The 5 Most Important Items to Fully Address For Entrepreneurs When Writing Business Plans

by: Geoff Ficke

The 5 Most Important Items to Fully Address For Entrepreneurs When Writing Business Plans

A good portion of my work is devoted to writing and reading Business Plans. My Consumer Product Development and Marketing Consulting firm works extensively with small businesses, foreign Companies seeking United States Sales and Distribution, Inventors and Entrepreneurs. The solid Business Plan is the keystone that is essential in successfully driving a new venture to success.

Unfortunately, the vast majority of the Business Plan submissions that I review are discarded. There are many reasons for this. A great Business Plan is the “window to the soul” of your planned enterprise. It needs to stand out, be crisp, exciting and make the reader want to learn more about the project, and most importantly, you.

In an effort to provide targeted guidance in preparing and presenting a Business Plan that will be given proper consideration by Investors, Venture Capital, Investment Banks, Partner and Strategic Alliance possibilities, the following Five Irrefutable Rules should be considered and included in your document.

1. Know Your Cost of Goods-ABSOLUTELY!

If you do not know what the dead net, landed final Cost of Goods is for the Consumer Product or Service that the Business Plan targets none of the Financial Assumptions will make sense or withstand scrutiny. I list the importance of this first, because the rest of the Business Plan shatters completely without this all-important number.

I cannot tell you how often we see plans that guess, or worse do not know actual Cost of Goods. Marketing Strategies, Sales Models, Promotion Budgets, Gross Margins, Pricing and many other Financial Projections cannot be nailed unless Cost of Goods has been fully vetted and is supported with detail and Exhibits. Not knowing definitively what true Cost of Production is for your product is an immediate disqualifier. Do not shortcut this point.

2. Write a Brisk, Exciting Executive Summary

Have you ever read a Ken Follett or Robert Ludlum novel? Ever taken in a Jerry Bruckheimer-produced action movie? There is always one constant that these consummate entertainers provide: excitement in the first chapter or scenes.

The Executive Summary must do the same for your target reader. Remember, they read dozens of Business Plans each week. Very few are professionally or properly written. Those are discarded immediately. You need, and deserve, to have your Business Plan read. Keep the Executive Summary short, no more than 2 pages, flowing, exciting (not gushing) and on point. It should summarize the key Features and Benefits of your Consumer Product/Project, the Management Structure, Marketing Plans and Sales Models, Financials and Harvest. At the end, I will want to explore the opportunity further if the Executive Summary has done its job.

3. The Management Team is Crucial

One of the most common deficiencies we see is the lack of consideration given to the Management of the New Company being proposed. If you have never managed a business, but have a marketable product or opportunity, you will need to assemble a group of core managers that can provide the skills required to run the business post-funding. Who are these Managers, name them? Who will handle Sales and Marketing, Logistics, Production, Finance? What are their bona-fides? Include their CV’s in Exhibits.

Do not seek investment if you cannot provide a slate of experienced, talented people to manage the enterprise. You will be dismissed.

4. Identify Clearly the Projects Unique Selling Proposition (USP)

There are Convergent and Divergent Consumer Product opportunities. Convergent Products are improvements on existing products. These are often considered “Niche Products”. Reading Glasses with night lights built into the frame is an example of a Niche Product.

Divergent products are rarer. These products create new product categories and alter existing Retail Sales Promotion and Distribution Models. The George Foreman Grille, Mr. Coffee or notebook computers are examples of divergent products.

The most important element for your New Consumer Product to possess is an identifiable USP. You must be able to differentiate your project from existing competition and be able to detail unique Features and Benefits you will offer consumers. This is also a First Mover Advantage.

5. Are Your Financials Compelling to Investors

A properly vetted Business Plan will include three year (not five) Cash Flow, Balance Sheet and Income Statements. These projections, for start-up projects, are always based on best-Assumptions. This is the Achilles Heel in most plans. The Assumptions will not withstand investor scrutiny.

Most Venture Capital (VC) investments do not return the capital invested. A 10% success rate is about the industry average. In order to be considered you will have to demonstrate that your opportunity offers at least a 35% Return on Investment (ROI), beginning between month 24 and 36 of operations post-investment. Failure to be able to support this ROI is a disqualifier.

Remember, the definition of a great Business Plan is a word picture based on Assumptions that you Qualify, Quantify and Narrate. Do not confuse a large, unwieldy, wordy document with a strong plan. Keep the Business Plan short, no more that 20 to 25 pages, before adding Assumption supporting Exhibits, as many as necessary.