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11 sections to the perfect business plan – part 1

June 14th, 2017 Posted by alastair, blog 0 comments on “11 sections to the perfect business plan – part 1”

written by alastair barlow [blog]

business plans can be daunting for those that have never done them before; a host of new terms, concepts and financial modelling.

and the seemingly endless task of never getting it quite right and continual tweaks. in this blog, I break down a business plan in 11 ‘easy’ to navigate key sections.

in order to craft a good business plan, you have to understand who will be reading it and for what purpose. this is key to getting it right and avoid writing war and peace just for the sake of it. it will also help you narrow in on what information you need to include and to what level of detail.

let’s start with why bother to prepare one in the first place. there are a number of very good reasons to prepare a business plan. sometimes that very good reason will be because the person you want money from is asking for it! they want to see the expected progression of your business, the market it’s in and importantly the risks around meeting your objectives. other times, it’s the business founders or management team that can benefit from developing the plan to give them guidance on what they are trying to achieve, when they are trying to achieve it and what resources they need (and I don’t just mean financial resources here).

in both cases, think of it as a set of guiding principles for the business to meet its objectives. a business plan is not set in stone, but it can help the business knuckle down and understand its industry, market, purpose and how it plans to achieve its objectives.

in this introduction to preparing a business plan I will predominantly cover the sections of a good business plan and provide hints and tips in each section. there will be a separate blog going into more detail on specific sections which are meaty enough to warrant it, such as financial forecasting.

so, these are my 11 key sections to the perfect business plan; I will describe each one in and bring to life what you should be thinking about in each one.

  • executive summary (part 1)
  • industry (part 1)
  • market (part 1)
  • product/service (part 1)
  • branding (part 2)
  • customer & marketing (part 2)
  • operations (part 2)
  • management (part 2)
  • business strategy (part 3)
  • finances (part 3)
  • risks (part 3)

executive summary

while this sits at the front of your business plan, it’s actually the last thing you will write but the most important part. after putting together what is probably an exhausting business plan, you will need to muster the excitement and energy to pull together your executive summary; the reason I say this is that it needs to get your reader as excited about your business as possible and it’s the first stage gate for a potential investor to keep reading or throw your plan in the bin!

the executive summary is an indicator of the quality of your overall business plan and of management. you will need to demonstrate to investors you know what they are looking for. it will also give them insight as to what they can expect from the business going forward on a monthly or quarterly basis in terms of reporting and updates they will receive from you. most importantly though, investors want to understand quickly what the size of the opportunity is, what are the key risks, what is happening in the market and how experienced the management team is; ultimately what is the risk v reward of the opportunity. you want them to be excited and confident in your ability to get the message across thoroughly and concisely.

key points to include in your executive summary:

  1. articulate what the business does, it’s markets, key selling point and competitive advantage
  2. outline the strategic objectives and new plans
  3. identify the risks and how they will be managed
  4. summarise the financial forecasts
  5. indicate the amount and us of the investment

industry

it’s quite possible and more likely probable that your investor is not an expert in your specific industry. if you’re talking to a vc or pe house that is in your ‘industry’, you’re probably still creating something new to them (which is why they’re talking to you) so it’s key to bring the investor up to speed; give them all the information they need to understand your proposition in its proper context. give them a brief history of the business but make it short and to the point as what’s most important for them to read is where the business is going in the future.

you should describe where the industry is in its development cycle – is it in its infancy, growth or maturity phase. identify what pressures exist in the industry and if there are any barriers to entry for you or for competitors – regulatory, financial or technological. or perhaps there is a first mover advantage that needs to be acted upon quickly!

don’t be afraid of using third party data or evidence to support the industry. don’t forget to include the source of the data. more often than not, when I see a business plan with tables and graphs, I wonder if the data is made up or from a reputable source. don’t let investors ask themselves the same question because straight away, yours will go to the bottom of the pile.

above all, make sure you demonstrate industry expertise. investors may technically be investing in a company, but realistically there are often similar business ideas in the market so they are actually investing in you!

key points to include in your industry section:

  1. outline a brief history of the company including accomplishments
  2. describe what the current size of the industry is
  3. what are the key success factors in the industry
  4. include any external data and forecasts to demonstrate the size, profile and future growth of the industry
  5. what trends, legislation or regulation is relevant in the industry
  6. include any barriers to entry
  7. include any trends in corporate activity – investors will always have one eye on an exit

market

it used to be the case that there needed to be a demonstrable market for your product or service, otherwise investors wouldn’t view your business plan as a likely success. however, with the advent of tech companies creating new markets, that’s no longer always the case.

your investor (or your own management team) needs to understand your market position and market share. who your competitors are and how you can defend this position from them. or if you are creating a new market you should include how have you gone about validating your market size and demographics. you need to demonstrate why this plan will be successful and allow you to meet your targets.

a swot analysis (an exercise to understand internal strengths and weaknesses, as well as external opportunities and threats) is a great tool to pictorially get these points across (and a picture is worth a thousand words) just make sure you include only credible information and factual data. if you are extrapolating using current state data, then ask someone independent to take a look to see if they agree with your methodology.

at the end of the day, within this section you need to respond to 3 key questions:

  1. what is the size of the market?
  2. what are your prices/margins compared to competitors?
  3. how can you protect your price and customers?
  4. what sort of true value or insight can you offer your customer?

key points to include in your market section:

  1. demonstrate there is a market for your product/service
  2. what is the size of the market – use external data if you can?
  3. provide a concise view of the market – consider a swot analysis?
  4. who are your customers, where are they located and how sensitive to price are they?

product/service

ah we get to the part you’ve probably been chomping at the bit to get into your business plan! it’s been your baby, your teenager and now your partner! you have probably spent every waking minute of the day thinking about your product or service and you know it inside out. your biggest challenge here is you now need to write about it objectively. you will need to take a step back, curb your immense enthusiasm for it and describe it without the technical jargon or infinitesimal detail you are used to thinking about it in. you need to communicate your product or service clearly and lively. I’m often told to imagine describing something to my grandmother, if she gets it then it’s probably the right amount of detail and language style.

keep it simple and explain the key differences and unique selling points of your product/service over competitors. if you are a first mover, you will need to describe your product/service in more detail to bring it to life and I would suggest you make it practical and demonstrate the value it adds to the customer, and if you do have first mover you really need to make this clear.

by all means put some passion into it, but you have got to describe it objectively and demonstrate it will provide a return on investment to your investor.

key points to include in your product/service section:

  1. describe your product/service succinctly – what is the usp of your product, technology, patents, pricing, delivery?
  2. are there opportunities to expand on the product/service you are pitching?
  3. described competitor products, their pricing strategies and how yours compares

in 11 sections to the perfect business plan – part 2, I will cover branding, customer & marketing, operations and management and part 3 will finish off with business strategy, finances, and risks.

thanks for reading – if you have any comments or questions on the above, or are interested in talking to us, please get in touch.