The Essentials of Writing a Good Business Plan

A good business plan is the key to attracting investors to a high-tech start-up company. The plan must be well-written and encourage venture capitalists that your idea, your management and your financial predictions are worthwhile. This article explains how to do that.

The Executive Summary

If you're seeking investors for your business, writing a business plan is one of those daunting tasks you'll have to face. Whether you choose to hire a professional business-plan writer to help or you choose to do it yourself, you'll need to be the chief architect of the ideas that will lead to success. Here are some tips to help you through the process.

Every plan should start with a one- to two-page executive summary. This section isn't a warm up, preface, forward or "make 'em feel good (rah rah) about your business" section. Rather, it's your entire business plan reduced to its essence. And your essence had better boil because if it doesn't, they (the ones with the checkbooks) aren't going to read the rest of your plan.

Those of us who have to read business plans hate it. I've yet to meet anyone who would choose to read a business plan over doing -- well, anything else. It's amazing what it takes to make a dental appointment look like an attractive break.

Your executive summary must capture your reader. You have two pages to make your jaded reader want to learn more about you.

You have two pages to talk about things such as your market, your product or service, why your management team is the best lineup put together since the squad that brought home Apollo 13, your projected revenues and expenses, how much money you're seeking, what you'll do with their money (this isn't the time to pay down the home equity loan) and, most importantly, "why you."

The Management Team

After the Executive Summary, I'm an advocate with front-loading your business plan with information about your management team. Tell the venture capitalist ("VC") about the business experience and successes of the team.

It's a simple formula. VCs invest in people as much as, if not more than, they invest in technology. Most will tell you that they'd rather have an "A team" and a "B technology" than vice versa.

If there isn't much to say here, you're probably not going to find venture capital. You may not want to hear this, but the sooner you come to terms with this reality check, the sooner you can begin moving in a path that may lead to success -- like adding strength to your management.

"Why You"

The next section begins the body of your plan. At some point, you're going to need to present the mundane facts. You'll talk about things like when you incorporated, who owns the company and what you've accomplished.

Today, the venture capital market is clearly tighter than it was a year ago. More than ever, VCs are looking for new, unique and hard to duplicate technologies and ideas.

The key to funding in today's market is a great explanation to answer what I referred to earlier as "why you." In writing your plan, never lose sight of the fact that VCs may read hundreds of business plans for every one they agree to fund.

People, like attorneys and accountants, who act as filters to VCs, similarly read many plans for every one they send to those in their venture capital network. Those of us who do this know that our credibility is at stake every time we forward a plan.

I know that if I want VCs to read the business plans I send, I have to prove to them that it only gets beyond me if it's quality. If any professional who gets involved in venture capital sends clunkers to VCs, he could find his packages heading straight for the trash.

Your plan must answer "why you" in such a way that it's clear that you have an unfair and sustainable advantage over your competition. You have to demonstrate how you'll survive direct competition, reverse engineering and a bigger company entering your space. Further, you need to explain how you'll sustain any advantage you have.

Finances

Remember, VCs aren't looking for 10% or 15% per-year return on their investment. They could invest in mutual funds and hope for that. They're looking for returns upwards of 25% per year and some would say upwards of 100% per year. Your plan must show numbers like this are possible.

Now, of course, the paper will hold whatever numbers you put on it. While some level of optimism is acceptable in projecting your numbers, you should increase your anti-hallucinogenic medication to where your delusions are at a moderate level when you do the financial projections. Absurd projections won't help your cause.

If you want venture capital, hunker down and get to work on that business plan. When you have it done, don't mass mail it the VCs. Look to your network of professionals and friends to present it to a VC they know. Mass mailed business plans have something approaching a zero chance of being funded -- no matter how well-written.