How to Write a Business Plan to Obtain Funding

Aug 4, 2010Nick Schklair

There are two good reasons for writing a business plan for a new business venture:

• A business plan is an orderly way of covering all of the steps that need to be taken in a new venture to achieve success.
• If outside funding is sought, whether from a venture capital firm, bank or group of individuals, all will demand it of the president or management team.

Even if the business concept is as simple as a small, local retail store, a business plan will define the steps that need to be taken in order to achieve success. with that being stated, it is assumed that the proposed business will require a formal business plan.

Realism is the key. If the senior managers are not realistic, the plan is nothing more than a fantasy. Assume that “stuff will go wrong!” nothing in life ever goes according to plan.There are templates that are available free from the US Small Business Administration and other organizations. All are certainly worth reviewing and if applicable, using. however, a template is only a guide, ultimately the business creator must add the realism to it.

Business Plan Guidelines

The basics of a business plan might contain the following components (depending upon the venture) whether from the SBA/SCORE or any other business plan software sources will contain the following elements.

• Executive Summary (Introduction of concept, overview, etc)
• The Market, Description, Drivers, etc
• Competitive Analysis
• Marketing Strategy, Plan & Products
• Company Structure/Organization
• Sales/Distribution plan
• Development Plan (engineering Plan), if required
• Financial Plan, Financial Statements & Projections, Departmental Budgets Financial Reporting System
• “What Could go Wrong” Scenarios and how to Solve the Issues
• Time Lines and Next Steps

- The Executive Summary

This is normally a two page summary, at the “10,000 foot level” of the business concept which includes the goals, how they will be achieved and a quick synopsis of the funding required and the profit/returns that will be achieved. This should state what the strategic business objectives are.

-The Market Description

This is a detailed view of the market that the entrepreneur is trying to enter, the market niche, expected growth, major products/services sold within the market and the market size. some of this data may be difficult to find. at times, the entrepreneur may have to perform this work himself.

– Competitive Analysis

This includes the firms currently in the market, their respective market shares, others that might enter, strengths/weaknesses and how the new prospective company compares against competition.

-Proposed Organization, Structure and Staff/Officers

This describes how the company will be organized, key employees and their functions. This should reflect the manpower loading and headcount over a 3 to 5 year horizon with the initial two or three years reflected on a monthly basis.

- Marketing Strategy, Plan and Products

This section encompasses how the proposed company addresses the market, market strategy, the product and marketing plan (the marketing mix). All of strengths, weaknesses of the company/products, prospective customers and what is the unique strength of the proposed business vs competition.

-Sales & Distribution Plan

This section covers in detail, the manner in which the products or services are sold or distributed (whether eCommerce, or not). This should include the staff head count, as well.

-Development or Engineering Plan

If the venture is one that depends upon technical or engineering developments, this section should carefully detail the investment required, equipment and all manpower

-Financial Plan, Pro Forma Statements, Investment Required and the Financial Reporting System

This section contains detailed financial statements on a five year basis with the first two or three developed on a monthly basis. it must include a rigorous cash flow analysis, reflecting all cash inflow and outflow. it should include a description of how transactions, expenses and sales will be recorded and reported.

-”What Could go Wrong” and how to Solve these Issues

The entrepreneur must be very honest with himself and potential investors and attempt to forecast everything that could go wrong from economic downturns to government regulation or the inability to achieve the financial goals that have been forecast. further, it also must have detailed solutions.

- Time Lines and Next Steps

The management team will need to set down carefully what the time table is and the immediate next steps for the first 6-12 months, assuming that funding is made available.

When the plan is complete, it should be reviewed by others that can provide real insight or suggestions. SBA and SCORE can help in this regard. Ultimately, a plan is a living document that should change if conditions change. Investors will expect no less

• Writing a Business Plan – Nick Schklair

How to Write a Business Plan to Obtain Funding