criteria for evaluating business plan

Creating a Comprehensive Business Plan Rubric

A well-structured business plan is a foundational document for any entrepreneurial venture, serving as a roadmap to guide your business to success. It provides clarity on your business goals, strategies, and financial projections, making it an essential tool for attracting investors and stakeholders. However, evaluating the quality and completeness of a business plan can be challenging, especially when dealing with multiple plans. This is where a business plan rubric comes into play. It’s a systematic and objective way to assess business plans consistently.

How to Create a Comprehensive Business Plan Rubric

1. define your objectives.

Start by identifying the objectives of your business plan rubric. What do you want to assess and measure in the business plans? Your objectives may include evaluating market research, financial projections, marketing strategies, or overall clarity and coherence. Make sure your objectives align with the key components of a well-rounded business plan.

2. Establish Criteria

For each objective, establish specific criteria or factors that you will evaluate. For instance, if you’re assessing market research, your criteria might include the depth of market analysis, competitor research, and target audience insights. Clearly define the criteria for each objective.

3. Assign Weightings

Not all criteria are equally important. Assign weightings to each criterion based on its significance. Weightings reflect the relative importance of different elements in the business plan. For example, financial projections may carry more weight than a company’s historical background.

4. Develop a Scoring System

Create a scoring system for each criterion. You can use a numerical scale (e.g., 1-5, 1-10) or a descriptive scale (e.g., poor, fair, good, excellent). This system allows you to provide a quantitative assessment for each criterion.

5. Provide Clear Descriptions

For each criterion and level on the scoring system, provide clear descriptions of what each level represents. This ensures consistent and objective evaluation. Avoid vague descriptions to prevent subjectivity.

6. Consider the Overall Structure

Include an assessment of the business plan’s overall structure and presentation. Elements to consider might include readability, use of headings, and formatting. A well-organized and visually appealing plan often indicates a more professional and thoughtful approach.

7. Test Your Rubric

Before applying your rubric to assess real business plans, test it with a few sample plans to ensure that it’s clear, fair, and effective. Make any necessary adjustments based on your testing.

8. Evaluate Business Plans

Once your rubric is ready, you can begin evaluating business plans. Review each plan against the criteria, assign scores, and calculate the final scores based on the weightings.

9. Provide Feedback

After assessing the plans, offer constructive feedback to the entrepreneurs or teams behind them. Highlight strengths and weaknesses, and offer recommendations for improvement. This feedback can be invaluable for the plan’s creators.

10. Maintain Consistency

Consistency is key in using a business plan rubric. Ensure that different assessors apply the rubric consistently, and if possible, discuss and calibrate your rubric assessments with other evaluators to maintain fairness and objectivity.

11. Use the Results

The results from your business plan rubric can help you make informed decisions about which plans align best with your investment or support criteria. Plans with higher scores are likely more well-prepared and have thoroughly considered various aspects of their business.

Business Rubric Example

Here are a few examples of criteria that could be included in a business plan rubric along with a corresponding scoring system:

• Identification of target market (5 points)
• Thoroughness of competitor analysis (5 points)
• Assessment of market trends and growth potential (5 points)
• Realistic revenue forecasts (5 points)
• Comprehensive cost analysis (5 points)
• Clear understanding of profit margins (5 points)
• Coherent and effective marketing plan (5 points)
• Utilization of digital marketing tools (5 points)
• Identification of key marketing channels (5 points)
• Description of unique value proposition (5 points)
• Clarity in product development roadmap (5 points)
• Assessment of potential market demand (5 points)
• Demonstrated expertise and experience (5 points)
• Coherence and complementary skills of the team (5 points)
• Clarity in roles and responsibilities (5 points)
• Identification of potential risks (5 points)
• Comprehensive risk mitigation strategies (5 points)
• Contingency plans for identified risks (5 points)
• Clarity and coherence of the business plan structure (5 points)
• Use of appropriate visuals and graphics (5 points)
• Professionalism and readability of the document (5 points)

For each of the criteria listed above, a scoring system can be implemented using a scale such as:

• 1-5 scale (1 being Poor, 5 being Excellent)
• 1-10 scale (1 being Low, 10 being High)
• Descriptive scale (Poor, Fair, Good, Excellent)

In summary, a well-structured business plan rubric is a valuable tool for evaluating and comparing multiple business plans. It provides objectivity, consistency, and fairness in assessing the quality and completeness of these plans, helping you make informed decisions when considering investments or partnerships. This business plan rubric can help assessors evaluate various business plans consistently and objectively, providing a comprehensive overview of the strengths and weaknesses of each plan and aiding in making informed decisions regarding potential investments or collaborations.

10 Qualities of a Good Business Plan Explained

9 min. read

Updated August 1, 2024

What makes a good business plan? 

Results. 

Goals met, milestones achieved, objectives accomplished. 

Forget the old-fashioned thinking of evaluating plans like a college term paper. You don’t get points for writing style, formatting, or completeness. 

A good business plan shows you can get results. But what does that look like in practice? What should you focus on when writing? 

Well, I’ve narrowed it down to 10 key qualities. Qualities I’ve found make for the best business plans and, ultimately, more successful businesses.

• 1. It fits the business need

You have to consider why you need a business plan in the first place. Business plans aren’t one-size-fits-all . Form follows function. 

Not all business plans have to be pretty

Most business plans exist to help run the company , not to be presented to outsiders. They don’t have to be polished and formal; they just need to work for you and be easy to review, revise, and run your business. 

Write it for your audience

A business plan being shown to outside investors does, in fact, have to look good, read well, and be presentation-worthy. It needs good summaries and descriptions to validate the idea, the team, the market, and other key elements. It should also describe how you intend to exit in the future. 

The business plan to support a loan application also needs summaries and descriptions. They need to reassure a lender about risk, usually with assets, often with the owner’s personal financial statements, and past performance on credit ratings and debt repayment. 

2. It’s realistic and can be implemented

The second measure of a good or bad business plan is realism. You don’t get points for ideas that can’t be implemented. Setting unrealistic and unachievable goals is a waste of time.  

For example, a brilliantly written, beautifully formatted, and excellently researched business plan for a product that can’t be built is not a good business plan. A plan that requires millions of dollars of investment but lacks a management team to get that investment is not a good plan. 

A plan that ignores a fatal flaw is not a good plan. Make sure your goals are achievable.

For example, if you share a financial forecast , is it realistic? Based on current revenue, can you realistically achieve your goals? If you’ve brought in $200,000 annually in revenue for the last few years, don’t expect to jump to $400,000 in the next quarter. 

Make a plan for increasing revenue—but in increments that make sense and are achievable.  Look at changes in revenue drivers, such as traffic, web views, sales per store, etc. Get into the details. 

Link your projected increases to actions and events, such as milestones, promotions, a new product launch, or a new location. Think of the power of cause and effect. Increases are more real when they result from activities and events, not just out of the blue. 

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3. It’s specific and measurable

Every business plan should include tasks, deadlines, dates, forecasts, budgets, and metrics. These will make your plan measurable .

Ask yourself: 

• How will we know if we followed the plan?
• How will we track actual results and compare them against the plan? 
• How will we know if we are on track or not?

While high-end strategy can be fun to develop, good planning depends more on what, when, who, and how much. These are the concrete specifics that offer visibility into the real progress toward your goals. 

• 4. It clearly defines responsibilities for implementation

You have to be able to identify a single person who will be responsible for every significant task and function. A task that doesn’t have an owner isn’t likely to be implemented. 

You should be able to review a business plan and recognize who is responsible for implementation at every point. If you don’t, you have a gap and need to fill it.

Avoid sharing responsibilities between different people or groups because this reduces accountability. Match every important task or function with one person in charge and accountable. 

Again, if you don’t have that person right now, don’t just ignore it. Mention in your plan that it’s a known gap, when you intend to address it, and if you have anyone in mind.

• 5. It clearly identifies assumptions

Business plans are always wrong. They’re written by humans who are making guesses about the future. Humans tend to guess wrong. 

So, your business plan must clearly address assumptions upfront. 

Did you assume the company will increase productivity by 10% this year because it did the last few years? Do you assume the market won’t change much? No new competitors? Do you assume that your technology will reduce your direct costs? Do you assume growth in your social media impact? 

Share your thoughts on why this is achievable based on past factors, but also clarify that you’re guessing. 

You may need to update or refine these areas of your plan after a few months. By flagging them as assumptions from the start, you won’t be surprised when you over or underperform and are prepared to revisit and adjust. 

• 6. It defines strategy and tactics

In the real world, a small business can’t do everything, so it has to do the right things. You can’t please everybody, so you need to please the right people. That is the essence of strategy. 

A strategy defines what problem you solve, the solution you offer, the relevant target market, and why you are the one to do it. 

How you treat strategy in a business plan depends on the nature and objective of the plan itself. 

Strategy can be as simple as a bulleted list taking up a page or two of a lean business plan. It could also be one or more slides in a pitch deck or a more detailed formal chapter of a traditional plan. 

The plan defines the strategy so you can refer back to it as often as necessary. It might be there for management value or to explain to outsiders. And who will be using or looking at it will dictate how it needs to be presented. 

Get into the details

Strategy is useless without the key tactics . 

Tactics might be pricing, distribution, marketing, financial plans, sales plans, etc. Make sure the tactics you choose are directly in service of executing your strategic goal. 

You should be able to explain how every action you take relates to your overall business strategy. And don’t leave tactics without developing concrete specifics, milestones, budgets, tasks, responsibility assignments, tracking, and how you’ll follow up. 

• 7. It incorporates a monthly review schedule

Good business plans include timing and schedules for regular updates. You anticipate the need for a regular monthly review . 

You know your plan is not perfect and needs to be revised to accommodate ongoing results. Real business plans need to be kept fresh. 

• 8. It includes essential numbers

Sure, there is a place for a simpler one-page business plan and other shorter plan summaries. Investors, banks, and strategic partners might want that kind of simple summary to quickly understand your business. 

But real business runs on cash, and keeping your business in cash requires thorough financial planning. 

You need budgets and tracking. 

So a real business plan includes essential financial projections , including sales, costs of sales, expenses, profits, and cash flow.  

