Factors that Make a Good Business Plan

Factors that Make a Good Business Plan

Most companies initially finance themselves through the three Fs, namely “friends, family, and fools.” After all, who else will provide initial seed funding to start a new company? But financing yourself (or relying on friends and family) will only allow you to go further in building a new business. Obviously, the longer the founder develops the business without the injection of external professional capital, the more control and ownership he or she retains.

This is why many founders choose to “start” their business for as long as possible. Many times, founders will max out their credit cards or apply for a second mortgage for their home to fund their new business. Sometimes, founders are lucky enough to attract wealthy people, usually called “angels”, and they can help them with start-up funds. However, at some point, for a company to create meaningful and important value, it may need to be fueled by a large amount of capital provided by professional venture capital investors. But how to present new business to venture capitalists?

1. It fits the business need

We simply can’t look at business plans as generic. You have to start with whether or not the plan achieved its business purpose. Some plans exist to get investment. Some are supposed to support loan applications. Those are specialty uses, that apply to some business situations, while almost all businesses ought to develop management-oriented business plans that exist to help run the company, not to be presented to outsiders.

2. It’s specific. You can track results against the plan.

Every business plan ought to include tasks, deadlines, dates, forecasts, budgets, and metrics. It’s measurable.

Ask yourself, as you evaluate a business plan: how will we know later if we followed the plan? How will we track actual results and compare them against the plan? How will we know if we are on plan or not?

3. Financial Factor:

Although financial data is generally at the back of the business plan, it plays a crucial part in the entire plan. If you know the exact amount of investment beforehand, things will be easier in the future for you.

 Good Business Plan

Assess what is the required amount to build up the organization. What are the areas where you will invest more? Over the next five years, what are your investment and revenue plans? What are the assets that you must acquire? These are some of the factors that will assist you in formulating a precise business plan. 

4. Build your vision.

The key to business success is having a clear vision of what you want to accomplish as a company, experts say. But before you write a business plan, you should come up with three to five key strategies that will enable you to achieve that vision, advised Evan Singer, CEO of SmartBiz, a provider of SBA loans. 

“Sometimes, less is more,” Singer said. “It’s far better to do three things very well versus 10 things not so well.” 

An additional, imperative aspect of your business plan is the mission statement, which is the “why” you’re doing what you do. 

5. Service or Product Line:

What do you sell, how will it help your customers, and how often will they need to replace it? The answers to those questions can be crucial factors in business sustainability. Include any patents or copyrights you own.

6. Marketing and Sales:

The best idea in the world won’t take off if you don’t let your potential customers know what you have. Are you going to rely on word of mouth, promotional discounts, or advertising? Remember, your method will have to be tailored to your market. New York businesses are famous for paying people to stand on the sidewalk promoting everything from discounted pizza slices to bargain jewelry prices, but that doesn’t work nearly as well in cities without a high volume of foot traffic.

7. It gets people committed

Here too it’s about the process surrounding the plan, more than the plan itself. The plan has to have the specifics in point 3 and responsibilities as in point 4, but the management has to take them to the team and get the team committed.

Good Business Plan

For the one-person business that’s easier, but still important.

Definition of commitment: in a bacon and egg breakfast, the chicken is involved, and the pig is committed. 

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