(free cheat sheet included)
For more free business plan tips, templates and cheat sheets, be sure to check out some of the other popular posts from the weekly blog:
This post will review the 4 fundamental rules for how to write a good business plan:
1) Start with a POWERFUL Cover Letter!!!
2) Identify Your Target Audience
3) Use the Right Tools
4) DON’T WRITE TOO MUCH
Time to elaborate…
Step 1: Start with a Persuasive Cover Letter
Your business plan layout, feel, and professionalism will all be judged and will be important factors to having a really good business plan.
However, if you are using your business plan for funding, you need one extra step.
Most first-timers miss the fact that a business plan for an investor or bank always starts with a great cover letter! You need a cover letter that is easy to read, lays the framework for your business plan and WHY you are worthy of getting funding, and should be written in persuasive business writing format.
The cover letter and the entire business plan can be 10 times easier if you just start with the right template.
If you are struggling with the templates out there provided by SCORE and SBA, visit the templates page for a user-friendly alternative created by a professional business plan consultant.
Step 2: Identify Your Target Audience
When wondering How to Write a Good Business Plan, your target audience will dictate some key elements of what “good” means. The same way you would use different language when talking to a parent than you would use talking with your friends or colleagues, you need to tailor your language and messaging if you are planning to pitch to an investor versus a bank versus self-strategy.
An investor will need to understand equity and how they will fit in with day to day operations. Be very specific and remember that you need to leave room for negotiation, so don’t list your maximum equity offer in the business plan. An investor will also want the deal terms, like how much they will be entitled to quarterly or annually and if there are intentions for future buy-out or sell-off of the business.
**Language should be “secure” and show you have a unique, high-growth potential business idea.**
A bank will want to see that you can prove your budget plan. They will want to see a loan amortization schedule and a lot of risk mitigation strategy throughout the business plan, especially in the Strengths, Weaknesses, Opportunities and Threats section.
**The language should be “secure” and show you have a slam dunk, stable business idea.**
A business plan for self-strategy will need to be detailed enough for you to follow like a step-by-step business manual. Creating a business plan for strategy may not go farther than your eyes and maybe a business partner’s, but doing it wrong can be self-sabotaging in the future if you were too vague or had too many business directions outlined in one plan.
*Keep the language easy for you to skim, should list the URLs of any research efforts you conduct, and should be something you can follow with a cold eye 3-6 months from now.**
Step 3: Use the Right Tools
First, let’s touch on the idea that a business plan is something that is “free”.
You will pay for it.
Whether you “pay” in 60 hours of your own time, sweat, and tears, or you “pay” by investing in a couple of great tools to guarantee it is done to the right caliber and without too much time and confusion on your part…
***The question is, what is the smartest way to pay for your business plan that will minimize your chances for rejection?***
Anything available that’s “free” risks being exactly that: worthless. Sometimes, a business plan is the first wise investment you can make in your business. You, dear entrepreneur, will need to spend money on your website, on advertising, on entity formation – there are situations where penny pinching will be important, and other situations where you will get exactly what you pay for.
The Real Risk Involved
Imagine being in school. There is a huge paper due, and you waited until the last minute to start it.
You do a rush job the morning it’s due…you do a little copy / paste, you borrow ideas you heard from other students. Right before the bell, you turn it in, relieved it wasn’t late.
The teacher takes one look and can see the effort you didn’t put in. The teacher can even spot some plagiarism and rejects your paper altogether.
Showing your business plan to an investor or banker is exactly like this.
They can see effort, they know when you pulled information verbatim from a website. Most important, they can tell if you have no idea what you are talking about. They figure, if you didn’t care enough to put effort into your business plan, then how much effort are you going to put into making the right decisions for your business?
As an adult, you have more options of course – more tools at your disposal.
You don’t have to struggle on this alone or fight against procrastination. You can find shortcuts, hire help. The right tools can save you a ton of time and mistakes. For financials especially, people struggle with creating cash flows and balance sheets. You may see value in paying for a great template that automates this for you and makes sure everything is done right.
***Beware of any software subscriptions that don’t allow you to access your content unless you are subscribed. The last thing you want is to pour your heart and soul into a software, only to have all that work held for ransom for another subscription fee.***
For research on your industry, consider sites like AnythingResearch.com and IbisWorld.com. Yes, you will have to pay hundreds to get access to the report you need for your industry. That’s because these reports will save you hours and will give great credibility to your business plan. This is a great example of getting what you pay for!
***Consultants tend to have annual subscriptions to these reports. When you hire a consultant, you are likely getting the industry reports for a severely discounted rate. Plus, you don’t have to do all the work of actually interpreting those reports or understanding what they mean for your business.***
Step 4: Don’t Write Too Much
Crazy concept, right?
One thing that drives everyone crazy is a page full of text that could have been 1 sentence. In order to write a good business plan, oftentimes less is more. Get to the point and don’t obsess over filling every page. First and foremost, tell your reader what your business purpose is, what problem your business solves, who will run the business, and how the business will operate.
Even though you shouldn’t write too much, this doesn’t mean you need to skimp out on effort. You need to write your business plan with a ton of strategy.
***Not talking about your business strategy, here – talking about your PITCH strategy. Yes, your business plan is a form of pitch proposal, and it needs to SELL.***
You need to write persuasively. Create a visualization for your audience and to show that your business is part of a very important vision. Use emotion words in your business plan. Explain how your customers will feel using your product, and balance with the economics of why the numbers make sense. It is a delicate balance but if you do it right you’ll have investors begging you to let them in.
Click here for a free cheat sheet. This will guide you through the right next steps on when to find professional help as you move forward with your business plan.
For personal business plan advice, find the help you need. No one expects you to automatically know how to write a good business plan. Luckily, there are plenty of experts out there who can help.
Funding is everywhere, and an opportunity to become a business success is important. Don’t be the person who goes to the grave with a brilliant idea because you never moved forward to take the right action.