Key Elements of a Good Business PlanBANGALORE, INDIA: Business plan is a stepping stone for any business. A good business plan should cover these six topics.
1. Executive summary: If you had two minutes going down an escalator with a potential investor, you should talk her through your executive summary. This should answer questions such as: What is your company’s mission? Why is it important to you? Why do you think your company can make money pursuing that mission? What is your track record of winning? How much money do you need? What kind of return can I expect if I give you the money? Why?
2. Business/product description: If you have more than two minutes, the investor will want to know more details. The business/product description should describe your company’s mission and present the details of the product that you have in mind to achieve that mission. This description should also focus on specific product attributes that you think will make it better than the competition.
3. Target market: This section details which group of potential customers your company will target. It describes why you picked that market, its revenues and growth rate, the key factors driving growth, and typical net profit margins in that market. This section must, in my opinion, also present the results of your customer interviews.
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4. Plan to gain market share: Here you will explain the key factors, ranked by importance, a potential customer uses to decide among competing suppliers. It will also describe how well those customers perceive that competitors perform on the various factors. It will next describe how your product will outperform competitors on the key factors. Finally, the plan to gain market share section will set market share goals and describe what your company will do to achieve those goals
5. Management team: This section will present biographies of the members of your team. If you have no prior entrepreneurial experience, investors will be looking for signs that you and your team are winners — this could show up in outstanding academic, athletic, or extra-curricular accomplishments.
6. Cash forecast: This section is in some ways the least believable for an investor. Here, investors are really looking to see whether you put in enough effort to make a detailed estimate of how much cash will be needed to achieve your goals and what revenues and profits will ultimately flow from that investment. The key here is to develop realistic assumptions and to prepare for investors to ask you questions about why you chose them and your sources of information.
To me, the most important part is how well you understand the customers — if you do a good job with that, I think you will boost your venture’s odds of success considerably.