By D.H. Lewis
“If you’re going to do it, do it right.”
That’s the advice my grandpa always gave me.
So now that you’re going to build a business plan for your project, you might as well go ahead and get it right. In this article we are going to discuss the essential questions your business plan must answer.
Basically, in order to impress your audience you need to answer six essential questions.
What problem are you going to solve?
Every business starts with a problem.
Your goal is to create riches making the lives of other people easier. That means scratching an itch, easing a pain or saving a life.
If the person evaluating your business plan can feel the pain, they will be much more inclined to believe in your solution.
In this section be specific.
Why is the problem important? How widespread is it?
How many people, who suffer this problem, are willing to pay for a solution?
Your next step is to quantify the potential of your target market.
Here you need to be brutally honest.
A business based on the idea of solving a problem for a remote village of impoverished people on the other side of the globe may be considered a noble cause, but will almost certainly raise doubts in the minds of someone hoping to invest in a viable business.
In this section you need to be able to establish both the size of your potential market and their willingness to pay for your solution.
Look for official statistics that document the number of people who suffer from the problem your solving and their income levels.
If you can prove that they are already paying for inferior solutions, even better!
What makes your solution better than what’s already out there?
No one wants to back “just another horse in the race.”
Even if you are entering an established marketplace with well known competitors, you need to find your own special angle that makes your proposition unique and compelling.
Can you bring a new technology to bear?
Do you have a special insight that makes your focus different?
Have you located a strategic location that makes your success more probable?
The objective of this section is to make the reader realize that you have really thought out a way of making your business stick out among the other players in the market.
Are you opening a franchise? In that case, explain why the proven formula from the head office is special and guarantees success.
Who is working with you to make this a success?
Often we think of businesses as the result of a sole heroic entrepreneur facing off against a world of obstacles and tests.
While it may at times feel that way, the truth is always far different.
Successful businesses are built by great teams working together.
No investor will believe that you are going to do everything and do it well.
If you are going to be launching the initiative by yourself, you will still need people to support your effort.
Can you create an advisory board of friends, family or colleagues who can bring a fresh viewpoint to the table?
Have you found the external professionals that will be working with you?
In this section you need to convince the reader that you have surrounded yourself with people who will help you overcome the difficulties that will certainly arise.
Businesses survive by selling their products and services.
How are you going to sell your products or services?
You may be a renowned expert in your field with years of experience.
You may have invented the most miraculous product ever seen.
You may have assembled a fabulous team to back your idea.
However, if you don’t have a clear and convincing way to reach your market and make the sale, your whole plan is crippled.
In this section you need to explain how you are going to market and sell to your market.
How much do you expect acquiring each new customer going to cost?
How are you going to communicate with them?
What is the sales funnel you are going to build?
Never, show your business plan to anyone until you’ve gotten this section right.
How are you going to organize your business that assures profits?
Finally, your business plan needs to address the nuts and bolts of managing a successful business.
Although we all love to talk about innovations, marketing strategies and great team members who are joining the company, the truth is that far too often businesses fail due to mundane everyday problems.
In this section of your business plan you need to show that you’ve prepared for these problems.
What is your cashflow going to look like?
How much capital do you need to cross the line from losses to profits?
Crunching the numbers and presenting a coherent financial plan has less to do with predicting the future than showing that you have done your homework.
Remember that the analyst who is reading your plan has seen a thousand plans.
They know the tricks and can spot your “glossed over” sections a mile away.
By studying your plan they aren’t looking to see how much money you’re going to bring in in month six. Instead they are going to be asking themselves questions like “is this reasonable?” or “does this plan make sense?” A great business plan proves that you’re capable of planning and thinking through the dangers ahead.
You may believe that their decisions will be based on the merits of your plan, but the truth is that they will be based on the merits of the person presenting the plan.
If you demonstrate that you’ve done your homework and are prepared to take on the difficulties ahead, your plan will be a success. Now go back and read through your business plan.