Before you take the leap into the path of entrepreneurship, it is essential that you done the homework and write a business plan. As cliché as it might sound, if you fail to plan, plan to fail.
Having a good business plan will provide you a clear business objective and an organized way of looking at all the important aspects of your business. Most importantly, it will provide you a crystallized view on whether your business idea can be successfully implemented.
A well written business plan will also come in handy, when you are looking for funding from potential investors (venture capitalists or angel investors). Key elements of it should focus on:
Stating/defining the problem
Your plan must define the problem which your business is addressing and not just stating your business idea. Nobody will be interested in a business idea if it is not solving a problem and is impractical. The plan has to be precise and easy to understand for layman (nobody likes to read a long-winded business plan filled with technical jargon, especially bankers and venture capitalists). Focus on how and why your business can deliver and solve the problem.
Market size and industry trend
Define the estimated market size and industry trends, dynamics and customer landscape. Describe and list your competitors, including substitutes. Highlight your competitive strength and the barriers to entry which will help to reduce competition.
Explain in details how the business is going to make money, revenue source, volume growth and gross margins. This section is also a good place for forecasting both revenues and expense totals for the next five years. A good business opportunity with scalability should show double digit positive growth per year, and revenues projected to $20million or more within the next 5 years.
Marketing, sales, and partners
In your plan, you should have a strategy for marketing so as to penetrate the market. You should define the sales channels, pricing and plans for strategic alliance with partners.
Goals and milestones
Besides listing the milestones you want to achieve, identify the potential show-stoppers and obstacles that can impede the growth of your business. In addition, the milestone dates and goals have to be specific and realistic.
If you intend to use your business plan to seek funding from investors, explain how the funding requirement is derived and provide details on the planned usage of the funds.
A good business plan must include all the necessary elements, though requirements of a business plan vary from case to case. If the business plan’s objective is to satisfy both venture capitalists and angel investors for funding purposes, you have to prepare the plan from the investors’ perspectives. Remember, the best plans are the longest with impressive charts, but rather one that answer every question your investors might ask.