A business plan is a formal report containing a company's business goals, why they're attainable and how you plan to go about reaching them.
FundedByMe does not require you to present a full Business Plan, however it is a helpful tool to convince prospective investors that you have thoroughly planned the execution of the business.
Having a great business plan is vital in promoting trust and transparency with potential investors. It should aim to preempt investors' questions about the workings of your company, persuading them that your business is sound, reasonable and potentially successful. Perhaps most importantly, it should convince you of your idea's viability.
So think of your business plan as a comprehensive blueprint for your company. It should be rational and objective, containing concrete, factual, fleshed-out evidence about your competition (current and future), the market, current funding, management responsibilities, personnel requirements, marketing and sales plans, your company's purpose and vision as well as the foundation of a financing proposal for investors and lenders to use to evaluate the company.
Graphs and charts that support your research and reasoning are fantastic aids and make your otherwise text-heavy document easier to digest for readers. So seriously consider adding these into your business plan.
Below is a list of what your business plan could contain:
Company name, address and other contact details.
Table of contents
Summarise your business model in such a way that potential investors can quickly gain an overview of what your business model entails without having to read the entire document. It usually contains a brief statement of the problem or proposal covered in the business model, background information, concise analysis and main conclusions. This is best written after you have put together your entire business model, when you have a clear idea of each component.
Briefly describe the purpose and goals of your business.
If your business is already established, outline its history and performance to date. Detail the sales turnover, its profits and its net worth - you can provide summary figures here and a detailed profit and loss account and balance sheets in the appendices. Elaborate on how your business' performance compares with its competitors and how the business has been funded up until now. In the business description, its also a good idea to detail the legal structure of your business (company, sole trader or partnership). Additionally here you could also detail your business' major achievements and state whether there are any distinguishing features, such as a unique aspect of the product or a new kind of service.
Product or Service
Describe your service or product (and its features) in simple terms, making it easily understandable to anyone. Provide an explanation as to why customers will want to buy your product or service, elaborating on the customer needs it will meet and how they will benefit from purchasing your product or service.
Avoid technical jargon and assume those who want more detailed information on your product will ask for it. Alternatively, you could include more technical information in an appendix.
If you already have a patent, design registration or copyright, it's to your benefit to add this information too!
Development plan or timetable
What are the specific development goals you need to achieve for your business to be successful and what is the estimated timeframe in which you can achieve them?
Define who you perceive to be your customer groups or niche markets. Give an overview of both your current and potential future competition and explain how your product or service differs from those similar to it.
In this section you will also outline the size of the market and, from there, estimate the the demand for your product or service both in the short and long term and then estimate the sales turn-over. Back your projections up with supporting research (both primary and secondary), making sure to include summary information in tables or graphs. Further detailed supporting information can be included in the appendices.
It is important to also include any potential or existing roadblocks for your product or service and explaining how you would overcome them. Detailing market barriers demonstrates to potential investors that you have done your research and have a firm grasp of your market.
A marketing plan is a blueprint for your advertising and marketing objectives. It should ultimately support the purpose of your business, as described in your "business description" section. Your marketing objectives should be quantifiable, measurable, challenging and achievable. Examples of some objectives might be profitability, sales growth, diversification and improvement in market share (e.g. "our objective is to sell 300 units and generate EUR 100,000 within one year").
From here, focus on the four "P"s to demontrate how your marketing objectives will be achieved:
Product: How will your product be developed over time? Will you expand your range of products or services?
Place: How will your product be distributed and sold to customers? Will you use agents or dealers and how will your product be transported to its point of sale? If it will be sold from a physical store, why did you choose that specific premises?
Price: Which should cover all of your costs and provide a profit. Detail how you reached this end-price.
Promotion: How do you intend to break into the market and signal to customers that you exist? What promotional channels will you use (e.g. social media, direct mail, pamphlets, traditional advertising)?
Management and personnel
It is essential to demonstrate that you have the ability to carry out the tasks to make the business work.
Central to this are your team and the strengths/skills they bring to your business; the production process and the premises and any licenses, permissions or other requirements you might need.
Detail the amount of money and assets you and/or your partners will be investing and how much more you require to raise (and for what).
The "break-even point" is the level of sales you need to reach in order to begin exceeding your costs. Beyond the break-even point is when you start to make a profit.
Once you have worked out your likely costs, and determined the price at which you will sell your product or service, you can work out exactly how much you need to sell in order to cover costs and reach break-even.
Sensitivity or Risk Analysis
This looks at different “what if...?” scenarios, assessing the likely risks, consequences and potential remedies of, for example falling sales or rising prices. For example, you could ask yourself "what will be the effect of a 10% fall in sales?" or "what would happen if there were a 20% increase in raw material prices?"
Acknowledging your potential "blind spots" demonstrates to potential investors that you have done your research thoroughly, are aware of your shortcomings and have a plan in place to counter their possible negative impact.
Cash flow and profit and loss forecasts
Provide a cashflow forecast to show receipts and payments on a monthly basis as an indicator of the required level of external finance.
Provide a forecast of the profit and loss account to demonstrate the direct costs, the gross profit, the overhead costs and the likely net profit. You can also elaborate here on how the profit will be distributed.
Some aspects of your business might require more background information, but try to keep any additional material to a minimum.
In the appendix, you might include:
- quotations for equipment and necessary insurance
- legal information - partnership agreement, leases etc
- a copy of your primary research questionnaires; and
- relevant secondary research information.
The conclusion to your business plan should be strong and confident, inspiring the reader to believe in you and your idea as much as you do. It should reiterate your overall vision, specify what you need from the reader and give them a call to action that will motivate them to join you. So write your conclusion in an optimistic tone, summarizing the opportunity, outlining your three to five year projections and reemphasizing what sets you apart from you competitors. Let the reader know exactly what you expect from them and end your conclusion with a call to action, a final push to encourage the reader to join in on your project (e.g. “Take this exciting opportunity to get in on the ground floor of a company with unlimited growth potential”).
Because of the hypothetical nature of a business plan, they can often be difficult to put together. Here are some templates that might make the daunting task of creating a business plan just that little bit simpler.