You track sales, costs, and expenses to monitor related budgets and progress toward goals. You also track cash flow factors such as accounts receivable and inventory to look for indications of change that might require management actions. 

Remember that management is about constant course corrections. This is why you include a regular monthly review of the plan against your actual results. 

9. It’s clear and simple

Keep it simple. 

Most businesses need and will use a lean business plan , which can be just a few pages of bullet point lists (strategy, tactics, milestones, etc.) and tables (sales, costs, expenses, profits, cash flow). 

Don’t use a business plan to show off. 

A business plan is about the business, not the science. Avoid industry jargon and long technical explanations. Investors and bankers will have experts review your details, but they don’t expect to find them all in the plan document.

Related Reading: How long should your business plan be?

• 10. Easy to communicate with the right people

Again, form follows function. 

For example, an internal plan to manage your business is not lengthy and formal. Instead, it links key elements together to make them easy for team members to access and work on. 

If you do have to present the plan, make the text business-appropriate.

Take the time and trouble to avoid typos and spelling errors. Use outlines and summaries to make the more important points easy to find. Make font sizes clean and large enough for older readers. Have somebody else read it before you finish. 

This makes it professional and shows respect for the reader and the business situation. It should also be presented in a format that lends itself to sharing, like a website or PDF document. 

Security is important too. Is the plan safely locked away from the prying eyes of outsiders? Most business plans live online or on local networks where team members can access and manage.  Some are online, and outsiders can see them. In both cases, use security safeguards. 

Ongoing planning process: it’s about the management it causes

U.S. president and military strategist Dwight D. Eisenhower is often quoted as saying: 

The plan is useless, but planning is essential .

The key point is that no clear criteria exists to tell you if a business plan is good or bad. 

What makes a business plan useful (good) is the management that comes out of it. The regular reviews and revisions that help you stay on track. That’s good planning , as opposed to just a good plan.

To start your own planning on the right foot, download our free business plan template . It provides the structure and guidance needed to create a good business plan and can be adapted to fit your meeds.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• 2. It’s realistic and can be implemented
• 3. It’s specific and measurable
• 9. It’s clear and simple
• Ongoing planning process: it’s about the management it causes

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5 Essential Steps To Evaluating Your Business Idea

Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest.

There's no doubt that America and other industrialized countries are small-business-friendly right now. In a year where elections around the world will play a key role in how economies continue to recover, there is at least one subject that most people agree on and that's small businesses. Politicians believe that small business is the key to economic growth and countries like the United States are passing legislation to make it easier for small businesses to thrive.

Robert Litan, economist from the Kauffman Foundation, the largest foundation in the world dedicated to the growth of small businesses, estimates that in order to add one percentage point to the United States' gross domestic product, or GDP, it would take 30 to 60 "home run" $1 billion companies.

Your business idea a home run idea? Being a successful small business owner doesn't require your company to be a $1 billion company, but entrepreneurs like to think big. National Federation of Independent Business Education Foundation (NFIB) estimates that only 40% of all small businesses are profitable and another 30% merely break even. These statistics prove that even with all of the incentives, it's difficult to turn your business in to one of those home run companies. Experts agree that you can improve your odds of success with careful preparation.

Identify the Need

What is the mission of your business? What is the need in the marketplace that you're filling and is it something that will appeal to a large portion of the population? Have you ever received a survey from a company asking you what you think of a product and if you would be likely to purchase the product and for how much?

This is the first step in market analysis . Don't just conduct an Internet survey. Go to a mall or other place where there are a lot of people and ask them to evaluate your idea.

How is your business different than others in the marketplace ? If you have competitors, what will make somebody come to your business instead of your competitor? Successful businesses have a USP or unique selling point that is used as the cornerstone of the business. The more you blend in the more you directly compete with others.

Avoiding the head to head competition, especially for a brand new business, is well advised.

Specifically, how big is your market? Does it include both males and females and people of all races and religions? How fast is the market growing or contracting?

If you design a product or service that only appeals to a small niche market, it will be difficult to gain enough market share to sustain a profitable business. It will also take a significant amount of advertising funds to find the people that comprise the niche market.

Based on your market analysis, how much of a market share do your competitors currently hold? What is left over for you or what is your strategy for taking share from them? Your business may have broad market appeal, but if the market is already saturated, the battle to gain customers may be too expensive.

Startups trying to manufacture new automobiles have found it exceedingly difficult to take market share from existing car companies. Evaluate whether that's a battle worth fighting and if you have the funds to fight it.

How much will it take to open your business? If you have family obligations, you'll probably have to pay yourself, adding additional costs to your budget. How will you get the money? Recently, Washington passed the JOBS Act, a law that made crowdfunding legal . This may provide a way for small businesses to gain funding without the use of banks or venture capital, but even with all of the recent legislation, businesses are finding it difficult to secure funding.

As an entrepreneur, your dream is likely centered around being one of those $1 billion or more businesses, but remember that many businesses fail and that's largely due to poor planning. Before investing a large amount of money in your business idea, create a plan and make sure that your idea is something that customers would be excited about purchasing. There are plenty of great opportunities waiting for a small business owner who follows a business startup system.

Top 6 Reasons New Businesses Fail

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Business Plan Evaluation

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What is Business Plan Evaluation?

A business plan evaluation is a critical process that involves the assessment of a business plan to determine its feasibility, viability, and potential for success. This process is crucial for entrepreneurs, investors, and other stakeholders as it helps them make informed decisions about the business. The evaluation process involves analyzing various aspects of the business plan, including the business model, market analysis, financial projections, and management team.

The purpose of a business plan evaluation is to identify strengths and weaknesses in the plan, assess the feasibility of the business idea, evaluate the potential for profitability, and determine the likelihood of achieving the business objectives. The evaluation process also helps identify areas where improvements can be made to enhance the chances of success. This process is particularly important for solopreneurs who are solely responsible for the success or failure of their business.

Importance of Business Plan Evaluation

The evaluation of a business plan is an essential step in the business planning process. It provides an opportunity for the entrepreneur to critically examine their business idea and identify potential challenges and opportunities . The evaluation process also provides valuable insights that can help improve the business plan and increase the chances of success.

For investors, a business plan evaluation is a crucial tool for risk assessment. It allows them to assess the viability of the business idea, the competence of the management team, and the potential for return on investment. This information is vital in making investment decisions.

For Solopreneurs

For solopreneurs, the evaluation of a business plan is particularly important. As they are solely responsible for the success or failure of their business, it is crucial that they thoroughly evaluate their business plan to ensure that it is feasible, viable, and has the potential to be profitable.

The evaluation process can help solopreneurs identify potential challenges and opportunities, assess the feasibility of their business idea, and determine the likelihood of achieving their business objectives. This information can be invaluable in helping them make informed decisions about their business.

For Investors

Investors use the evaluation process to determine whether or not to invest in a business. They look at various aspects of the business plan, including the business model, market analysis, financial projections, and management team, to assess the potential for success. If the evaluation reveals that the business plan is solid and has a high potential for success, the investor may decide to invest in the business.

Components of a Business Plan Evaluation

A business plan evaluation involves the analysis of various components of the business plan. These components include the executive summary, business description, market analysis, organization and management, product line or service, marketing and sales, and financial projections.

Each of these components plays a crucial role in the overall success of the business, and therefore, they must be thoroughly evaluated to ensure that they are realistic, achievable, and aligned with the business objectives.

Executive Summary

The executive summary is the first section of a business plan and provides a brief overview of the business. It includes information about the business concept, the business model, the target market, the competitive advantage, and the financial projections. The executive summary is often the first thing that investors read, and therefore, it must be compelling and persuasive.

In the evaluation process, the executive summary is assessed to determine whether it clearly and concisely presents the business idea and the plan for achieving the business objectives. The evaluator also assesses whether the executive summary is compelling and persuasive enough to attract the attention of investors.

Business Description

The business description provides detailed information about the business. It includes information about the nature of the business, the industry, the business model, the products or services, and the target market. The business description also provides information about the business's competitive advantage and how it plans to achieve its objectives.

In the evaluation process, the business description is assessed to determine whether it provides a clear and comprehensive description of the business. The evaluator also assesses whether the business description clearly outlines the business's competitive advantage and how it plans to achieve its objectives.

Methods of Business Plan Evaluation

There are several methods that can be used to evaluate a business plan. These methods include the SWOT analysis, the feasibility analysis, the competitive analysis, and the financial analysis. Each of these methods provides a different perspective on the business plan and can provide valuable insights into the potential for success.

It's important to note that no single method can provide a complete evaluation of a business plan. Therefore, it's recommended to use a combination of these methods to get a comprehensive understanding of the business plan.

SWOT Analysis

SWOT analysis is a strategic planning tool that is used to identify the strengths, weaknesses, opportunities, and threats related to a business. This method involves examining the internal and external factors that can affect the success of the business.

In the evaluation process, a SWOT analysis can provide valuable insights into the potential for success of the business. It can help identify the strengths and weaknesses of the business plan, as well as the opportunities and threats in the market.

Feasibility Analysis

A feasibility analysis is a process that is used to determine whether a business idea is viable. This method involves assessing the practicality of the business idea and whether it can be successfully implemented.

In the evaluation process, a feasibility analysis can provide valuable insights into the feasibility of the business plan. It can help determine whether the business idea is practical and whether it can be successfully implemented.

In conclusion, a business plan evaluation is a critical process that involves the assessment of a business plan to determine its feasibility, viability, and potential for success. This process is crucial for entrepreneurs, investors, and other stakeholders as it helps them make informed decisions about the business.

The evaluation process involves analyzing various aspects of the business plan, including the business model, market analysis, financial projections, and management team. The purpose of a business plan evaluation is to identify strengths and weaknesses in the plan, assess the feasibility of the business idea, evaluate the potential for profitability, and determine the likelihood of achieving the business objectives.

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How to Evaluate a Business Idea: Detailed Checklist

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What is a Business Idea?

What is business idea validation.

• Too Big to Fail - Why evaluation of business ideas matters

How to Evaluate a Business Idea

Final thoughts.

