Whether you have 100 investors or 100 dollars to fund your start-up, your business plan being on-point is a must. It should meticulously and thoroughly describe the launch of your product and/or service as well as reflect how you will make use of the resources that you do have as well as garner success from them.
I’m fortunate to be a part of the annual MillerCoors Urban Entrepreneurs Series (MUES) business plan competition as a national judge. The dedicated team awards grants to the most viable business concepts. It’s always those with solid business plans that secure the money and resources to propel their business forward.
Having reviewed business plans ranging from polished to pitiful over the years, I can tell you there are patterns in poor preparing. So, to make sure your document delivers, here are four business plan must-haves.
Not clearly addressing crucial areas within your plan easily assures the death of your business, in some cases, before it even begins. Because, if you can’t tackle it in writing, what makes you or any potential investor confident it can be done face-to-face? It doesn’t. So, let’s get to work.
1) Develop a viable revenue model.
Having a great idea is, umm great, but the follow up question to that would be: How you are going to make money? Don’t expect to put a product/service out there, stand back and watch the magic happen. It just doesn’t work like that.
Within the business plan, the revenue model shouldn’t be indecipherable or a secret to you or those reading it. But what it should set out to do is reveal—in a clear, concise yet thorough, and realistic explanation—how you intend to maximize profitability in offering your products and/or services to your clients and/or customers. This may involve one or, over time, multiple revenue streams.
Research plays a huge role in developing this portion of your plan. In determining the revenue model, you must know the following:
- Who your target audience is.
- How many of them actually exist.
- How you intend to reach them (if you even can).
- What the results will be for your business and for them.
- Revenue models that worked or failed for your competitors.
Your plan needs a viable revenue model. It’s the most vital piece of your business plan’s puzzle. So, don’t leave people puzzled about how the money will actually be made.
2) Get the financials right.
It baffles me how often prospective entrepreneurs – and even those already doing business – include in their plan inaccurate, incomplete, or just plain incoherent numbers on their company.
There’s no getting around it, you are responsible for having accurate financial documents that offer a true snapshot of your company now and a rational, realistic look at how the company will look and produce over time. This is where the majority of mistakes are made. Some entrepreneurs either undermine the process or overestimate the result.
From how much monies the company currently has on-hand to projected cash flow to budgeting for salaries, equipment and supplies needed, required travel or marketing and advertising, this and more must be included.
The three basic financial statements are the…
- Balance sheet, which shows firm’s assets, liabilities, and net worth on a stated date.
- Income statement (also called profit & loss account), which shows how the net income of the firm is arrived at over a stated period.
- Cash flow statement, which shows the inflows and outflows of cash caused by the firm’s activities during a stated period.
Even if the numbers aren’t what you may have anticipated, putting on paper the financials helps to further determine the company’s viability. Unless you are qualified (and have the background to prove it), pay an experienced certified public accountant or other financial professional to make sure the numbers not only add up but also make sense. (Key words here: experienced professional. This is neither the time nor the situation for Do-It-Yourself.) Hiring the right people to get the numbers right is an investment in your business. So be willing to budget for it.Of course, it goes beyond hiring people to crunch the numbers and handle the related paperwork; you need to know, be highly familiar with, and understand what the numbers represent. Also, what the financials mean to the business in the short- and long-term. (Book: Finance for Non-Financial Managers and Small Business Owners by Lawrence W. Tuller (Adams Media; $16.95).)
Too many prospective entrepreneurs stammer with this query, offering vague to no explanation. Don’t be one of them.