step 3: List your risks

Every startup has to consider the risks, and it’s important to list these out in your business plan so that investors are aware of them.

By being upfront about the risks, you’ll show that you’re prepared and have thought through the potential challenges your business may face.

Step 4: Create a marketing plan

No matter how great your product or service is, you need to have a plan for getting it in front of your target market.

A good marketing plan will help you define your target market, set budget and marketing goals, and determine the best channels for reaching your customers.

Plus, a well-executed marketing plan can be a great way to get investors interested in your business.

Step 5: Include an operations manual

An operations manual is an important part of your business plan because it shows investors that you have a clear understanding of how your business will run on a day-to-day basis .

Plus, it will help keep your business organized once it’s up and running. Here are two things to include in your operations manual:

• A description of your company’s structure and hierarchy!
• A list of your company’s key personnel, their roles, and responsibilities!

Step 6: Include financial statements

Financial statements are important because they show potential investors whether or not your business is viable .

They also help you track your progress and identify any areas where you may need to make changes.

Step 7: Market your plan

Now that you have a killer business plan, it’s time to market it to potential investors. Here are a few tips for getting your plan in front of the right people :

1) If you’re going for a bank loan or venture capital funding, find out who is on their investment committee and address your proposal to them with the rest of the member’s CC’ed on the email.

2) Create an informative video about your company and post it to your company website and social media pages.

3) Reach out to the channels with huge followings in your area(they often post interviews with experts). By having an opportunity to appear on others’ pages, you will have a much bigger exposure than if you were to start out on yourself.

The Main Concerns of Investors

Cashing out.

Many startup owners show concerns about why investors have such a short attention span. Many people who consider their initiatives as a lifetime commitment assume that anyone else who joins them would feel the same way.

When evaluating a business strategy, investors assess whether or not to invest, but also how and when to exit. The exit plan is super critical as it paves a way for investors to come out of unfavorable circumstances in case the startup fails to make an impact in the market.

Sound Financial Projections

Profit estimates over the next 5 years might assist investors to negotiate the amount they will receive in exchange for their capital. Investors use financial forecasts as a measure for evaluating future performance.

Entrepreneurs go to extremes with their numbers. They don’t put enough effort into their finances in some situations, relying on figures that are so skewed or optimistic, anyone who has read more than a dozen business plans can see right through them. Some entrepreneurs feel that the financials are the company plan.

They may envelop the project in a mist of numbers. Many investors threw off by “spreadsheet merchants,” who have pages of computer printouts covering every possible company variation and analyzing product sensitivity.

Even when genuine marketing finds data financial projections, investors are apprehensive because emerging companies almost never realize their optimistic profit forecasts.

The Development Stage

Every investor wants to lower their risks. They analyze the status of the product and the management team while assessing the risk of a new and developing enterprise. The smaller the risk, the higher the chances of funding. 

A solitary entrepreneur with an unproven idea is at one extreme. Such a venture has a limited chance of acquiring investment capital unless the creator has a stellar track record.

At the more desirable extreme, is a venture with an approved product in an established market and a trained and staffed management team. 

If you’ve never launched a business before, you’ll need to show a lot of tangible progress in order to assuage investors’ concerns about your lack of expertise.

Do a Pilot Test

Unless you are wealthy enough to fund the company and test the pet product or service yourself, the only way to meet your wants is to satisfy those in the market.

Off course, you’ll have to overcome a number of obstacles before you can persuade investors that your company can thrive. What, for example, are the proprietary aspects of the product or service? How will you achieve consistency in quality? What would be the payback period? How long would it take before you become profitable?

Have you focused on a single market segment, or are you aiming to accomplish too much? The outcome will be more successful if you reply in terms of the market and investors rather than your personal preferences.

Numberly has Got Your Back!

Whether it’s your first startup, or you’ve raised funding in the past, writing a killer pitch deck or business plan is always a nerve-wracking experience. Blank pages will haunt you for days unless you have a concrete idea of where to take a head start.

Coming up with great business strategies is as much an art as it is a science, despite what we hope. The concept of a master document with blanks for executives to fill in, similar to how lawyers use example wills or real estate deals, is as fascinating as it is impossible.

Businesses have different marketing, manufacturing, and financial obstacles. Their strategies must account for these differences, stressing appropriate areas while downplaying minor problems. Keep in mind that investors view a business plan as a distillation of the company’s aims and personality.

Let Numberly be your guide here. Our careful and thought-out process ensures your business plan takes into account all stakeholders.

We will help you save time and energy while increasing your chances of attracting investors and clients.

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How To Write a Business Plan

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Starting a business is a wild ride, and a solid business plan can be the key to keeping you on track. A business plan is essentially a roadmap for your business — outlining your goals, strategies, market analysis and financial projections. Not only will it guide your decision-making, a business plan can help you secure funding with a loan or from investors .

Writing a business plan can seem like a huge task, but taking it one step at a time can break the plan down into manageable milestones. Here is our step-by-step guide on how to write a business plan.

Table of contents

• Write your executive summary
• Do your market research homework
• Set your business goals and objectives
• Plan your business strategy
• Describe your product or service
• Crunch the numbers
• Finalize your business plan

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Step 1: Write your executive summary

Though this will be the first page of your business plan , we recommend you actually write the executive summary last. That’s because an executive summary highlights what’s to come in the business plan but in a more condensed fashion.

An executive summary gives stakeholders who are reading your business plan the key points quickly without having to comb through pages and pages. Be sure to cover each successive point in a concise manner, and include as much data as necessary to support your claims.

You’ll cover other things too, but answer these basic questions in your executive summary:

• Idea: What’s your business concept? What problem does your business solve? What are your business goals?
• Product: What’s your product/service and how is it different?
• Market: Who’s your audience? How will you reach customers?
• Finance: How much will your idea cost? And if you’re seeking funding, how much money do you need? How much do you expect to earn? If you’ve already started, where is your revenue at now?

Step 2: Do your market research homework

The next step in writing a business plan is to conduct market research . This involves gathering information about your target market (or customer persona), your competition, and the industry as a whole. You can use a variety of research methods such as surveys, focus groups, and online research to gather this information. Your method may be formal or more casual, just make sure that you’re getting good data back.

This research will help you to understand the needs of your target market and the potential demand for your product or service—essential aspects of starting and growing a successful business.

Step 3: Set your business goals and objectives

Once you’ve completed your market research, you can begin to define your business goals and objectives. What is the problem you want to solve? What’s your vision for the future? Where do you want to be in a year from now?

Use this step to decide what you want to achieve with your business, both in the short and long term. Try to set SMART goals—specific, measurable, achievable, relevant, and time-bound benchmarks—that will help you to stay focused and motivated as you build your business.

Step 4: Plan your business strategy

Your business strategy is how you plan to reach your goals and objectives. This includes details on positioning your product or service, marketing and sales strategies, operational plans, and the organizational structure of your small business.

Make sure to include key roles and responsibilities for each team member if you’re in a business entity with multiple people.

Step 5: Describe your product or service

In this section, get into the nitty-gritty of your product or service. Go into depth regarding the features, benefits, target market, and any patents or proprietary tech you have. Make sure to paint a clear picture of what sets your product apart from the competition—and don’t forget to highlight any customer benefits.

Step 6: Crunch the numbers

Financial analysis is an essential part of your business plan. If you’re already in business that includes your profit and loss statement , cash flow statement and balance sheet .

These financial projections will give investors and lenders an understanding of the financial health of your business and the potential return on investment.

You may want to work with a financial professional to ensure your financial projections are realistic and accurate.

Step 7: Finalize your business plan

Once you’ve completed everything, it's time to finalize your business plan. This involves reviewing and editing your plan to ensure that it is clear, concise, and easy to understand.

You should also have someone else review your plan to get a fresh perspective and identify any areas that may need improvement. You could even work with a free SCORE mentor on your business plan or use a SCORE business plan template for more detailed guidance.

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The takeaway

Writing a business plan is an essential process for any forward-thinking entrepreneur or business owner. A business plan requires a lot of up-front research, planning, and attention to detail, but it’s worthwhile. Creating a comprehensive business plan can help you achieve your business goals and secure the funding you need.