Do you have an idea for a new business or app? The first thing to learn is how to evaluate a business idea.

See, many entrepreneurs don’t objectively evaluate new concepts before plunging in. While many ideas seem original and plausible, spectacular success is rare. According to the  National Federation of Independent Business Education Foundation  (NFIB), just 30% of all small businesses are profitable, while 30% only manage to break even.

Launching a small business is a complex process that must combine enthusiasm with meticulous research. This should not discourage you, though. With careful preparation, you can ensure your concept is a home run.

We have a few suggestions to get you started.  Just follow this business plan evaluation checklist:

Before discussing how to evaluate business ideas, let’s define what exactly a business idea is and what is not:

“It’s a thought or suggestion about which product or service to offer customers for financial gain.”

Businesses are engaged in generating profits—by earning more money than they spend. So, the idea must be profitable and easy to monetize.

How do people arrive at new business ideas? Successful ideas are brand-new concepts or better versions of existing ones.  The first question is:

“Business idea validation is determining that a proposed idea meets the minimum criteria required to maintain a thriving venture.”

Before undertaking a business idea assessment, it’s critical to recognize the characteristics of a great idea.

Here are some essential qualities to use when you evaluate the business idea:

• Usefulness (Value proposition):  The new product must strive to address a known or unknown need. Some needs exist naturally, while others are artificially created —where a service creates a need and offers itself as a solution. Needs may be simple or complex. They keep evolving, necessitating the launch of new businesses.
• Explainable (Easy to convey):  People should have an easy time understanding the business idea. The litmus test to determine if the concept is explainable is if it’s possible to communicate the value proposition in a few sentences. Henry Ford famously said that people wished for faster horses — but it was easy to explain how a car was different.
• Simplicity:  Awesome ideas produce simple products and services that users can start interacting with without requisite know-how. So, when developing an app idea, ensure it’s pretty easy to use. For instance, Apple incorporates simplicity into its products.
• Scalable:  Highly successful businesses can quickly scale with demand and take advantage of economies of scale. A perfect scenario is where the costs to serve additional customers are almost negligible, for instance, building an app like Zoom where overheads don’t significantly increase if the company adds 1 million new users.
• Habitual (Users can’t live without it):  Users should find the product or service more valuable, meaningful, and a must-have as they interact with it. For instance, Netflix requires users to set their preferences and personalizes the content to their tastes. It’s also integrated into their daily life and comes pre-installed on most devices. Even if a better company than Netflix popped up, many users would still find it hard to switch. Business owners should always ask: “Is my business idea so good that people can’t live without it?”

This criterion provides a basis for business idea evaluation. An idea should be useful, simple, explainable, scalable, and habitual.

Too Big to Fail – Why evaluation of business ideas matters

The startup world has countless examples of companies that sounded good on paper but failed tremendously because the idea was not properly validated.

Pets.com  is a famous cautionary tale. The company was launched in 1998 as an online store offering pet products. It had an attractive website and provided expert advice from veterinarians. The startup raised hundreds of millions in venture funding before going public in 2000.

Still, the basic foundation was shaky. Pets.com lacked a unique business model, as it offered products stocked by other e-retailers and offline stores. There was no clear positioning strategy but a heavy reliance on low prices to out-compete other retailers.

Additionally, the company excessively relied on advertising, which benefited stores with similar domain names, such as petsmart.com.

Pets.com sold its merchandise below cost, hoping its dominance would eventually result in future profits. Eventually, the high shipping costs, weak value proposition, and low customer demand brought down the company.

Pets.com’s startup idea was explainable and straightforward. But it failed on all other fronts. For instance, it lacked a unique proposition and couldn’t provide a better level of service than brick-and-mortar stores. Customers still had to wait several days to receive their pet food and pay high shipping fees.

What are the ways to evaluate a business idea?

Evaluating a business opportunity in project management simply entails determining if an idea is practical and profitable, for instance, identifying the main problem the business is attempting to solve and establishing that they are people willing to have the issue resolved.

Use this checklist to cover major steps required when evaluating business ideas:

1. Identify the Problem You’re Solving

The first step in the idea evaluation checklist entails  determining the actual problem the business seeks to solve . That’s because companies don’t merely offer products or services; they solve problems.

Amazon’s success has been predicated on offering the best selection of items at the best prices and with convenient delivery options —such as same-day delivery.

Follow this checklist to identify a problem:

• List problems that your business can solve for its customers;
• Determine how consumers are dealing with the problem now;
• Assess if your product is identical to an existing one (It solves the same problem). If it is, how can you tweak it to make it different?

2. Analyze Market Demand

Market demand measures the number of consumers willing to acquire your product during a given time. It’s not constant but fluctuates — based on market conditions and external factors.  For instance , demand is affected by product availability, pricing, disposable income, and the presence of alternative products from competitors.

It’s crucial to assess the level of market demand when evaluating a business idea. If you launch a product with no market space, the endeavor is doomed altogether. Failing to satisfy the available demand is another pitfall to watch out for.

Use this evaluation tool (checklist) to analyze market demand:

• Pinpoint the overall target market;
• Divide into segments for easier analysis;
• Determine the main drivers for demand in each segment and think about their future impact;
• Identify the current market cycle (emerging, plateau, or declining);
• Test the waters by developing a few products and distributing them to actual customers, or publish an MVP to test an app idea.

Your idea may be unique (which is rare), or you may improve on what is already available. Whatever the case, the concept must stem from actual market demand.

Demand vs. Market Fit

A related concept to focus on when figuring out how to evaluate your business idea is  ‘market fit’ . It is achieved when the demand for your product or service is strong, and you are in a good market that your idea can satisfy.

The fit is quantifiable, and there are multiple approaches to the calculation. For example, you may begin with the  total addressable market (TAM)  — the audience you can target. Take the estimated number of customers in the market. Next, multiply it by the percentage of those who do not have access to the product in question.

Business owners can increase the market fit by identifying the right market and building products that customers want to use.

Use this checklist to promote better market fit during idea validation:

• Go with the most profitable segments with the least competition;
• Identify at least five underserved customer needs;
• Obtain feedback from the underserved customers;
• Create a sample product or undertake MVP development for a promising app idea;
• Test the sample with the target market, looking out for indications of solid and consistent demand.

3. Get to Know Your Customers

Once the market gap is evident, zoom in on the people likely to buy your product or service.

Where to find customers

This stage is crucial when starting a business, as it determines the efficiency of your subsequent marketing efforts.

Now, the preliminary market research in steps one and two should provide an understanding of the following questions as you evaluate your idea:

• Who are they, and what do they want?
• What problem do they have that you can solve?
• What goals can your product help them achieve?

The next stage in the business idea evaluation checklist is to gain a precise understanding of the customers.

And it’s important to know where to find them.

Follow this industry analysis checklist to find customers:

• Check users who follow and comment on your competitors’ posts on social media channels;
• Use business review sites for real-time insights into past customers who have engaged with a competitor;
• Join online communities that people using your product would join;
• Connect with customers in-person. For instance, attend wedding fairs if your business plans to offer bridal services;
• Refine the target market selection using geographic, demographic, and psychographic characteristics.

Try to understand their specific needs

After finding customers, you need to understand their specific needs and ways to turn them into paying customers.

Follow this checklist to understand specific customer needs:

• Explain your product or offer a sample, and ask if it met their needs;
• In a survey, inquire whether they buy products similar to yours, how often, and how much they pay? List brands they prefer and why;
• Prepare a list of the biggest customer grievances from past negative ratings on competitor pages;
• List must-have features customers look for in a similar product or service;
• Consider any emerging trends in your industry, for instance, a shift towards green and eco-friendly products.

*Keep the survey brief:  10 questions are the limit, so you do not bore anyone. And use tech tools. You don’t have to go door to door with surveys. Today, data collection is lightning-fast. You can easily collect the opinions of prospective customers online.

Create basic questionnaires for free using software like Typeform or Google Forms. Share these via social media.

If your audience is not particularly tech-savvy, use old-school ways if it makes sense. Why not print off the survey and hit the streets? It all depends on your target group.

Responses provide a picture of your potential customers. It will then be necessary to assess your idea from that perspective.

4. Create a Customer Profile

Identifying the target market is a crucial part of figuring out how to evaluate a new business idea. But it doesn’t end there!

After figuring out the demographics to target and engaging users with surveys, go one step further and create a profile of your ideal customer. It should be based on data from different sources: your personal observations, feedback from mentors, colleagues, and test users. Thorough research can lead to a more accurate profile.

Follow this checklist to create the customer profile:

• Create a customer journey map;
• Find out the target customer’s location, age, gender, income, occupation, education, ethnicity, marital status, number of children, spending habits, etc.
• Use the information to create one unified and fictionalized profile of the customer;
• Determine the audience size, and if it’s necessary to create more than one profile to cater to different archetypes;
• Use actual data to confirm the validity of assumptions in the customer profile.

5. Find your Competitors

Competition is not harmful unless the market is saturated. So, when you figure out how to evaluate the business opportunity and idea the major things to consider are who are the competitors and how to tweak an idea to make it competitive.

Where to find competitors

Whichever niche you choose, you will always have competitors — direct or indirect.

For instance, if you have a hot dog stand, your direct competitors are other hot dog stand owners in the area. At the same time, there are indirect rivals — for instance, local taco stands, burger joints, or pizzerias. These competitors meet the same need with a different product or service.

Use this checklist to find your competitors:

• Search for an industry keyword and evaluate the first page results on Google or Bing;
• Use Google maps to find similar businesses, targeting local customers in your region;
• Search for competitors on social media;
• Ask customers about other businesses or brands they have worked with before;
• Use local business directories;
• Check for ads on print media and online.

Perform competitive analysis to see if the idea is competitive

Suppose you own an old-school pizzeria with in-store dining only. Customers have to visit your eatery to buy from you. You may be beaten by a nearby taco place that also offers quick delivery through a sleek app.

The critical question is: Why should hungry customers prefer your hot dogs over other options? Is it possible to compete at all, or should you refocus on a different audience (for instance, in another district)?

