June 29, 2010
If you want to raise capital, youâ€™re going to need a professional business plan.
Here are three guiding stars to keep an eye on when writing a winning business plan.
1. Write Plainly.
This does not mean write in a boring fashion. To write plainly is to let the facts speak for themselves. A business plan is a logical argument that demonstrates a) there is a market need in a large and growing industry, b) your company has the resources to fill that need, c) your company has the methods of using those resources to fill the need, and d) that those methods will lead to long-term profitability.
Use simple sentences and a universal vocabulary. If you absolutely need to use industry jargon, explain each new term as you bring it up in the business plan. As lenders and investors are always short on time, your business plan must be as concise as possible, without sacrificing any of the compelling facts, figures, and explanations that will show your business to be profitable.
Avoid errors in spelling, punctuation, and grammar. You may want to pull out a copy of â€œThe Elements of Styleâ€ by Strunk and White and brush up on your plain writing skills. Also, get help from friends, family, associates, mentors, and writing experts to revise the final draft.
2. Clearly Explain the Value of Your Intellectual Property without Divulging Proprietary Secrets
You will need to make a strong argument about why your unique methods and operations strategies will work to grow the business successfully. However, you do not need to give away secrets. As your business plan will be circulated among many parties, you will need to ride the fine line between value-clarity and self-protection.
Here is how to ride that fine line. Rather than spell out exactly how your technology, proprietary secrets, or other â€œace up your sleeveâ€ works, show investors examples by which similar methods have worked for you in the past. Alternatively, you may reference research showing how similar companies in your industry have found success using similar, but not the same, methods.
Say everything you need to get the point across, but no more. Protect yourself. In subsequent meetings with investors, you can begin to open up more and more as the relationship develops.
3. Get Inside The Mind of the Investor
As stated earlier, a business plan is a logical argument for profitability. It flows from point to point, propelling the reader forward to the next logical step. It keeps investors hooked every step of the way.
Just don’t keep investors in the dark. Suspense is not a worthwhile plot device in a business plan. Your facts and figures must be clearly reasoned and based in hard research. An investor will be looking to make sure your pro forma (projected) financial figures are realistic. They will want to see clearly where liquidity events may occur, such as revenues, a buyout, or IPO.
The key is to demonstrate that you have found an unfilled market need, and that you shall fill it with the proper funding and guidance from investors.
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