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How To Write A Business Plan (2024 Guide)

Updated: Apr 17, 2024, 11:59am

Table of Contents

Brainstorm an executive summary, create a company description, brainstorm your business goals, describe your services or products, conduct market research, create financial plans, bottom line, frequently asked questions.

Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and dreams, a strong business plan outlines short-term and long-term goals, budget and whatever else you might need to get started. In this guide, we’ll walk you through how to write a business plan that you can stick to and help guide your operations as you get started.

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Drafting the Summary

An executive summary is an extremely important first step in your business. You have to be able to put the basic facts of your business in an elevator pitch-style sentence to grab investors’ attention and keep their interest. This should communicate your business’s name, what the products or services you’re selling are and what marketplace you’re entering.

Ask for Help

When drafting the executive summary, you should have a few different options. Enlist a few thought partners to review your executive summary possibilities to determine which one is best.

After you have the executive summary in place, you can work on the company description, which contains more specific information. In the description, you’ll need to include your business’s registered name , your business address and any key employees involved in the business. 

The business description should also include the structure of your business, such as sole proprietorship , limited liability company (LLC) , partnership or corporation. This is the time to specify how much of an ownership stake everyone has in the company. Finally, include a section that outlines the history of the company and how it has evolved over time.

Wherever you are on the business journey, you return to your goals and assess where you are in meeting your in-progress targets and setting new goals to work toward.

Numbers-based Goals

Goals can cover a variety of sections of your business. Financial and profit goals are a given for when you’re establishing your business, but there are other goals to take into account as well with regard to brand awareness and growth. For example, you might want to hit a certain number of followers across social channels or raise your engagement rates.

Another goal could be to attract new investors or find grants if you’re a nonprofit business. If you’re looking to grow, you’ll want to set revenue targets to make that happen as well.

Intangible Goals

Goals unrelated to traceable numbers are important as well. These can include seeing your business’s advertisement reach the general public or receiving a terrific client review. These goals are important for the direction you take your business and the direction you want it to go in the future.

The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in the current market or are providing something necessary or entirely new. If you have any patents or trademarks, this is where you can include those too.

If you have any visual aids, they should be included here as well. This would also be a good place to include pricing strategy and explain your materials.

This is the part of the business plan where you can explain your expertise and different approach in greater depth. Show how what you’re offering is vital to the market and fills an important gap.

You can also situate your business in your industry and compare it to other ones and how you have a competitive advantage in the marketplace.

Other than financial goals, you want to have a budget and set your planned weekly, monthly and annual spending. There are several different costs to consider, such as operational costs.

Business Operations Costs

Rent for your business is the first big cost to factor into your budget. If your business is remote, the cost that replaces rent will be the software that maintains your virtual operations.

Marketing and sales costs should be next on your list. Devoting money to making sure people know about your business is as important as making sure it functions.

Other Costs

Although you can’t anticipate disasters, there are likely to be unanticipated costs that come up at some point in your business’s existence. It’s important to factor these possible costs into your financial plans so you’re not caught totally unaware.

Business plans are important for businesses of all sizes so that you can define where your business is and where you want it to go. Growing your business requires a vision, and giving yourself a roadmap in the form of a business plan will set you up for success.

How do I write a simple business plan?

When you’re working on a business plan, make sure you have as much information as possible so that you can simplify it to the most relevant information. A simple business plan still needs all of the parts included in this article, but you can be very clear and direct.

What are some common mistakes in a business plan?

The most common mistakes in a business plan are common writing issues like grammar errors or misspellings. It’s important to be clear in your sentence structure and proofread your business plan before sending it to any investors or partners.

What basic items should be included in a business plan?

When writing out a business plan, you want to make sure that you cover everything related to your concept for the business,  an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.

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What does an investor look for in a business plan?

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Investing in a business is risky. Investors essentially put their trust in your business to deliver on their promises and take care of their money. Because of the risk, investors look for reassurance that they’re making the right decision – something to convince them that they’ll see a return on their investment. 

That reassurance comes in the form of a solid business plan . If you want to give yourself the best possible chance of finding investors for your business, you need to know what to include.

In this guide, we outline key things that investors look for in a business plan:

• Evidence 

Most investors are swarmed with business plans from budding entrepreneurs, so you need something to set you apart from the rest. 

A unique idea is great, but it’s tough to create a truly original one. Chances are, if you’ve had an idea, somebody else has thought of it already, but that doesn’t mean you can’t approach it in a unique or interesting way. 

Facebook wasn’t the first social media platform, Nandos wasn’t the first chicken restaurant, and Apple wasn’t the first computer company – it was their vision for the businesses that set them apart. 

Outlining a unique vision in your business plan will prove to investors that you’ve put some real thought into your actual strategy. Moreover, your vision is a chance to showcase your creativity as a business owner – a highly sought after skill in business. 

A creative business owner will adapt to problems and continue to innovate throughout their business’ life. 

Here are some common examples of businesses that developed a unique vision to compete in their respective markets:

• Apple –  To make the best products on earth, and to leave the world better than we found it
• Dyson –  To develop core technologies (such as motors, batteries, robotics, etc.) which enable it to develop better performing products. 
• IKEA – To create better everyday lives for as many people as possible.

A good idea isn’t enough on its own. You also need to prove that your business is a viable concept in the real world. Your business plan should include thorough market research about target audiences, opportunities for expansion, expenses, and revenue projections.

As well as research for your business, it will also help if you do some research about the investors you’re contacting. If you can give specific reasons why you’re approaching an individual investor, it’s a surefire way to get their attention. 

Do background research about the investor’s history – maybe even include something they’ve said before in a speech or statement. Little details like this will show you’re putting real thought into your business plan, rather than just throwing everything at the wall and seeing what sticks. 

It’s incredibly easy to start a business nowadays, so it can be difficult for investors to differentiate between serious business people and half-hearted entrepreneurs. 

If you want to prove you’re serious about your business, your business plan needs to show that you’re committed to the future. 

For example:

• Have you invested your own money into the business?
• Have you reworked your prototype after product testing?
• Have you reduced your working hours to spend more time on the business?

Ultimately, investors are putting their trust in people – the best idea in the world won’t work if the person in charge isn’t dedicated to the cause. 

Again, investing in a new business is a considerable risk, so investors want a little more than your best guesses and estimations. Providing specific figures shows your dedication and attention to detail while giving investors the respect they deserve. 

Your business plan should include exact figures based on detailed research, showing:

• What the market is worth.
• How much you’ll spend on start-up costs . 
• How much you’ll spend on running costs. 
• How your costs will change as your business scales. 
• Profit and loss projections for the first two years of business. 
• When they can expect to make their money back. 
• Your plan for the next stages of the business. 

While creativity and vision are important, investors have little interest in starry-eyed dreamers. Instead, they need to know that your ideas are rooted in realistic expectations. 

Don’t try to pull the wool over in their eyes with a flashy pitch that promises them the world – these are intelligent people who can smell nonsense from a mile away. 

Slow and steady business growth isn’t all that exciting, but it’s a realistic plan that shows you’re grounded in real-world expectations. 

Similarly, if you can foresee any difficulties in the future, don’t try to hide them. Instead, address those problems and explain how you plan to navigate them. 

It’s easy to make a business look good on paper, but investors will need a little more convincing before spending their hard-earned money. Your business needs to show, with actual evidence, that your business plan is viable. 

With enough market research, hard work, and product testing, you should be able to provide evidence of the following things:

• You’ve managed to progress the business on your own.
• There’s interest from consumers. 
• There’s enough demand to sustain long-term growth. 
• The financial projections you’ve provided are reasonable. 

When preparing a business plan, you need to provide accurate financial data and future projections. With the Countingup business account and app, you’ll have access to all the financial information you need, as well as a range of valuable features, such as:

• Profit and loss statements – Countingup uses real-time cash flow insights to generate accurate profit and loss statements.  
• Automatic expense categorisation – Countingup sorts your expenses into HMRC approved categories and shows you tax estimates throughout the year. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Start your three-month free trial today. 

Find out more here .

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