Running a business is no easy task. Despite good effort and hard work, half of all businesses fail within the first five years. For many, business failure has less to do with the product or service they’re selling and more to do with their financial strategy. In fact, 82% of failed businesses reported cash flow… [Read More]
Business and Entrepreneurship Articles
Successful businesses are built with patience, discipline and an eye towards getting the best value out of every investment dollar. Just like value investing.
I advocate a business owner's mindset for every investor. At the same time, I realize that most business owner's do not make good investors. In this section, we will change that. We will cover topics that are relevant to business owners and entrepreneurs, and we will also cover investment topics that address issues and challenges that business owners and entrepreneurs face.
Let's start with the challenge of getting investment into your business. The art of making an effective business plan.
How to Write an Effective Business Plan
Got a great idea for a startup and wondering how to write a business plan that will get you funded? Well written effective business plans are invaluable to the potential success of a business. Investors and lenders expect well researched, clear and concise plans prior to offering startup capital. Startup plans should be drafted for pre-approval prior to a full business plan, both of which have specific writing standards. Consider the following formatting descriptions and tips to further develop a successful outline.
The Effective Business Plan Format
Startup plans are the most effective way to outline a potential business plan without creating unnecessary work or time on an unsuccessful full project. Well written and engaging mission statements, combined with a financial data sheet or outline describing potential capital make the best plans. Mission statements preface details within the business plan and are timeless outlines that summarize all the components within the plan. Also included are financial outlines, which are the fast and easy to understand projected capital reports. Most businesses choose to include graphs with percentage data for a more visually appealing report. Following the warm reception of an organized startup plan, the first step in constructing a full business plan includes drafting a business plan executive summary.
Mission statements are first included again in the executive summary. Data reports and projected capital are included as well, though these should be elaborated on. Include further investigation into questions most investors would ask, topics like who and where. Who the employees will be and how many? Who are the local competitors? Details and full analysis are necessary.
Using analysis charts from the startup plan, there are many data tables, graphs and projected sales reports to include within Market Analysis. Feature the target demographic with market test research, sales from local competitors and projected reports. Future projections assure investors of projected goals and growth within the company. Stagnant looking businesses never get investments, so these data sheets are vital.
Often overlooked are the next summarized selling points on the business. Company description could be the determining factor between funding and being denied for potential capital. Organization and management should also be included, explaining qualifications within the leadership of the business. Hook words, confident statements and the best data should be included. Be sure they both create intrigue for investors in concise statements with well regarded praise to those deserving.
Writing a Business Plan - Make it Realistic
Investors will never believe that there will only be increasing capital. As all new businesses lose money before earning any, it is unexpected and frowned on to only include profit on the projected outlines. Weaknesses lay in between even the best outlines and the best for business option is to include these faults. Developing trust is definitely a key component within investing, though well rounded quality assurance is the best reason. Well executed businesses prepare for the worst in all cases and including such practices prove respect and responsibility within the planning phase.
Business plans should also steer clear of exaggeration, especially within projections and marketing strategy. Not only should they both be well analyzed and truthfully explained, the distribution should be concise and direct. Choose a source or a few sources of distribution and focus in on them. Do not include every possible option or emphasize those that will not be implemented.
Full details and extended summaries should also not be included within the company description. Consider this piece the plot summary of the business. Explain the footnotes and most exciting aspects of the company without getting into detail. As most banks read this portion before anything else, make it brief and to the point.
Competitors should also be detailed, including location and sales reports. Although this may seem counterproductive, it will actually prove research of the local market and that the potential business is well organized. All companies have competition and understanding other markets will maintain success. Not only are competitors important to address, those that might want to pursue legal action toward the company should be addressed.
Legal issues can restrict any new business and should be addressed prior to any funding. Former employers could potentially sue over knowledge attained during employment, as could co-workers from a past job. Patents can always be tricky, so making sure the company is completely unique is important. All gaps within legal paperwork must be faced and fixed as soon as possible.
Financial assessment, including risks and projections must be fully detailed. Incomplete data should not be added but graphs, data and all future risks should be included. Do not include bias or off topic statistics. Be sure to highlight the most effective information and data.
Use these additional resources to write an effective business plan
- Small Business Center Network: How to Develop a Business Plan
- Kansas Business Center: Starting a Business
- NYC Business Solutions: Startup Checklist
- VetBiz: Writing a Business Plan - Business Plan Outline
- US Small Business Administration: Small Business Management Series
- Ready Business: Continuity of Operations Planning
- Utah State: Prepare a Written Business Plan
- OISC: Successful Business Plan
View articles in other categories: Dividend Stocks, Large Cap Stocks, Mid Cap Stocks, small cap stocks, Macro-economic, Value Investing Tips, Investing Questions, Personal Finance, Investment Guide, Investment Definitions
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