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Business Plans - do's and don'ts

Written by Larry Johnson Friday, 06 November 2009 16:29

A business plan is a mission, vision and values document. It is often written to start a new business or get funding for an existing business that is changing in some significant way. It documents the strategy, tactics and plans for the business and seeks to convince potential investors such as banks or private individuals who may decide to fund the business or its expansion.

Writing a business plan is one of the most difficult things that business people and entrepreneurs have to do. This is because it takes time, challenges the business in areas that they may have little or no knowledge or experience and forces a business to prognosticate.

Realistically, the development of the business plan takes a minimum of two weeks. Consider it to be a living document and adjust it as new information or insight comes to light.

Here are 16 tips, tricks, do's and don'ts for business plan development:

  1. Know your competition. What is your competitive advantage? What makes your company different?
  2. Know the target group of your business plan. Its content will differ depending on who is targeted. Think like your target and write what they would want to see. For example, credit facilities will be seeking different information than a potential business partner or your bank.
  3. If the business plan makes claims that support your case, ensure that it is backed up with a statistic or fact or quote from a knowledgeable source. If your product, management team or marketing opportunity is the best, explain why and how it is better than the competition.
  4. Be conservative in all financial estimates and projections. Back up the projections for market share by explaining why the business will capture a percentage of the market. Past performance is the best indicator of future performance.
  5. An accountant should be considered for the financial projections. Besides adding credibility to your position, an accountant will put them into a standard business format.
  6. Use conservative time frames. If it takes most companies 6-12 months to get up and running, that is what it will take yours. There will be delays and issues out of your control.
  7. The credentials of the management team is very important. If they have not worked in the field, explain how their experience and expertise are transferable. Consider adding an advisory board of people skilled in the fields required. If that is not possible, discuss the short-comings factually in the business plan, showing how and when they will be addressed.
  8. Describe the facilities and location. If an expansion is envisioned, discuss when, where and why.
  9. Outline the exit strategy for investors. All investors want to know when they can get their money back and at what rate of return.
  10. Content counts, but appearance can enhance the content. Use charts, tables, graphics and/or illustrations to break up long passages of words. Readability studies say that adding a second color, used strategically increases retention of the information.
  11. Refrain from using superlatives and hyperboles. Words like major, incredible, amazing, outstanding, unbelievable, terrific, great, most, best, and fabulous should not be in a business plan. This is not an advertisement for the latest in fashion. Avoid "unique" unless you can demonstrate with facts that the product or service is truly "one of a kind."
  12. Use plenty of headlines, subtitles and short paragraphs that convey information. Make it easy for your targets to find what they want to know.
  13. Answer the five W's. Good journalists use the who, what, where, when, why and how in their articles. Be sure your business plan does the same.
  14. Keep the business plan concise. Strive for a document size of 20-25 pages or less including the financial projections.
  15. Typos, spelling mistakes and grammatically incorrect language send the wrong message about the proponent of the business plan. It hints at carelessness and inattention to detail. Use a spell checker.
  16. And finally, hire a proof-reader or an editor not familiar with your case to give it a once-over for clarity and a disaster-check.

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