Follow this checklist to assess if your idea is still competitive

• Pre-sell the idea to customers who have already engaged with competing products;
• Consider what the product lacks in light of current market offerings;
• Distinguish market leaders by using tools such as Spyfu to analyze web traffic, or check for the number of app downloads, reviews, etc.
• Pay close attention to 3-4 star ratings from dissatisfied users and find ways to make your product different.

Tweak your idea to increase its viability

Be flexible and consider tweaking the idea to make it more competitive. For instance, how about hot dogs with gluten-free buns and organic condiments? A vegan pizzeria could also be competitive if it is the only one in town.

Consider ‘green’ food trucks that have been gaining traction in the US. They run on compressed natural gas and solar power. Positive social impact can boost your bottom line, as can be seen from this bar graph.

Use this checklist to increase your idea’s viability

• Look at what rivals are doing or failing to do. Think of how best to meet the same consumer needs?
• Tweak the product using fact-based evidence to make the concept more competitive;
• Find other areas to compete such as price, logistics, or features.

6. Understand Your Talents and Limitations

One aspect of the business evaluation checklist that may not be quite apparent is the need to understand your talents and limitations.

Talents are simply innate abilities that you can positively use to give your business ideas a higher chance of survival.

You don’t have to be the smartest person in the world. Nick Grouf, a prominent venture capitalist, looks for  clarity of thought and intellectual integrity  — which he deems more important than the founder’s intelligence.

Limitations are things that can hold you back. For instance, many small business owners may lack the ability to admit mistakes and ask for help. Mistakes can cripple the business at its early stages:

Use this checklist to understand your talents and limitations:

• Identify things that you love doing;
• Evaluate previous successes;
• Track things that didn’t work out in past ventures;
• Obtain feedback about any weaknesses from trusted persons;
• Consider how you’ll leverage your strengths to properly execute the business idea;
• Make a note of any personal inconveniences that may impact the viability of the business.

7. Collect and Analyze Feedback

To make sure the idea is going to work, you need to let consumers see it. Tests do not always require time and money.

Follow this checklist to collect and analyze initial feedback:

• Create a free basic website for your enterprise to showcase the product;
• Share the website with people you know such as your friends, family, and colleagues — see what they think of the concept;
• Promote it on social media platforms and analyze feedback from there. This is the beginning of your social media strategy;
• Find out if people are interested in learning more about your company by sending inquiries, or leaving comments on social media;
• Consider giving out free samples or trials to customers in return for feedback.

If the potential is confirmed, you will already have a website to promote it through. Real customers may even find you through the primary website and reach out. That is when you know you are in business! A website is essential — it adds credibility to your brand from the get-go.

8. Financial Feasibility Assessment

Countless businesses have failed because they ran out of money or failed to turn a profit. In fact, many startups fail to carefully analyze if their monetization strategies are practical. A good example is  WeWork , which raised more than $13 billion, only for the business model to prove unsustainable and unprofitable. At some point, they were losing more than  $219,000 an hour .

Follow this checklist to analyze financial feasibility:

• Identify all startup expenses —from hiring to legal;
• Make a plan to bridge the revenue gap as profitability will not come overnight;
• Calculate ongoing expenses to keep the business up and running;
• Explore funding options to meet start-up and first-year expenses before attaining profitability ( Get Funding for an App Idea );
• Assess the business’s earning potential and how predictable the income is.

You may realize that feasibility is questionable in the current market conditions. If the risk is unjustifiable, search for something better. Financial analysis will prevent you from wasting time and money.

But if the audience is clear, competition is moderate, and the finances are stable, you can develop and implement a business plan.

9. Make Sure the Business Is Right for You

This is the last but crucial point in our business idea evaluation checklist.

Launching a company is not easy. It requires sacrifices like time with your family. Things will not always go according to plan. If you are passionate about the idea and determined to get the business off the ground, go for it!

Use this checklist to determine if the business is right for you:

• Determine if you’re the right person to start this business and why?
• Check if you have the right skills and how to bridge the skills gap;
• Confirm that it’s something that you really want to do and that you’ll have the resilience to surmount the difficulties.

These are the key stages in business idea evaluation. You have decided to create an unprecedented product or make the existing one better. You have analyzed the market and identified your niche. It is clear who your future customers will be and how to ignite their interest. Financial success is attainable.

This means your business idea is indeed feasible, so start working! Use digital marketing to spread the word about your product. Invest in an attractive website. Attract Group team will help you do business analysis and expand your online presence. 

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How to Write a Business Plan in 9 Steps (+ Template and Examples)

Every successful business has one thing in common, a good and well-executed business plan. A business plan is more than a document, it is a complete guide that outlines the goals your business wants to achieve, including its financial goals . It helps you analyze results, make strategic decisions, show your business operations and growth.

If you want to start a business or already have one and need to pitch it to investors for funding, writing a good business plan improves your chances of attracting financiers. As a startup, if you want to secure loans from financial institutions, part of the requirements involve submitting your business plan.

Writing a business plan does not have to be a complicated or time-consuming process. In this article, you will learn the step-by-step process for writing a successful business plan.

You will also learn what you need a business plan for, tips and strategies for writing a convincing business plan, business plan examples and templates that will save you tons of time, and the alternatives to the traditional business plan.

Let’s get started.

What Do You Need A Business Plan For?

Businesses create business plans for different purposes such as to secure funds, monitor business growth, measure your marketing strategies, and measure your business success.

1. Secure Funds

One of the primary reasons for writing a business plan is to secure funds, either from financial institutions/agencies or investors.

For you to effectively acquire funds, your business plan must contain the key elements of your business plan . For example, your business plan should include your growth plans, goals you want to achieve, and milestones you have recorded.

A business plan can also attract new business partners that are willing to contribute financially and intellectually. If you are writing a business plan to a bank, your project must show your traction , that is, the proof that you can pay back any loan borrowed.

Also, if you are writing to an investor, your plan must contain evidence that you can effectively utilize the funds you want them to invest in your business. Here, you are using your business plan to persuade a group or an individual that your business is a source of a good investment.

2. Monitor Business Growth

A business plan can help you track cash flows in your business. It steers your business to greater heights. A business plan capable of tracking business growth should contain:

• The business goals
• Methods to achieve the goals
• Time-frame for attaining those goals

A good business plan should guide you through every step in achieving your goals. It can also track the allocation of assets to every aspect of the business. You can tell when you are spending more than you should on a project.

You can compare a business plan to a written GPS. It helps you manage your business and hints at the right time to expand your business.

3. Measure Business Success

A business plan can help you measure your business success rate. Some small-scale businesses are thriving better than more prominent companies because of their track record of success.

Right from the onset of your business operation, set goals and work towards them. Write a plan to guide you through your procedures. Use your plan to measure how much you have achieved and how much is left to attain.

You can also weigh your success by monitoring the position of your brand relative to competitors. On the other hand, a business plan can also show you why you have not achieved a goal. It can tell if you have elapsed the time frame you set to attain a goal.

4. Document Your Marketing Strategies

You can use a business plan to document your marketing plans. Every business should have an effective marketing plan.

Competition mandates every business owner to go the extraordinary mile to remain relevant in the market. Your business plan should contain your marketing strategies that work. You can measure the success rate of your marketing plans.

In your business plan, your marketing strategy must answer the questions:

• How do you want to reach your target audience?
• How do you plan to retain your customers?
• What is/are your pricing plans?
• What is your budget for marketing?

How to Write a Business Plan Step-by-Step

1. create your executive summary.

The executive summary is a snapshot of your business or a high-level overview of your business purposes and plans . Although the executive summary is the first section in your business plan, most people write it last. The length of the executive summary is not more than two pages.

Generally, there are nine sections in a business plan, the executive summary should condense essential ideas from the other eight sections.

A good executive summary should do the following:

• A Snapshot of Growth Potential. Briefly inform the reader about your company and why it will be successful)
• Contain your Mission Statement which explains what the main objective or focus of your business is.
• Product Description and Differentiation. Brief description of your products or services and why it is different from other solutions in the market.
• The Team. Basic information about your company’s leadership team and employees
• Business Concept. A solid description of what your business does.
• Target Market. The customers you plan to sell to.
• Marketing Strategy. Your plans on reaching and selling to your customers
• Current Financial State. Brief information about what revenue your business currently generates.
• Projected Financial State. Brief information about what you foresee your business revenue to be in the future.

The executive summary is the make-or-break section of your business plan. If your summary cannot in less than two pages cannot clearly describe how your business will solve a particular problem of your target audience and make a profit, your business plan is set on a faulty foundation.

Avoid using the executive summary to hype your business, instead, focus on helping the reader understand the what and how of your plan.

View the executive summary as an opportunity to introduce your vision for your company. You know your executive summary is powerful when it can answer these key questions:

• Who is your target audience?
• What sector or industry are you in?
• What are your products and services?
• What is the future of your industry?
• Is your company scaleable?
• Who are the owners and leaders of your company? What are their backgrounds and experience levels?
• What is the motivation for starting your company?
• What are the next steps?

Writing the executive summary last although it is the most important section of your business plan is an excellent idea. The reason why is because it is a high-level overview of your business plan. It is the section that determines whether potential investors and lenders will read further or not.

The executive summary can be a stand-alone document that covers everything in your business plan. It is not uncommon for investors to request only the executive summary when evaluating your business. If the information in the executive summary impresses them, they will ask for the complete business plan.

If you are writing your business plan for your planning purposes, you do not need to write the executive summary.

2. Add Your Company Overview

The company overview or description is the next section in your business plan after the executive summary. It describes what your business does.

Adding your company overview can be tricky especially when your business is still in the planning stages. Existing businesses can easily summarize their current operations but may encounter difficulties trying to explain what they plan to become.

Your company overview should contain the following:

• What products and services you will provide
• Geographical markets and locations your company have a presence
• What you need to run your business
• Who your target audience or customers are
• Who will service your customers
• Your company’s purpose, mission, and vision
• Information about your company’s founders
• Who the founders are
• Notable achievements of your company so far

When creating a company overview, you have to focus on three basics: identifying your industry, identifying your customer, and explaining the problem you solve.

If you are stuck when creating your company overview, try to answer some of these questions that pertain to you.

