People often ask "What makes a good business plan? Or, "How do I make my plan attractive to lenders and investors?". The simple answer is that lenders and investors (I'll call them "readers" from here on out) are looking for "good deals". A "good deal" is one that offers
reader a reasonable rate of return for risk assumed. The complete answer is that you should write a plan that a reader will want to read and then get it to reader(s) who are looking for your type of project and levels of risk and return. This article deals with first part of equation - how to write a business plan that readers will want to read.
Readers want plans that clearly, accurately and completely allow them to make an initial determination about project. Here are steps needed to write that plan:
To paraphrase a real estate expression, three most important things about a business plan are research, research and research. While other things are important (even critical), ultimately your plan will live or die on quality and completeness of your information. For that matter, you're about to risk your time and financial future on a project - how much information do you want to have? Step one:
1. Become expert in your project. Learn everything possible about:
a. The customers to whom you will sell (your market).
b. The competition.
c. The actual costs of operating your business (get quotes).
d. The actual results of similar projects.
e. Your industry.
f. The project's physical location(s) and it's impact (if any) on project.
g. The people who will be key to project.
(You are welcome to use as a guide questions that we use with FundablePlans to query a business plan. It is available via e-mail at http://www.fundableplans.com/how-to-do-a-business-plan.html )
If you've followed above, you've now got a mound of research - sticky notes, web pages, reports, quotes, etc., etc. But, what does it all mean? Step two:
2. Analyze. (Hopefully) when you first got idea for your project there was a sense of excitement and a feeling that "this is a sure winner". Now is time to see if your feelings were well founded. With a critical eye, do a "SWOT" (strengths, weaknesses, opportunities, threats) analysis on your project. Determine what you are able to do to capitalize on S and O and minimize W and T.
Steps one and two may have changed somewhat your "sure winner" feelings - which is good. (If not, you either have hit upon next "sliced bread" or you need to redo preceding steps). Presuming that your research and analysis shows a worthwhile use of your time and money (and that of your readers) move to step three:
3. Forecast. This is where "rubber meets road". Using your research and analysis you will now tell your readers that "this is what will happen to money". You'll do it with accounting forecasts called "pro forma" statements. Provide either three or five years of statements with (generally) first year done monthly, second and third done quarterly and (if included) last two years done annually. In all events, include:
