A comprehensive business plan isn’t just for you as an entrepreneur. It is also a roadmap your potential investors can follow to see how you plan on delivering a return on their investment.
Being an entrepreneur is as challenging as it is rewarding. Before your new venture dazzles even its first customer, you will need to write a detailed and comprehensive business plan. Use this handy 21 point checklist to make sure you haven’t left anything critical out.
Getting Started – My Business Plan
7 items to review
These are the essentials.
These are the aspects of your future business that tie it all together and provide direction. These are the basics, and the foundation that everything is built on—not just within your business plan presentation, but also within the business itself once you are up and running.
___ I know the need my business satisfies.
Without fulfilling or satisfying a need, your business will have trouble getting off the ground. A way to think of this is that people don’t buy products or services, they purchase solutions to their needs.
How does your product or service provide a solution to a need?
___ I know the audience my business plan will be presented to.
Different investors have different needs and interests. Keeping this in mind will help produce a successful first round of fundraising.
For example, banks as investors are often willing to extend repayment options over a longer period, whereas individual investors are often more interested in a quicker turnaround.
___ I know who my potential customers are and how I will reach them.
Not everyone has the same needs, and not everyone will be a potential customer. Identifying who your potential customers will be is a crucial step in generating investor confidence and future success.
A good question to ask here is “Why will my potential customers buy my product or service?”
As part of a larger comprehensive marketing plan, it is important to know exactly how you intend to reach your potential customers, or the people who have the need that your product or service fulfills. This could include word of mouth, print advertising, social media, etc.
___ I know what values drive my business.
The values that drive your business influence the how and why of the ways in which you will meet your goals and objectives.
These are the story elements of your business and are selling points to investors—especially investors that may share your values. People respond to passion, so selecting values that you believe in, as well as values that are a good fit for your target demographic, can be business assets in themselves.
___ I have a clear plan for producing or delivering my products or services.
This is the meat of your USP, or Unique Sales/Service Proposition.
Knowing how to execute the way in which you will make your money, and communicating it effectively, is the core of your business plan. No investor will be willing to commit funds if you are unsure exactly how you will meet the needs of your potential customers.
___ I know how my business will be organized, and I can confidently convey initial staffing needs.
This also includes understanding and communicating how you are prepared to fund payroll for any employees, and how payroll costs will be a feature of your three- and five-year funding plans.
___ I am aware of ancillary costs and regulatory responsibilities associated with my future business.
This includes permits, licensing, applicable rules and regulations, etc.
Even the most robust businesses can be derailed by surprise fines or litigation, and regulatory agencies often have wide-reaching authority. Look over your business plan. Have you mentioned your plans to insure your business?
The Next Step – My Market
5 items to review
Marketing is the communications lifeblood of any business, but it is so much more than advertising and promotion.
In the initial stages of business planning it is essential to understand the SWOT profile of your business with regard to the ways in which it interacts with others in your market. Review these items to ensure that you understand the market you will be operating within inside and out.
___ I know my industry.
This means knowing where your product or service fits into that industry and how it competes with other products or with the industry as a whole. How does your product/service fill an existing gap?
How does it leverage an opportunity that exists within the industry now or in the future?
___ I know how I will overcome any barriers to entry that may exist within my industry.
Some industries are difficult to access for less established entrants. This could be due to legal monopolies, category killers, or massive initial levels of capital commitment. Investors will want to know how you intend to gain access to the market you are pitching to them.
Not all markets are as restrictive; knowing what barriers exist is a function of being fluent in the characteristics of your chosen market.
___ I know who my competitors are.
This includes both direct and non-direct competitors.
No business exists in a vacuum, and understanding how your business will be a better fit for your potential customers than the competition is the basis of creating competitive edge as well as increasing investor confidence in your business plan.
___ I know how big my market share will be.
Knowing your portion of market share at the outset of your foray into a market is important, and knowing what you can capture right away will inform your growth goals.
Psst: Not sure how to calculate market share?
___ I have a developed plan to react to potential changes within my industry.
Demonstrating a knowledge of trends and the changing face of your industry inspires confidence in investors. It also sets your business up for success and helps create competitive edge. Always assume your competitors are as well versed in the future of your industry as you are.
In Detail – My Product or Service
3 items to review
A broad understanding of how your product or service fits the needs of specific customers will earn you a seat at the table, but to have a successful first round of fundraising you must be prepared to answer detailed questions about exactly how you will beat the competition that exists within your industry, and more specifically, your market.
___ I have a pricing structure that reflects the current state of the industry and key demographic information.
Even in markets where there is very little price sensitivity, price matters to the customer. It also matters to your business.
You will need to recoup your costs and then some, but too high of a price will allow your competitors to price you out with little effort. Make sure that you can back up your pricing strategy with data.
___ I know the life cycle of my product or service
Product life cycle is the time a product spends within the market from inception to retirement. Not all products reach retirement—it is not uncommon for products to be folded into one another or to be changed so much that they become something else entirely.
This same concept applies to services. If you have a short product life cycle, investors will want to know what your plans are to introduce new products once the original product life cycle has ended.
___ I have a plan to manage my inventory (if applicable)
Inventory management is a major source of cost for an organization, and poor planning on this front can produce an array of expensive surprises.
When it comes to costs, no one likes surprises.
Of course inventory management in the traditional sense doesn’t apply to some service-based businesses. For example, you can’t store haircuts on a shelf.
Just because you can’t store haircuts doesn’t mean that a barbershop doesn’t have to be conscientious of physical storage for scissors, clippers, towels, etc.
What inventory will your business have to carry? Is it a supply inventory or a product inventory?
Planning for the Future – Growth
2 items to review
Investments are assets that grow in value. Investors will be looking for evidence that your business has growth potential. This is something you should be planning for as well, regardless of investor input.
___ I have a plan to sustainably scale my business.
Scale is more than just growth.
Scale means maintaining current levels of efficiency and profitability while increasing the capacity of operations. Unchecked growth may look good on paper, but it can be volatile (and no one likes surprises with their investments).
A scalable growth plan conveys stability and a growth mind-set to investors.
___ I can identify new markets or market segments to target with a growth mind-set.
Remember that any assertions presented without data to back them up will damage your chances of securing capital.
The Pitch – Funding Request
4 items to review
These checklist items correspond to the funding portion of your business plan presentation. Everything else is supporting evidence that your business is a good investment. This is the pitch, where you ask for your audience’s investment.
___ I have a clear plan for use of the funds I receive.
Transparency regarding the use of the funds you will receive is an assurance that investor money will not be wasted, and that it will be used to the greatest effect. Wouldn’t you want the same assurance if it was your money on the line?
___ I have a financial strategy.
How does the the above plan fit into an overall financial strategy that supports the completion of your business goals and objectives?
___ I have a plan to repay my obligations.
Your investors will be seeking their investment back and then some. What are your plans to make that happen?
___ I have completed financial projection documentation.
At a minimum, a projection of cash flow and a profit/loss projection are a must. These can be summarized and are of course estimates, but they must be grounded in data to be taken seriously by investors.
The Bottom Line
When it comes to double checking your business plan, you can never be too thorough.
Of course, the best feedback is the feedback that is provided in real time by real investors who have just heard your pitch.
As an entrepreneur, you know the value of always improving and always learning from the world around you. Use this checklist as a second pair of eyes before making the rounds with your business plan, or as a guide while building it from the ground up.
Best checklist ever, or is it missing a thing or two?
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Benjamin Sweeney is the Senior Business Writer for ClydeBank Media who specializes in the wide and wonderful world of business and process optimization. He has an appetite for waste reduction and an eye for efficiency. He has authored two titles on the subject of Lean manufacturing, both available from ClydeBank Media.