What Are the 4 Important Parts of a Business Plan?
by Brian Hill
A business plan is made up of a narrative section that includes a description of the products or services, short- and long-range objectives, discussion of the industry, business model, competition, marketing strategies, management team and capital required. The plan also contains spreadsheets with financial projections. Venture capitalists and angel investors focus on four parts of the plan in particular.
For a company to grow and succeed, it has to be offering its customers products and services that have clear, demonstrable--even obvious--superiority to what is available from its competitors. Show the problem the customer has that you will be solving. It must be a significant problem or difficulty that the customer is anxious to solve very soon. Describe a customer using your product or service and how it benefits him--save money, save time, improve his quality of life, health, or the productivity of his business. This is sometimes called the “wow factor” in a business plan--superiority compelling enough to convince the reader that your business represents an outstanding opportunity.
A thorough discussion of the marketing strategies you intend to deploy should be a central focus of the plan. Be specific about the means you will use to reach your target customers and the message you are going to present to the marketplace to convert prospects into paying customers. You must show the reader that you and your management team truly understand how to get out there and sell in a tough and competitive world. Without the right combination of message and means of delivering the message, even truly superior products have trouble gaining traction
in the marketplace. If you can show the reader that you already have customers lined up ready to purchase your products or services, this makes your case more convincing.
Investors want to align themselves with management teams they believe have the capability of successfully executing the strategies outlined in the plan--and be good stewards of the capital the investors put into the company. The management discussion has to go well beyond just a rehash of resume-type information. It must show how each team member’s background and accomplishments contribute essential elements needed to succeed with this new venture. Prior success is highly valued by investors. Give the reader of the plan a clear indication that your team is a group of winners and people of good character -- with a strong drive to succeed.
As they read the business plan, investors make a determination of whether the company can earn a sufficient return on investment to make the investment attractive for them. The financial projections provide clues about how well thought out the venture is. Investors look at whether the management team presented a reasonable forecast for revenue and profit growth. When they see projections that seem unrealistic and unattainable, the management team immediately loses credibility in their eyes. They also want to see whether the management team backed up the projections with sound assumptions based on hard data obtained from industry sources--or were the projections simply guesswork. Financial projections in a business plan do not need to voluminous or excessively complex. They need to be clear and reasonable while being exciting from a ROI standpoint.
- Small Business Administration: Write a Business Plan
Category: Business plan