• Who are you targeting? (The answer is not everyone)
• What pain point does your product or service solve for your customers that they will be willing to spend money on resolving?
• How does your product or service overcome that pain point?
• Where is the location of your business?
• What products, equipment, and services do you need to run your business?
• How is your company’s product or service different from your competition in the eyes of your customers?
• How many employees do you need and what skills do you require them to have?

After answering some or all of these questions, you will get more than enough information you need to write your company overview or description section. When writing this section, describe what your company does for your customers.

The company description or overview section contains three elements: mission statement, history, and objectives.

• Mission Statement

The mission statement refers to the reason why your business or company is existing. It goes beyond what you do or sell, it is about the ‘why’. A good mission statement should be emotional and inspirational.

Your mission statement should follow the KISS rule (Keep It Simple, Stupid). For example, Shopify’s mission statement is “Make commerce better for everyone.”

When describing your company’s history, make it simple and avoid the temptation of tying it to a defensive narrative. Write it in the manner you would a profile. Your company’s history should include the following information:

• Founding Date
• Major Milestones
• Location(s)
• Flagship Products or Services
• Number of Employees
• Executive Leadership Roles

When you fill in this information, you use it to write one or two paragraphs about your company’s history.

Business Objectives

Your business objective must be SMART (specific, measurable, achievable, realistic, and time-bound.) Failure to clearly identify your business objectives does not inspire confidence and makes it hard for your team members to work towards a common purpose.

3. Perform Market and Competitive Analyses to Proof a Big Enough Business Opportunity

The third step in writing a business plan is the market and competitive analysis section. Every business, no matter the size, needs to perform comprehensive market and competitive analyses before it enters into a market.

Performing market and competitive analyses are critical for the success of your business. It helps you avoid entering the right market with the wrong product, or vice versa. Anyone reading your business plans, especially financiers and financial institutions will want to see proof that there is a big enough business opportunity you are targeting.

This section is where you describe the market and industry you want to operate in and show the big opportunities in the market that your business can leverage to make a profit. If you noticed any unique trends when doing your research, show them in this section.

Market analysis alone is not enough, you have to add competitive analysis to strengthen this section. There are already businesses in the industry or market, how do you plan to take a share of the market from them?

You have to clearly illustrate the competitive landscape in your business plan. Are there areas your competitors are doing well? Are there areas where they are not doing so well? Show it.

Make it clear in this section why you are moving into the industry and what weaknesses are present there that you plan to explain. How are your competitors going to react to your market entry? How do you plan to get customers? Do you plan on taking your competitors' competitors, tap into other sources for customers, or both?

Illustrate the competitive landscape as well. What are your competitors doing well and not so well?

Answering these questions and thoughts will aid your market and competitive analysis of the opportunities in your space. Depending on how sophisticated your industry is, or the expectations of your financiers, you may need to carry out a more comprehensive market and competitive analysis to prove that big business opportunity.

Instead of looking at the market and competitive analyses as one entity, separating them will make the research even more comprehensive.

Market Analysis

Market analysis, boarding speaking, refers to research a business carried out on its industry, market, and competitors. It helps businesses gain a good understanding of their target market and the outlook of their industry. Before starting a company, it is vital to carry out market research to find out if the market is viable.

The market analysis section is a key part of the business plan. It is the section where you identify who your best clients or customers are. You cannot omit this section, without it your business plan is incomplete.

A good market analysis will tell your readers how you fit into the existing market and what makes you stand out. This section requires in-depth research, it will probably be the most time-consuming part of the business plan to write.

• Market Research

To create a compelling market analysis that will win over investors and financial institutions, you have to carry out thorough market research . Your market research should be targeted at your primary target market for your products or services. Here is what you want to find out about your target market.

• Your target market’s needs or pain points
• The existing solutions for their pain points
• Geographic Location
• Demographics

The purpose of carrying out a marketing analysis is to get all the information you need to show that you have a solid and thorough understanding of your target audience.

Only after you have fully understood the people you plan to sell your products or services to, can you evaluate correctly if your target market will be interested in your products or services.

You can easily convince interested parties to invest in your business if you can show them you thoroughly understand the market and show them that there is a market for your products or services.

How to Quantify Your Target Market

One of the goals of your marketing research is to understand who your ideal customers are and their purchasing power. To quantify your target market, you have to determine the following:

• Your Potential Customers: They are the people you plan to target. For example, if you sell accounting software for small businesses , then anyone who runs an enterprise or large business is unlikely to be your customers. Also, individuals who do not have a business will most likely not be interested in your product.
• Total Households: If you are selling household products such as heating and air conditioning systems, determining the number of total households is more important than finding out the total population in the area you want to sell to. The logic is simple, people buy the product but it is the household that uses it.
• Median Income: You need to know the median income of your target market. If you target a market that cannot afford to buy your products and services, your business will not last long.
• Income by Demographics: If your potential customers belong to a certain age group or gender, determining income levels by demographics is necessary. For example, if you sell men's clothes, your target audience is men.

What Does a Good Market Analysis Entail?

Your business does not exist on its own, it can only flourish within an industry and alongside competitors. Market analysis takes into consideration your industry, target market, and competitors. Understanding these three entities will drastically improve your company’s chances of success.

You can view your market analysis as an examination of the market you want to break into and an education on the emerging trends and themes in that market. Good market analyses include the following:

• Industry Description. You find out about the history of your industry, the current and future market size, and who the largest players/companies are in your industry.
• Overview of Target Market. You research your target market and its characteristics. Who are you targeting? Note, it cannot be everyone, it has to be a specific group. You also have to find out all information possible about your customers that can help you understand how and why they make buying decisions.
• Size of Target Market: You need to know the size of your target market, how frequently they buy, and the expected quantity they buy so you do not risk overproducing and having lots of bad inventory. Researching the size of your target market will help you determine if it is big enough for sustained business or not.
• Growth Potential: Before picking a target market, you want to be sure there are lots of potential for future growth. You want to avoid going for an industry that is declining slowly or rapidly with almost zero growth potential.
• Market Share Potential: Does your business stand a good chance of taking a good share of the market?
• Market Pricing and Promotional Strategies: Your market analysis should give you an idea of the price point you can expect to charge for your products and services. Researching your target market will also give you ideas of pricing strategies you can implement to break into the market or to enjoy maximum profits.
• Potential Barriers to Entry: One of the biggest benefits of conducting market analysis is that it shows you every potential barrier to entry your business will likely encounter. It is a good idea to discuss potential barriers to entry such as changing technology. It informs readers of your business plan that you understand the market.
• Research on Competitors: You need to know the strengths and weaknesses of your competitors and how you can exploit them for the benefit of your business. Find patterns and trends among your competitors that make them successful, discover what works and what doesn’t, and see what you can do better.

The market analysis section is not just for talking about your target market, industry, and competitors. You also have to explain how your company can fill the hole you have identified in the market.

Here are some questions you can answer that can help you position your product or service in a positive light to your readers.

• Is your product or service of superior quality?
• What additional features do you offer that your competitors do not offer?
• Are you targeting a ‘new’ market?

Basically, your market analysis should include an analysis of what already exists in the market and an explanation of how your company fits into the market.

Competitive Analysis

In the competitive analysis section, y ou have to understand who your direct and indirect competitions are, and how successful they are in the marketplace. It is the section where you assess the strengths and weaknesses of your competitors, the advantage(s) they possess in the market and show the unique features or qualities that make you different from your competitors.

Many businesses do market analysis and competitive analysis together. However, to fully understand what the competitive analysis entails, it is essential to separate it from the market analysis.

Competitive analysis for your business can also include analysis on how to overcome barriers to entry in your target market.

The primary goal of conducting a competitive analysis is to distinguish your business from your competitors. A strong competitive analysis is essential if you want to convince potential funding sources to invest in your business. You have to show potential investors and lenders that your business has what it takes to compete in the marketplace successfully.

Competitive analysis will s how you what the strengths of your competition are and what they are doing to maintain that advantage.

When doing your competitive research, you first have to identify your competitor and then get all the information you can about them. The idea of spending time to identify your competitor and learn everything about them may seem daunting but it is well worth it.

Find answers to the following questions after you have identified who your competitors are.

• What are your successful competitors doing?
• Why is what they are doing working?
• Can your business do it better?
• What are the weaknesses of your successful competitors?
• What are they not doing well?
• Can your business turn its weaknesses into strengths?
• How good is your competitors’ customer service?
• Where do your competitors invest in advertising?
• What sales and pricing strategies are they using?
• What marketing strategies are they using?
• What kind of press coverage do they get?
• What are their customers saying about your competitors (both the positive and negative)?

If your competitors have a website, it is a good idea to visit their websites for more competitors’ research. Check their “About Us” page for more information.

If you are presenting your business plan to investors, you need to clearly distinguish yourself from your competitors. Investors can easily tell when you have not properly researched your competitors.

Take time to think about what unique qualities or features set you apart from your competitors. If you do not have any direct competition offering your product to the market, it does not mean you leave out the competitor analysis section blank. Instead research on other companies that are providing a similar product, or whose product is solving the problem your product solves.

The next step is to create a table listing the top competitors you want to include in your business plan. Ensure you list your business as the last and on the right. What you just created is known as the competitor analysis table.

Direct vs Indirect Competition

You cannot know if your product or service will be a fit for your target market if you have not understood your business and the competitive landscape.

There is no market you want to target where you will not encounter competition, even if your product is innovative. Including competitive analysis in your business plan is essential.

If you are entering an established market, you need to explain how you plan to differentiate your products from the available options in the market. Also, include a list of few companies that you view as your direct competitors The competition you face in an established market is your direct competition.

In situations where you are entering a market with no direct competition, it does not mean there is no competition there. Consider your indirect competition that offers substitutes for the products or services you offer.

For example, if you sell an innovative SaaS product, let us say a project management software , a company offering time management software is your indirect competition.

There is an easy way to find out who your indirect competitors are in the absence of no direct competitors. You simply have to research how your potential customers are solving the problems that your product or service seeks to solve. That is your direct competition.

Factors that Differentiate Your Business from the Competition

There are three main factors that any business can use to differentiate itself from its competition. They are cost leadership, product differentiation, and market segmentation.

1. Cost Leadership

A strategy you can impose to maximize your profits and gain an edge over your competitors. It involves offering lower prices than what the majority of your competitors are offering.

A common practice among businesses looking to enter into a market where there are dominant players is to use free trials or pricing to attract as many customers as possible to their offer.

2. Product Differentiation

Your product or service should have a unique selling proposition (USP) that your competitors do not have or do not stress in their marketing.

Part of the marketing strategy should involve making your products unique and different from your competitors. It does not have to be different from your competitors, it can be the addition to a feature or benefit that your competitors do not currently have.

3. Market Segmentation

As a new business seeking to break into an industry, you will gain more success from focusing on a specific niche or target market, and not the whole industry.

If your competitors are focused on a general need or target market, you can differentiate yourself from them by having a small and hyper-targeted audience. For example, if your competitors are selling men’s clothes in their online stores , you can sell hoodies for men.

4. Define Your Business and Management Structure

The next step in your business plan is your business and management structure. It is the section where you describe the legal structure of your business and the team running it.

Your business is only as good as the management team that runs it, while the management team can only strive when there is a proper business and management structure in place.

If your company is a sole proprietor or a limited liability company (LLC), a general or limited partnership, or a C or an S corporation, state it clearly in this section.

Use an organizational chart to show the management structure in your business. Clearly show who is in charge of what area in your company. It is where you show how each key manager or team leader’s unique experience can contribute immensely to the success of your company. You can also opt to add the resumes and CVs of the key players in your company.

The business and management structure section should show who the owner is, and other owners of the businesses (if the business has other owners). For businesses or companies with multiple owners, include the percent ownership of the various owners and clearly show the extent of each others’ involvement in the company.

Investors want to know who is behind the company and the team running it to determine if it has the right management to achieve its set goals.

Management Team

The management team section is where you show that you have the right team in place to successfully execute the business operations and ideas. Take time to create the management structure for your business. Think about all the important roles and responsibilities that you need managers for to grow your business.

Include brief bios of each key team member and ensure you highlight only the relevant information that is needed. If your team members have background industry experience or have held top positions for other companies and achieved success while filling that role, highlight it in this section.

A common mistake that many startups make is assigning C-level titles such as (CMO and CEO) to everyone on their team. It is unrealistic for a small business to have those titles. While it may look good on paper for the ego of your team members, it can prevent investors from investing in your business.

Instead of building an unrealistic management structure that does not fit your business reality, it is best to allow business titles to grow as the business grows. Starting everyone at the top leaves no room for future change or growth, which is bad for productivity.

Your management team does not have to be complete before you start writing your business plan. You can have a complete business plan even when there are managerial positions that are empty and need filling.

If you have management gaps in your team, simply show the gaps and indicate you are searching for the right candidates for the role(s). Investors do not expect you to have a full management team when you are just starting your business.

Key Questions to Answer When Structuring Your Management Team

• Who are the key leaders?
• What experiences, skills, and educational backgrounds do you expect your key leaders to have?
• Do your key leaders have industry experience?
• What positions will they fill and what duties will they perform in those positions?
• What level of authority do the key leaders have and what are their responsibilities?
• What is the salary for the various management positions that will attract the ideal candidates?

Additional Tips for Writing the Management Structure Section

1. Avoid Adding ‘Ghost’ Names to Your Management Team

There is always that temptation to include a ‘ghost’ name to your management team to attract and influence investors to invest in your business. Although the presence of these celebrity management team members may attract the attention of investors, it can cause your business to lose any credibility if you get found out.

Seasoned investors will investigate further the members of your management team before committing fully to your business If they find out that the celebrity name used does not play any actual role in your business, they will not invest and may write you off as dishonest.

2. Focus on Credentials But Pay Extra Attention to the Roles

Investors want to know the experience that your key team members have to determine if they can successfully reach the company’s growth and financial goals.

While it is an excellent boost for your key management team to have the right credentials, you also want to pay extra attention to the roles they will play in your company.

Organizational Chart

Adding an organizational chart in this section of your business plan is not necessary, you can do it in your business plan’s appendix.

If you are exploring funding options, it is not uncommon to get asked for your organizational chart. The function of an organizational chart goes beyond raising money, you can also use it as a useful planning tool for your business.

An organizational chart can help you identify how best to structure your management team for maximum productivity and point you towards key roles you need to fill in the future.

You can use the organizational chart to show your company’s internal management structure such as the roles and responsibilities of your management team, and relationships that exist between them.

5. Describe Your Product and Service Offering

In your business plan, you have to describe what you sell or the service you plan to offer. It is the next step after defining your business and management structure. The products and services section is where you sell the benefits of your business.

Here you have to explain how your product or service will benefit your customers and describe your product lifecycle. It is also the section where you write down your plans for intellectual property like patent filings and copyrighting.

The research and development that you are undertaking for your product or service need to be explained in detail in this section. However, do not get too technical, sell the general idea and its benefits.

If you have any diagrams or intricate designs of your product or service, do not include them in the products and services section. Instead, leave them for the addendum page. Also, if you are leaving out diagrams or designs for the addendum, ensure you add this phrase “For more detail, visit the addendum Page #.”

Your product and service section in your business plan should include the following:

• A detailed explanation that clearly shows how your product or service works.
• The pricing model for your product or service.
• Your business’ sales and distribution strategy.
• The ideal customers that want your product or service.
• The benefits of your products and services.
• Reason(s) why your product or service is a better alternative to what your competitors are currently offering in the market.
• Plans for filling the orders you receive
• If you have current or pending patents, copyrights, and trademarks for your product or service, you can also discuss them in this section.

What to Focus On When Describing the Benefits, Lifecycle, and Production Process of Your Products or Services

In the products and services section, you have to distill the benefits, lifecycle, and production process of your products and services.

When describing the benefits of your products or services, here are some key factors to focus on.

• Unique features
• Translating the unique features into benefits
• The emotional, psychological, and practical payoffs to attract customers
• Intellectual property rights or any patents

When describing the product life cycle of your products or services, here are some key factors to focus on.

• Upsells, cross-sells, and down-sells
• Time between purchases
• Plans for research and development.

When describing the production process for your products or services, you need to think about the following:

• The creation of new or existing products and services.
• The sources for the raw materials or components you need for production.
• Assembling the products
• Maintaining quality control
• Supply-chain logistics (receiving the raw materials and delivering the finished products)
• The day-to-day management of the production processes, bookkeeping, and inventory.

Tips for Writing the Products or Services Section of Your Business Plan

1. Avoid Technical Descriptions and Industry Buzzwords

The products and services section of your business plan should clearly describe the products and services that your company provides. However, it is not a section to include technical jargons that anyone outside your industry will not understand.

A good practice is to remove highly detailed or technical descriptions in favor of simple terms. Industry buzzwords are not necessary, if there are simpler terms you can use, then use them. If you plan to use your business plan to source funds, making the product or service section so technical will do you no favors.

2. Describe How Your Products or Services Differ from Your Competitors

When potential investors look at your business plan, they want to know how the products and services you are offering differ from that of your competition. Differentiating your products or services from your competition in a way that makes your solution more attractive is critical.

If you are going the innovative path and there is no market currently for your product or service, you need to describe in this section why the market needs your product or service.

For example, overnight delivery was a niche business that only a few companies were participating in. Federal Express (FedEx) had to show in its business plan that there was a large opportunity for that service and they justified why the market needed that service.

3. Long or Short Products or Services Section

Should your products or services section be short? Does the long products or services section attract more investors?

There are no straightforward answers to these questions. Whether your products or services section should be long or relatively short depends on the nature of your business.

If your business is product-focused, then automatically you need to use more space to describe the details of your products. However, if the product your business sells is a commodity item that relies on competitive pricing or other pricing strategies, you do not have to use up so much space to provide significant details about the product.

Likewise, if you are selling a commodity that is available in numerous outlets, then you do not have to spend time on writing a long products or services section.

The key to the success of your business is most likely the effectiveness of your marketing strategies compared to your competitors. Use more space to address that section.

If you are creating a new product or service that the market does not know about, your products or services section can be lengthy. The reason why is because you need to explain everything about the product or service such as the nature of the product, its use case, and values.

A short products or services section for an innovative product or service will not give the readers enough information to properly evaluate your business.

4. Describe Your Relationships with Vendors or Suppliers

Your business will rely on vendors or suppliers to supply raw materials or the components needed to make your products. In your products and services section, describe your relationships with your vendors and suppliers fully.

Avoid the mistake of relying on only one supplier or vendor. If that supplier or vendor fails to supply or goes out of business, you can easily face supply problems and struggle to meet your demands. Plan to set up multiple vendor or supplier relationships for better business stability.

5. Your Primary Goal Is to Convince Your Readers

The primary goal of your business plan is to convince your readers that your business is viable and to create a guide for your business to follow. It applies to the products and services section.

When drafting this section, think like the reader. See your reader as someone who has no idea about your products and services. You are using the products and services section to provide the needed information to help your reader understand your products and services. As a result, you have to be clear and to the point.

While you want to educate your readers about your products or services, you also do not want to bore them with lots of technical details. Show your products and services and not your fancy choice of words.

Your products and services section should provide the answer to the “what” question for your business. You and your management team may run the business, but it is your products and services that are the lifeblood of the business.

Key Questions to Answer When Writing your Products and Services Section

Answering these questions can help you write your products and services section quickly and in a way that will appeal to your readers.

• Are your products existing on the market or are they still in the development stage?
• What is your timeline for adding new products and services to the market?
• What are the positives that make your products and services different from your competitors?
• Do your products and services have any competitive advantage that your competitors’ products and services do not currently have?
• Do your products or services have any competitive disadvantages that you need to overcome to compete with your competitors? If your answer is yes, state how you plan to overcome them,
• How much does it cost to produce your products or services? How much do you plan to sell it for?
• What is the price for your products and services compared to your competitors? Is pricing an issue?
• What are your operating costs and will it be low enough for you to compete with your competitors and still take home a reasonable profit margin?
• What is your plan for acquiring your products? Are you involved in the production of your products or services?
• Are you the manufacturer and produce all the components you need to create your products? Do you assemble your products by using components supplied by other manufacturers? Do you purchase your products directly from suppliers or wholesalers?
• Do you have a steady supply of products that you need to start your business? (If your business is yet to kick-off)
• How do you plan to distribute your products or services to the market?

