The age-old saying “You never get a second chance to make a first impression” is true in all aspects of life, including business. A well-researched business plan is essential to any money-seeking startup, regardless of how that startup will be funded.
When it comes to obtaining financing from investors or via a startup bank loan, the business plan is really the be-all, end-all as far as first impressions go. Sure, you’ll likely get a chance to talk to the person(s) who get to make the choice whether to fund or not. However, if your business plan is missing elements, it’s very unlikely you’ll be getting a check cut any time soon.
Following is a simple 9-point checklist you can use to make sure your startup business plan has all the information required to obtain the funding you need:
1. Executive Summary
Make this short and to-the-point. What is your business idea and why will it be successful? Craft a mission statement, basic info about your team, its base of operations, and how much money you’re seeking.
2. Company Description
Write out the specific problem your startup will solve in the marketplace. List your demographics, including specific age-groups, niche markets, or businesses you’ll service. It’s important to make clear what your competitive advantage will be, as the specific strengths you, your team, and products offer will either paint a promising future for the business, or spell certain doom in the eyes of investors and loan officers.
3. Marketshare Analysis
If you’ve done zero competition analysis at this point, stop – do not pass go! Researching the competition is the only way to determine how viable your offering is to the market. Those reading your startup business plan will want to understand what other businesses in your niche are doing and identify the various trends and themes that affect the industry.
- What is your most successful competition doing?
- How can you do it better?
4. Operational Structure
Tell the reader how the company will be run from the top down to the bottom. Who’s running the show and what are the major components involved in running the entire operation? It’s never a bad idea to include the CVs of key players on the team in the appendix section, in order to demonstrate the company’s unique ability to succeed at its goals. State whether you will incorporate the business as a C corp, S corp, form a general or limited partnership, or if you’re a sole proprietor or LLC.
The key determiner of your ability to turn profits over and over again. Talk about your current and future (planned) offerings, and how they’ll benefit consumers. Product life cycle is important here too. You must be able to accurately predict how that product will grow, mature, and later decline in market demand.
6. Marketing and Sales
Here, you’re attempting to make one of your very first sales by selling the investor or loan advisor on the product or service you offer. Articulate your marketing plan – how will you attract customers and how do you plan to keep them? Remember that one-off sales models are hard to sustain and whomever you’re seeking money from will be well aware of that reality. Outline the entire sales process from start to finish.
7. Funding Request
Outline how much you need and what that money will be used for (eg., lease, rentals, equipment, bills, R&D, etc.) The funding request will vary depending on whether you’re seeking a one-time loan, or if you’re looking for a series of funding rounds over the next several (typically 5 – 10) years:
- If you’re seeking a simple one-time startup loan, outline how much money you need and how long you’ll need to pay it back.
- If you’re seeking a long-term investor, outline how much money you need now and later in various installments. Are you asking for debt or equity – what’s your ideal interest rate or what stake are you offering?
8. Financial Projections
If an investor has read your startup business plan up until this point, they’re interested, yet in the most skeptical sense one could imagine. You’ll need to convince those reading the business plan that the business is/will be stable over the coming years. Income statements, cash flow statements, and balance sheets providing quarterly (even monthly) projections will often lead you to the most desirable funding outcome.
The appendix section of a startup business plan is where you’ll offer any supporting documents that can back up the projections given in previous sections. Examples of documents to include are:
- Credit history (yours, your partners, the company’s)
- Resumes of key team members
- Pictures of the products
- Letters of reference (from past customers or business partners)
- Licenses related to running the business
- Permits necessary to operate
- Patents (applications or actual)
- Legal documents (the more the better)
- Contracts (customers, vendors)
The sections described above should be used in all startup business plans, whether big or small. It’s important to note, though, that there is nothing written specifically in stone saying you can’t tweak the basic format to better get your point across to increase the chances of getting funded. Add your own sections as you see fit.
Also, when sitting down with investors or loan advisors, make sure to have a product prototype to offer, or members of your service team onsite to demonstrate how a service will be performed (if requested). Many startups seek funds based on an idea, but you need to be able to make that idea a reality before the investor’s eyes to really get their attention.
Essentially, when you turn your startup business plan into the people who can give your idea legs, you should have all your research done, paperwork in order, and team ready to go as if you were planning to open the business tomorrow.