273
Chapter 14
Writing a Winning
Business Plan
14.1 Introduction
A business plan is a selling document that conveys your irrepressible excite-
ment and vision to potential investors and stakeholders. The creation of your
business plan is the rst step on your path to nancial success. The business
plan is your key to achieving the entrepreneurial goals of the 4 Cs: (1) cash,
(2) control, (3) creativity, and (4) challenge.
A business plan is your most crucial business document. Without a
persuasive business plan, no one will seriously consider investing in your
startup venture; and without investors, it is unlikely you will ever get off the
ground.
As you go through this chapter, remember that the greatest beneciary
of the business plan is not your investor, customer, or banker—it is you.
Whether your enterprise is a startup, small, medium-sized, or rapidly grow-
ing business, develop a winning business plan to enable you to:
1. Persuade nancial investors.
2. Assess if your business ideas will work.
3. Outline each area of the business and maximize your resources.
4. Establish nancial and technical milestones.
5. Dene your target market and set protable directions.
6. Secure additional funding or loans for continuing growth.
274 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
7. Determine your long-term nancial needs.
8. Attract and retain top-level personnel.
9. Help monitor the progress of your business over time.
10. Devise contingency plans and avoid obstacles.
In general, there are three types of business plans, as shown in
Figure14.1.
Your plan will be read by two primary audiences: investors and other
stakeholders (for the Summary and Full Plans), or your own employees (for
the Operational Plan). Thus, your business plan must make the case that it
will serve the interests of investors and stakeholders. The key is to include
facts generated through a properly conducted feasibility analysis. A business
plan rings hollow if it is based strictly on what founders project or envision
will happen. This is summarized in Figure14.2.
14.2 Need for a Winning Business Plan
“The only good business plan is the one that gets funded.”
Perhaps you are going through the motions of writing a business plan
because both your attorney and your accountant told you that investors
require a well-reasoned business plan. Most entrepreneurs view the business
Types of Business Plans
Summary Plan
8
–10 pages
Works best
for new
ventures in the
early stages
when “testing”
the waters”
for investor
sentiment and
appetite
Full plan
25
–
35 pages
Works best
at the point of
needing
financing for
seed, early
stage, growth,
and exit
strategy
Tool for creating
a blueprint for
the operation.
Meant primarily
for an internal
audience.
Provides guidance
to managers
Operational plan
45
–100 pages
Figure 14.1 Types of business plans—The three types of business plans.
Writing a Winning Business Plan ◾ 275
plan as a chore, secondary to technological achievement and innovation. On
the contrary, a business plan is worth your considerable investment of time,
effort, and energy.
A business plan is your only chance to demonstrate that you know what
you are doing and can be trusted with the money you are seeking. This is
summarized in Figure14.3.
Your full business plan should be structured to answer the following
investor questions:
What ? Business are you in?
How? Much money do you really need?
Who? Is in the deal?
What? Is unique about this deal?
Why? Should I invest now?
Do not make the plan too long.
“If an investor is interested, they’ll ask for more details.” —Eugene
Kleiner, Venture Capitalist
Bank loan
debt
Managerial
guidance
Prospecting
Business plan
Type of planReader of plan
Venture source
Equity
Plan(s) purposes
Summary
plan
Corporate finance
Operational
plan
Executive
team
Founders
Figure 14.2 Plan purposes—Your plan must emphasize the interests of investors and
stakeholders.
276 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
14.3 The Essential Components
“If you don’t know where you are going, any road will take you there.”
While you may be tempted to be creative with your business plan, at pres-
ent, most business plans follow an accepted and pre-described format.
It forces the entrepreneur to set objectives, dene budgets, engage staff,
anticipate problems, and identify how the innovation will solve market
needs. It attempts to prevent the entrepreneur from catching the well-known
Christopher Columbus syndrome:
◾ When he left, didn’t know where he was going.
◾ When he got there, didn’t know he had arrived.
◾ When he returned, didn’t know where he had been.
Why?
Need for a Business Plan
Raise capital
Positioning, competitive
advantage, innovation
Direction to sta
and stakeholders
Shows
the prot potential
of your goals to
investors
Early identication of
problems and
solutions
Integral part of the funding process
Pricing strategy,
competitors
Organizational
structure
Figure 14.3 Need for a business plan—Demonstrate to investors that you can be
trusted with their funds.
Writing a Winning Business Plan ◾ 277
According to the Federal Development Insurance Corporation (FDIC),
1
every business plan should include four essential components:
1. Overview of the business: Describes the business, including its products
and services.
2. Operations and management plan: Describes how you will manage the
core processes of your business, including use of human resources.
3. Marketing plan: Describes the target market for your product and
explains how you will reach that market.
4. Financial management plan: Details the costs associated with operating
your business and explains how you will pay for those costs, including
the amount of nancing you may need.
14.3.1 Common Parts of a Good Business Plan
“The only place success comes before work is in the dictionary.”
—Vidal Sassoon
Business plans must help investors understand and gain condence in
how you will meet your customers’ needs. Your language should give the
impression that you are thoughtful, knowledgeable, and trustworthy. Your
statements should be veriable by credible references. Do not overstate
your enthusiasm with exuberant phrases such as “we have no competition,”
“unmatched,” “terric,” etc.
The common parts of a good business plan are shown in Table14.1.
14.4 Risk Is a Four-Letter Word
“Your business plan is nothing more than a reasoned list of risk-
mitigating milestones.” —M. Szycher
Your best chance of being funded is to persuade investors that you are
mitigating all known risks, and thus protecting their investment. Notice that I
said “persuade,” not “convince.” Convincing aims for investors to accept the
problem as you have presented; persuading aims to move investors to act
on your proposal and invest in your company. This is shown graphically in
Figure14.4.
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