You can also hint at the marketing or promotion plans you have for your products or services such as how you plan to build awareness or retain customers. The next section is where you can go fully into details about your business’s marketing and sales plan.

6. Show and Explain Your Marketing and Sales Plan

Providing great products and services is wonderful, but it means nothing if you do not have a marketing and sales plan to inform your customers about them. Your marketing and sales plan is critical to the success of your business.

The sales and marketing section is where you show and offer a detailed explanation of your marketing and sales plan and how you plan to execute it. It covers your pricing plan, proposed advertising and promotion activities, activities and partnerships you need to make your business a success, and the benefits of your products and services.

There are several ways you can approach your marketing and sales strategy. Ideally, your marketing and sales strategy has to fit the unique needs of your business.

In this section, you describe how the plans your business has for attracting and retaining customers, and the exact process for making a sale happen. It is essential to thoroughly describe your complete marketing and sales plans because you are still going to reference this section when you are making financial projections for your business.

Outline Your Business’ Unique Selling Proposition (USP)

The sales and marketing section is where you outline your business’s unique selling proposition (USP). When you are developing your unique selling proposition, think about the strongest reasons why people should buy from you over your competition. That reason(s) is most likely a good fit to serve as your unique selling proposition (USP).

Target Market and Target Audience

Plans on how to get your products or services to your target market and how to get your target audience to buy them go into this section. You also highlight the strengths of your business here, particularly what sets them apart from your competition.

Before you start writing your marketing and sales plan, you need to have properly defined your target audience and fleshed out your buyer persona. If you do not first understand the individual you are marketing to, your marketing and sales plan will lack any substance and easily fall.

Creating a Smart Marketing and Sales Plan

Marketing your products and services is an investment that requires you to spend money. Like any other investment, you have to generate a good return on investment (ROI) to justify using that marketing and sales plan. Good marketing and sales plans bring in high sales and profits to your company.

Avoid spending money on unproductive marketing channels. Do your research and find out the best marketing and sales plan that works best for your company.

Your marketing and sales plan can be broken into different parts: your positioning statement, pricing, promotion, packaging, advertising, public relations, content marketing, social media, and strategic alliances.

Your Positioning Statement

Your positioning statement is the first part of your marketing and sales plan. It refers to the way you present your company to your customers.

Are you the premium solution, the low-price solution, or are you the intermediary between the two extremes in the market? What do you offer that your competitors do not that can give you leverage in the market?

Before you start writing your positioning statement, you need to spend some time evaluating the current market conditions. Here are some questions that can help you to evaluate the market

• What are the unique features or benefits that you offer that your competitors lack?
• What are your customers’ primary needs and wants?
• Why should a customer choose you over your competition? How do you plan to differentiate yourself from the competition?
• How does your company’s solution compare with other solutions in the market?

After answering these questions, then you can start writing your positioning statement. Your positioning statement does not have to be in-depth or too long.

All you need to explain with your positioning statement are two focus areas. The first is the position of your company within the competitive landscape. The other focus area is the core value proposition that sets your company apart from other alternatives that your ideal customer might consider.

Here is a simple template you can use to develop a positioning statement.

For [description of target market] who [need of target market], [product or service] [how it meets the need]. Unlike [top competition], it [most essential distinguishing feature].

For example, let’s create the positioning statement for fictional accounting software and QuickBooks alternative , TBooks.

“For small business owners who need accounting services, TBooks is an accounting software that helps small businesses handle their small business bookkeeping basics quickly and easily. Unlike Wave, TBooks gives small businesses access to live sessions with top accountants.”

You can edit this positioning statement sample and fill it with your business details.

After writing your positioning statement, the next step is the pricing of your offerings. The overall positioning strategy you set in your positioning statement will often determine how you price your products or services.

Pricing is a powerful tool that sends a strong message to your customers. Failure to get your pricing strategy right can make or mar your business. If you are targeting a low-income audience, setting a premium price can result in low sales.

You can use pricing to communicate your positioning to your customers. For example, if you are offering a product at a premium price, you are sending a message to your customers that the product belongs to the premium category.

Basic Rules to Follow When Pricing Your Offering

Setting a price for your offering involves more than just putting a price tag on it. Deciding on the right pricing for your offering requires following some basic rules. They include covering your costs, primary and secondary profit center pricing, and matching the market rate.

• Covering Your Costs: The price you set for your products or service should be more than it costs you to produce and deliver them. Every business has the same goal, to make a profit. Depending on the strategy you want to use, there are exceptions to this rule. However, the vast majority of businesses follow this rule.
• Primary and Secondary Profit Center Pricing: When a company sets its price above the cost of production, it is making that product its primary profit center. A company can also decide not to make its initial price its primary profit center by selling below or at even with its production cost. It rather depends on the support product or even maintenance that is associated with the initial purchase to make its profit. The initial price thus became its secondary profit center.
• Matching the Market Rate: A good rule to follow when pricing your products or services is to match your pricing with consumer demand and expectations. If you price your products or services beyond the price your customer perceives as the ideal price range, you may end up with no customers. Pricing your products too low below what your customer perceives as the ideal price range may lead to them undervaluing your offering.

Pricing Strategy

Your pricing strategy influences the price of your offering. There are several pricing strategies available for you to choose from when examining the right pricing strategy for your business. They include cost-plus pricing, market-based pricing, value pricing, and more.

• Cost-plus Pricing: This strategy is one of the simplest and oldest pricing strategies. Here you consider the cost of producing a unit of your product and then add a profit to it to arrive at your market price. It is an effective pricing strategy for manufacturers because it helps them cover their initial costs. Another name for the cost-plus pricing strategy is the markup pricing strategy.
• Market-based Pricing: This pricing strategy analyses the market including competitors’ pricing and then sets a price based on what the market is expecting. With this pricing strategy, you can either set your price at the low-end or high-end of the market.
• Value Pricing: This pricing strategy involves setting a price based on the value you are providing to your customer. When adopting a value-based pricing strategy, you have to set a price that your customers are willing to pay. Service-based businesses such as small business insurance providers , luxury goods sellers, and the fashion industry use this pricing strategy.

After carefully sorting out your positioning statement and pricing, the next item to look at is your promotional strategy. Your promotional strategy explains how you plan on communicating with your customers and prospects.

As a business, you must measure all your costs, including the cost of your promotions. You also want to measure how much sales your promotions bring for your business to determine its usefulness. Promotional strategies or programs that do not lead to profit need to be removed.

There are different types of promotional strategies you can adopt for your business, they include advertising, public relations, and content marketing.

Advertising

Your business plan should include your advertising plan which can be found in the marketing and sales plan section. You need to include an overview of your advertising plans such as the areas you plan to spend money on to advertise your business and offers.

Ensure that you make it clear in this section if your business will be advertising online or using the more traditional offline media, or the combination of both online and offline media. You can also include the advertising medium you want to use to raise awareness about your business and offers.

Some common online advertising mediums you can use include social media ads, landing pages, sales pages, SEO, Pay-Per-Click, emails, Google Ads, and others. Some common traditional and offline advertising mediums include word of mouth, radios, direct mail, televisions, flyers, billboards, posters, and others.

A key component of your advertising strategy is how you plan to measure the effectiveness and success of your advertising campaign. There is no point in sticking with an advertising plan or medium that does not produce results for your business in the long run.

Public Relations

A great way to reach your customers is to get the media to cover your business or product. Publicity, especially good ones, should be a part of your marketing and sales plan. In this section, show your plans for getting prominent reviews of your product from reputable publications and sources.

Your business needs that exposure to grow. If public relations is a crucial part of your promotional strategy, provide details about your public relations plan here.

Content Marketing

Content marketing is a popular promotional strategy used by businesses to inform and attract their customers. It is about teaching and educating your prospects on various topics of interest in your niche, it does not just involve informing them about the benefits and features of the products and services you have,

Businesses publish content usually for free where they provide useful information, tips, and advice so that their target market can be made aware of the importance of their products and services. Content marketing strategies seek to nurture prospects into buyers over time by simply providing value.

Your company can create a blog where it will be publishing content for its target market. You will need to use the best website builder such as Wix and Squarespace and the best web hosting services such as Bluehost, Hostinger, and other Bluehost alternatives to create a functional blog or website.

If content marketing is a crucial part of your promotional strategy (as it should be), detail your plans under promotions.

Including high-quality images of the packaging of your product in your business plan is a lovely idea. You can add the images of the packaging of that product in the marketing and sales plan section. If you are not selling a product, then you do not need to include any worry about the physical packaging of your product.

When organizing the packaging section of your business plan, you can answer the following questions to make maximum use of this section.

• Is your choice of packaging consistent with your positioning strategy?
• What key value proposition does your packaging communicate? (It should reflect the key value proposition of your business)
• How does your packaging compare to that of your competitors?

Social Media

Your 21st-century business needs to have a good social media presence. Not having one is leaving out opportunities for growth and reaching out to your prospect.

You do not have to join the thousands of social media platforms out there. What you need to do is join the ones that your customers are active on and be active there.

Businesses use social media to provide information about their products such as promotions, discounts, the benefits of their products, and content on their blogs.

Social media is also a platform for engaging with your customers and getting feedback about your products or services. Make no mistake, more and more of your prospects are using social media channels to find more information about companies.

You need to consider the social media channels you want to prioritize your business (prioritize the ones your customers are active in) and your branding plans in this section.

Strategic Alliances

If your company plans to work closely with other companies as part of your sales and marketing plan, include it in this section. Prove details about those partnerships in your business plan if you have already established them.

Strategic alliances can be beneficial for all parties involved including your company. Working closely with another company in the form of a partnership can provide access to a different target market segment for your company.

The company you are partnering with may also gain access to your target market or simply offer a new product or service (that of your company) to its customers.

