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Wednesday, September 5, 2012

The Importance of a Business Plan

When you are the owner of a prospective or new start-up business, the only thing you have to secure private equity investment is likely to be your business plan. A business plan acts as your vision for the future of your company, and as such it must be both realistic and convincing enough to secure the level of investment you will need to take your business forward.
In effect, the business plan you present to investors should tell a story, in that there should be a clear progression throughout so that anyone can see how your business is going to grow. Focus on quality, engaging information rather than trying to blow the investors away with colourful info graphics and charts.

Building a Business Plan

Fundamentally your business plan should have three main features. Part one should outline the reason for your company, if you like a more detailed mission statement, why are you going on this journey and why is your product or service so important?
After this relatively easy part, you then need to focus on the “how,” which can be a little more difficult. How big is the opportunity for generating profit, and how exactly are you going to do this over a sustained period of time?
Your business plan should be as long as it needs to be but no longer than necessary. If it ends up being 15 pages of high quality information, that is better than 115 pages where only 15 of them are actually relevant to the investors.

Making Your Business Plan Stand Out

There is a very simple formula you should follow if you are putting a business plan to investors. Imagine like you are writing an article for a newspaper, or preparing a key note speech to a Government administration. State an opinion or a thought, then include the evidence that backs this up to your investors, thus showing how your business will make money. Remember not to simply blind them with facts and figures, there needs to be a reason behind it.
One point of contention is should you draw comparisons to similar businesses that have failed. No, you shouldn’t, however be prepared to explain to investors how your business will be better and avoid the mistakes of others. There is no need to slag off failed businesses in your plan, simply focus on what you want to do well.

Updating Your Business Plan

In the early stages of a business your plan will likely change and tweak on a daily basis. In the longer term, plan to review your business plan every 6-12 months, either yourself or alongside the investors, or perhaps even using a consultancy firm should you feel there is benefit to be had from this.

Author Bio:
Deal Market is an online private equity platform for investors.

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