Contents and Executive Summary

The Contents section (or table of contents) makes it easy for readers to see at a glance what the plan has to offer and where it can be located. The contents should be followed by an executive summary, a short section of two to three pages. In terms of selling your plan, this is the most important part of the entire document, so take the time to get it right. The executive summary is not a preface or an introduction; instead, it is a snapshot of the entire plan, something that explains your business to an intelligent reader in only a few minutes. A well-written executive summary captures the interest and attention of readers and prepares them for what follows.

The Opportunity

There is no point in pursuing an innovative business concept if the entrepreneur or idea champion has not identified a lucrative opportunity. Use this section to describe that opportunity: the market factors driving it, its current size, and its projected size in the years ahead. Describe the opportunity in terms that are clear and compelling.

Use this section also to highlight the economics underlying the opportunity and the factors that will drive its success, such as market penetration, product innovation, and so on. But don’t get carried away. Keep it brief, focused, and upbeat. This is also a suitable place to cite the magnitude of the funding being sought and explain how it will be used in pursuing the opportunity.

Although it is important to document the opportunity with objective data, don’t turn this section into a boring “data dump.” Don’t allow your compelling story to be buried under a mountain of facts. Instead, summarize the data and explain its implications for investors. Put the actual documentation in an appendix.

The Product (or Service) Line and Its Strategy

Use this section to describe the company, explain how it is organized, and state its essential purpose. Don’t forget to include a subsection about the goals of the company and its business strategy. Investors will want to know how you plan to grow. If there is a chance that the company will become a tempting acquisition target for a larger, less innovative competitor, mention this possibility. Here is an example:

Lo-Carbo has three goals:

1. To broaden its product line
2. To expand market penetration through stores and through a private labeling agreement with one of the major diet companies (currently in negotiations)
3. To expand the business to the point where it either becomes a dominant player in the low-carbohydrate food niche or is acquired by one of the packaged food industry giants.

If your products are not yet market-ready, you should reveal your plans for product rollouts. Also include an artist’s rendering of the final physical product. If your products are market-ready, go beyond the written description; include high-quality photographs.

Also include in this or a separate section a discussion of the company’s strategy. Strategy is about differentiation and competitive advantage. Explain what is different about your approach to the marketplace and how that difference will give it a sustainable competitive advantage.

The Management Team

Investors are keen to know about the people behind the business, whom they see as key assets. Specifically, what experiences or qualifications do they bring to the enterprise?

• Where are the founders from?
• Where were they educated?
• Where have they worked—and for whom?
• What have they accomplished—professionally and personally—in the past?
• What experience do they have that is directly relevant to the opportunity they are pursuing?

Put the details of their backgrounds into an appendix to prevent readers from getting bogged down.

Organization

Most plans use an organization chart to indicate the reporting relationships among key personnel. A table indicating names, titles, and salaries is also useful.

Assuming that your company is a corporation, this is also an appropriate place to identify the board of directors. You should indicate the names of board members, their positions on the board, their professional backgrounds, and their history of involvement with the company.

Recruiting board members should be a matter of the highest importance. You want people who have abundant business experience and, if technology is essential to the business, considerable scientific or engineering know-how. Board members should also be respected in the broader business community. Their capabilities and integrity will speak volumes to whoever reads your business plan, financiers in particular.

Marketing Plan

If the “people” section of your business plan gets the most attention from readers, the marketing plan runs a close second. Investors know that marketing is the activity most associated with success or failure. An attractive product or service is essential, but a company will fail if it cannot connect with customers. A sound and realistic marketing plan is the best assurance that a solid customer connection will be made. The plan should be clear about all aspects of marketing, including the following:

• Identification of customers
• The number of potential customers and potential sales revenues
• The requirements of various customer segments
• The importance of purchase convenience, rapid delivery, product customization, and so on for these segments
• Ways to effectively access each segment—through distributors, a captive sales force, direct mail, e-commerce, or whatever
• Appropriate sales and promotion approaches
• An analysis of how purchase decisions are made
• Customer price sensitivity
• The cost of acquiring and retaining customers
• The strengths and weaknesses of competitors and ways that competitors are likely to react when the company enters the market

For your plan to be credible, these issues should be supported with solid market intelligence. Summarize that supporting intelligence here, and refer readers to whatever market research you’ve provided in the appendix.

Operating Plan

Whether you’re in the business of designing products, manufacturing them, acting as a distributor, or running an e-commerce site, you are faced with a host of operational issues. What supplier relationships do you have or envision? How much inventory will be required? If you are a manufacturer, will you follow a job shop or continuous flow operation? Which day-to-day operating chores will be handled internally, and which will be outsourced?

An operations plan considers the many details of converting inputs to outputs that customers value. What is your plan?

Financial Plan

If a company is already operating, it will have (or should have) a set of financial statements: a balance sheet, an income statement, and a cash flow statement. In a nutshell, the balance sheet describes what the company owns—its assets—and how those assets have been financed (through liabilities and the funds of the current owners) as of a particular date.

The income statement reveals the company’s revenues, what it spent to gain those revenues, and the interest and taxes it paid over a specified period. Finally, the cash flow statement tells readers the sources and uses of cash during the same period. Together, these three financial statements reveal much to the trained eye of potential investors.

Generally, it’s best to place the full financial statements in the appendix to your business plan. Use this space for key data from those statements—data that will give readers the big picture of your business and its intended future. Key among these data are your sales and expense projections, described earlier in this book as a pro forma income statement.

Use Words Sparingly

In the business world, shorter is always better if it communicates the required information. So heed Rule 17 in Strunk and White’s timeless Elements of Style, and omit needless words. “Vigorous writing is concise. A sentence should contain no unnecessary words; a paragraph no unnecessary sentences; for the same reason that a drawing should have no unnecessary lines and a machine no unnecessary parts. This requires not that the writer make all his sentences short, or that he avoid all detail and treat his subjects only in outline, but that every word tells.”¹

This quotation is itself a perfect model of their rule: every word makes a contribution. Economy of words has two big benefits for the business plan writer: your key messages will stand out, and economy of words saves your readers valuable time.

Use Simple Sentences

The sentence is the basic unit of written expression. Most sentences make a statement. The statement can be simple or complex. Consider these:

1. The growing popularity of low-carbohydrate diets has created a business opportunity for makers of low-carb foods.
2. On the one hand we witness rising levels of obesity among children and adults, both in North America and in Western Europe, which in turn have increased the popularity of low-carb diets, which in turn have created a business opportunity for Lo-Carb Company and other makers of low-carb foods.

The first sentence, unlike the second, is spare and to the point. It will more likely register with readers. It does not contain all the information found in the second. If that information is important, it should be provided in a separate sentence.

Packing more information into each sentence is not necessarily bad, nor does it violate the rules of grammar if done properly. However, complex sentences make the reader work harder and may create confusion. As a writer, your challenge is to know when a sentence has reached its optimal carrying capacity.

Use Design Elements to Lighten the Reader’s Load

Readers of your business plan are busy people who have learned to skim; they drill down only to what they believe to be relevant details. You can facilitate their skimming through the use of design elements : include headings, subheads, and short blocks of text. Even white space can be used as a design element. All are useful in long documents.