Join Rudolph Rosenberg for an in-depth discussion in this video What should you include in a business plan, part of Entrepreneurship: Raising Startup Capital.
- A central element to the entire process of raising capital is having a business plan to present to investors. So, let's quickly go over what a business plan is and what it should include. This is a very large topic, and I'll just present briefly what a business plan contains. A business plan is a document that you can either share in printed version or electronically, which provides not only an overview of your business but all the elements required for someone completely external to your business to be able to understand it.
It's a complete overview of your business, both from the inside and the outside. The inside, of course, is about you and your team, your product and services, your strengths and weaknesses, your strategy and your ambitions. From the outside, it's the market you're in, what your customers need, what problems they have and that you're going to solve. It's also who your competitors are, what they're offering, and how they answer to the problems you're trying to solve, if they actually do.
There are sections that are common to all business plans, and those are an executive summary, which is a two pages max document that is very well written and sums up all the key elements of your business, but more important, who creates the excitement of investors, so that they want to get in contact with you to get you to present your business in more detail. Investors usually first review executive summaries before they ask for a complete business plan.
A company description, which explains who your company is, what it stands for, and where it is on the path to its mission. Is it still just a project on paper or have you started? Are you alone or with a team? Have you started doing real business? You need to bring the investor here up to speed on where you are with this company. You also need a market analysis. Let's be clear on what the market is. The market is where customers and companies meet and is materialized by the sale of products and services.
You can represent the market with words, by describing the profile of your customers. Are they teenagers, in the workforce, senior citizens, a minority? Who your competitors are. Are they proposing low-end products or high-end ones? Are they selling another version of your product or an alternative product, such as tea, for example, when you compare it to coffee? And it can be represented in numbers, through total number of dollars spent by customers over a full year buying that product.
You could be targeting, for example, a one billion dollar market, which would mean that over a full year all of the people who buy your product, or a similar product, have spent together one billion dollars. Then describe the product or service you're going to offer. What problem it solves, why customers will need it, how is it different from what already exists. Once you have covered all of those elements, comes the time to talk about yourself and your team, who you are, what skills you have, why you will be the right person to make this project successful.
Ideally, be able to show that you're not doing this for the first time, but if you are, what shows that you will be successful at it. Then, you'll have to present your sales and marketing strategy. What concrete actions you will be taking to make things happen and ignite sales and show that you won't be waiting for customers to come in. And last, a business projection showing the financial impact of your entire plan, which, by the way, will have to show why you need the money you're trying to raise.
If you want to know more about that topic in particular, there is a course you can follow on Lynda.com called Making Business Projections, which shows in detail how to build such a plan. In any case, preparing a business plan has many virtues. It will help you define the building blocks of your plan and assess what it takes to be successful. You should prepare it just as much for yourself as for the purpose of raising capital. It actually is the first step of your journey.
- Estimating the capital you need
- Understanding the four big sources of capital
- Valuing your business
- Making a business plan
- Using your own funds
- Limiting your personal liability
- Making crowdfunding a part of your strategy
- Borrowing from friends and family
- Working with angel investors and VC firms