Key Elements of Successful Business Plans
Investor's commitment hinge on market analysis, financial ability
May 25, 2009
Successful entrepreneurs consider the business plan to be one of the most important tools for convincing investors to support a new enterprise. A business plan that grabs the interest and funding of the investor must have certain key elements. These elements are:
The Executive Summary
The executive summary is the gateway for the rest of the plan. This one to three page summary of the proposed project is the first and potentially the last item that the investor will read. If the summary does not capture their interest, then the rest of the plan may not be read. Therefore, the executive summary must be concise, covering the most salient points such as the importance of this new business, the benefits to the investor, the size of the investment needed and the anticipated profits.
Market Analysis
This section of the business plan describes the market environment in which the proposed business will be competing. The writer should provide information about competitors, their market share, utilization, as well as national and local trends. For example, the market analysis for a new spa should identify the location and owners of competing spas, their services and prices plus any other business intelligence available that will give the reader a clear idea as to what the new service is up against.
Description of the Proposed Project
The description should identify where the new business will be located, who will operate it, what will be offered and how it will be provided. The potential investor needs to understand how the business will function and who will be responsible for managing the operation on a day to day basis.
This section will also include volume estimates and assumptions concerning how those estimates were developed. The potential investor needs to understand the sale projections and how those were developed. For example, the new spa business plan would identify the number of procedures (e.g. BOTOX® injections, massages, etc) would be offered in the first and future years. Volume estimates should include best, worst and most likely case scenarios.
Pro Forma and Financial Statements
An inventive entrepreneur can paint a wonderful picture of the proposed business but it must translate into profits for the investor. The pro forma exhibits the estimated sales, revenues, expenses and the bottom line for years 1 through 5. In addition, the report should include a forecasted balance sheet, income statement and cash flow analysis.
Other Components of the Business PlanThe business plan should include a marketing plan, an implementation time line (the actions necessary to open the business) and exit strategy.
Providing solid information on these key elements will gain the investor’s interest and funding.
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