How ever you count them up, the basic parts of a business plan are pretty similar from plan to plan. Here they are.
Is the cover of the business plan really part of it? Good grief, guys.
Yes, it is. Just as the cover of any magazine is part of it. Or the cover of any annual report. It is absolutely true that the same chocolate eclair can be inside a plain box, but I will pick the box that says “Scrumptious, made just for you, utterly delicious French chocolate eclair.”
2. EXECUTIVE SUMMARY
This is the one page masterpiece that tugs at the reader’s interest. Include important contact information, as well as the nature of the loan/investment.
3. TABLE OF CONTENTS
Most people would not consider this a real part of a business plan, but it is. Without it, the plan looks very amateurish.
4. INFORMATION ON THE COMPANY ITSELF
There is a bunch of factual information that needs to be included, such as
- When was it formed?
- What kind of company is it?
- If it is a corporation, how many shares are issued? To whom?
- If it is a partnership, who is involved?
- Who formed the company?
- If you are not the founder, how did it come to be yours?
- Who is presently involved? What is the nature of their involvement?
There is also a good dollop of information that is not really “factual”, but it does need to be included. That is The Story of the Company. Why was it founded? What are the dreams of the owners for this company? Why do the owners want to devote their lives to this business rather than to any other business in the world?
It is The Story that will grab the lender. Lenders see facts and figures all day long. Rarely do they hear a compelling story. Make yours good. Make it real.
5. INFORMATION ON THE INDUSTRY
Here is where a good statistical source is worth its weight in gold.
- Show how the industry is growing.
- Show how your company fits into the industry.
- Include charts to visually show strength of industry.
- Include demographic information.
Bankers and lenders like figures and statistics. It is easy for them to compare and analyze. It is a whole lot harder to analyze your character.
So give them solid figures. They will see these stats whether you include them or not. They have got their own sources. So include them. And show them off in a manner that benefits you.
6. BIOGRAPHICAL INFORMATION ON PRINCIPALS
While venture capital companies consider the strength of the management team the most important component of the business, this section by itself is not necessarily the most important. They will see the strength of the team in the Industry Information, the Marketing Plan and the Financial Summaries. This section is to give them a notion of who they are talking with.
Most business plan writers tell you to write a paragraph on each officer. I do not. I tell you to write a page on each principal. That page is not a bio. It is a summary of accomplishments. If you have not got a page of accomplishments, maybe you have got the wrong management team.
7. MARKETING PLAN
So what makes you think you can promote this idea or product or service? How will you go about it? What will it cost? What are other doing, and how can you compete with them?
If you have a history of successes, this is the place to shout about them.
8. FINANCIAL DOCUMENTS
For existing companies, the rule of thumb is that you summarize by year the past 5 – 10 years, depending on your industry. Then project as for new companies. For new companies, project quarterly for the first year or two, then annually until the loan is comfortably paid back, or the investment has made a profit.
The more you can put into charts for easy reference, the better.
Then make it unique. All the parts of a business plan need to look sharp, be concise, and provide all pertinent information. Putting all of that together in a convincing presentation is what separates one business plan from another.