Mutually beneficial partnerships can cover the weaknesses of one company with the strength of another. You should consider strategic alliances with companies that sell complimentary products to yours. For example, if you provide printers, you can partner with a company that produces ink since the customers that buy printers from you will also need inks for printing.

Steps Involved in Creating a Marketing and Sales Plan

1. Focus on Your Target Market

Identify who your customers are, the market you want to target. Then determine the best ways to get your products or services to your potential customers.

2. Evaluate Your Competition

One of the goals of having a marketing plan is to distinguish yourself from your competition. You cannot stand out from them without first knowing them in and out.

You can know your competitors by gathering information about their products, pricing, service, and advertising campaigns.

These questions can help you know your competition.

• What makes your competition successful?
• What are their weaknesses?
• What are customers saying about your competition?

3. Consider Your Brand

Customers' perception of your brand has a strong impact on your sales. Your marketing and sales plan should seek to bolster the image of your brand. Before you start marketing your business, think about the message you want to pass across about your business and your products and services.

4. Focus on Benefits

The majority of your customers do not view your product in terms of features, what they want to know is the benefits and solutions your product offers. Think about the problems your product solves and the benefits it delivers, and use it to create the right sales and marketing message.

Your marketing plan should focus on what you want your customer to get instead of what you provide. Identify those benefits in your marketing and sales plan.

5. Focus on Differentiation

Your marketing and sales plan should look for a unique angle they can take that differentiates your business from the competition, even if the products offered are similar. Some good areas of differentiation you can use are your benefits, pricing, and features.

Key Questions to Answer When Writing Your Marketing and Sales Plan

• What is your company’s budget for sales and marketing campaigns?
• What key metrics will you use to determine if your marketing plans are successful?
• What are your alternatives if your initial marketing efforts do not succeed?
• Who are the sales representatives you need to promote your products or services?
• What are the marketing and sales channels you plan to use? How do you plan to get your products in front of your ideal customers?
• Where will you sell your products?

You may want to include samples of marketing materials you plan to use such as print ads, website descriptions, and social media ads. While it is not compulsory to include these samples, it can help you better communicate your marketing and sales plan and objectives.

The purpose of the marketing and sales section is to answer this question “How will you reach your customers?” If you cannot convincingly provide an answer to this question, you need to rework your marketing and sales section.

7. Clearly Show Your Funding Request

If you are writing your business plan to ask for funding from investors or financial institutions, the funding request section is where you will outline your funding requirements. The funding request section should answer the question ‘How much money will your business need in the near future (3 to 5 years)?’

A good funding request section will clearly outline and explain the amount of funding your business needs over the next five years. You need to know the amount of money your business needs to make an accurate funding request.

Also, when writing your funding request, provide details of how the funds will be used over the period. Specify if you want to use the funds to buy raw materials or machinery, pay salaries, pay for advertisements, and cover specific bills such as rent and electricity.

In addition to explaining what you want to use the funds requested for, you need to clearly state the projected return on investment (ROI) . Investors and creditors want to know if your business can generate profit for them if they put funds into it.

Ensure you do not inflate the figures and stay as realistic as possible. Investors and financial institutions you are seeking funds from will do their research before investing money in your business.

If you are not sure of an exact number to request from, you can use some range of numbers as rough estimates. Add a best-case scenario and a work-case scenario to your funding request. Also, include a description of your strategic future financial plans such as selling your business or paying off debts.

Funding Request: Debt or Equity?

When making your funding request, specify the type of funding you want. Do you want debt or equity? Draw out the terms that will be applicable for the funding, and the length of time the funding request will cover.

Case for Equity

If your new business has not yet started generating profits, you are most likely preparing to sell equity in your business to raise capital at the early stage. Equity here refers to ownership. In this case, you are selling a portion of your company to raise capital.

Although this method of raising capital for your business does not put your business in debt, keep in mind that an equity owner may expect to play a key role in company decisions even if he does not hold a major stake in the company.

Most equity sales for startups are usually private transactions . If you are making a funding request by offering equity in exchange for funding, let the investor know that they will be paid a dividend (a share of the company’s profit). Also, let the investor know the process for selling their equity in your business.

Case for Debt

You may decide not to offer equity in exchange for funds, instead, you make a funding request with the promise to pay back the money borrowed at the agreed time frame.

When making a funding request with an agreement to pay back, note that you will have to repay your creditors both the principal amount borrowed and the interest on it. Financial institutions offer this type of funding for businesses.

Large companies combine both equity and debt in their capital structure. When drafting your business plan, decide if you want to offer both or one over the other.

Before you sell equity in exchange for funding in your business, consider if you are willing to accept not being in total control of your business. Also, before you seek loans in your funding request section, ensure that the terms of repayment are favorable.

You should set a clear timeline in your funding request so that potential investors and creditors can know what you are expecting. Some investors and creditors may agree to your funding request and then delay payment for longer than 30 days, meanwhile, your business needs an immediate cash injection to operate efficiently.

Additional Tips for Writing the Funding Request Section of your Business Plan

The funding request section is not necessary for every business, it is only needed by businesses who plan to use their business plan to secure funding.

If you are adding the funding request section to your business plan, provide an itemized summary of how you plan to use the funds requested. Hiring a lawyer, accountant, or other professionals may be necessary for the proper development of this section.

You should also gather and use financial statements that add credibility and support to your funding requests. Ensure that the financial statements you use should include your projected financial data such as projected cash flows, forecast statements, and expenditure budgets.

If you are an existing business, include all historical financial statements such as cash flow statements, balance sheets and income statements .

Provide monthly and quarterly financial statements for a year. If your business has records that date back beyond the one-year mark, add the yearly statements of those years. These documents are for the appendix section of your business plan.

8. Detail Your Financial Plan, Metrics, and Projections

If you used the funding request section in your business plan, supplement it with a financial plan, metrics, and projections. This section paints a picture of the past performance of your business and then goes ahead to make an informed projection about its future.

The goal of this section is to convince readers that your business is going to be a financial success. It outlines your business plan to generate enough profit to repay the loan (with interest if applicable) and to generate a decent return on investment for investors.

If you have an existing business already in operation, use this section to demonstrate stability through finance. This section should include your cash flow statements, balance sheets, and income statements covering the last three to five years. If your business has some acceptable collateral that you can use to acquire loans, list it in the financial plan, metrics, and projection section.

Apart from current financial statements, this section should also contain a prospective financial outlook that spans the next five years. Include forecasted income statements, cash flow statements, balance sheets, and capital expenditure budget.

If your business is new and is not yet generating profit, use clear and realistic projections to show the potentials of your business.

When drafting this section, research industry norms and the performance of comparable businesses. Your financial projections should cover at least five years. State the logic behind your financial projections. Remember you can always make adjustments to this section as the variables change.

The financial plan, metrics, and projection section create a baseline which your business can either exceed or fail to reach. If your business fails to reach your projections in this section, you need to understand why it failed.

Investors and loan managers spend a lot of time going through the financial plan, metrics, and projection section compared to other parts of the business plan. Ensure you spend time creating credible financial analyses for your business in this section.

Many entrepreneurs find this section daunting to write. You do not need a business degree to create a solid financial forecast for your business. Business finances, especially for startups, are not as complicated as they seem. There are several online tools and templates that make writing this section so much easier.

Use Graphs and Charts

The financial plan, metrics, and projection section is a great place to use graphs and charts to tell the financial story of your business. Charts and images make it easier to communicate your finances.

Accuracy in this section is key, ensure you carefully analyze your past financial statements properly before making financial projects.

Address the Risk Factors and Show Realistic Financial Projections

Keep your financial plan, metrics, and projection realistic. It is okay to be optimistic in your financial projection, however, you have to justify it.

You should also address the various risk factors associated with your business in this section. Investors want to know the potential risks involved, show them. You should also show your plans for mitigating those risks.

What You Should In The Financial Plan, Metrics, and Projection Section of Your Business Plan

The financial plan, metrics, and projection section of your business plan should have monthly sales and revenue forecasts for the first year. It should also include annual projections that cover 3 to 5 years.

A three-year projection is a basic requirement to have in your business plan. However, some investors may request a five-year forecast.

Your business plan should include the following financial statements: sales forecast, personnel plan, income statement, income statement, cash flow statement, balance sheet, and an exit strategy.

1. Sales Forecast

Sales forecast refers to your projections about the number of sales your business is going to record over the next few years. It is typically broken into several rows, with each row assigned to a core product or service that your business is offering.

One common mistake people make in their business plan is to break down the sales forecast section into long details. A sales forecast should forecast the high-level details.

For example, if you are forecasting sales for a payroll software provider, you could break down your forecast into target market segments or subscription categories.

Your sales forecast section should also have a corresponding row for each sales row to cover the direct cost or Cost of Goods Sold (COGS). The objective of these rows is to show the expenses that your business incurs in making and delivering your product or service.

Note that your Cost of Goods Sold (COGS) should only cover those direct costs incurred when making your products. Other indirect expenses such as insurance, salaries, payroll tax, and rent should not be included.

For example, the Cost of Goods Sold (COGS) for a restaurant is the cost of ingredients while for a consulting company it will be the cost of paper and other presentation materials.

2. Personnel Plan

The personnel plan section is where you provide details about the payment plan for your employees. For a small business, you can easily list every position in your company and how much you plan to pay in the personnel plan.

However, for larger businesses, you have to break the personnel plan into functional groups such as sales and marketing.

The personnel plan will also include the cost of an employee beyond salary, commonly referred to as the employee burden. These costs include insurance, payroll taxes , and other essential costs incurred monthly as a result of having employees on your payroll.

3. Income Statement

The income statement section shows if your business is making a profit or taking a loss. Another name for the income statement is the profit and loss (P&L). It takes data from your sales forecast and personnel plan and adds other ongoing expenses you incur while running your business.

Every business plan should have an income statement. It subtracts your business expenses from its earnings to show if your business is generating profit or incurring losses.

The income statement has the following items: sales, Cost of Goods Sold (COGS), gross margin, operating expenses, total operating expenses, operating income , total expenses, and net profit.

• Sales refer to the revenue your business generates from selling its products or services. Other names for sales are income or revenue.
• Cost of Goods Sold (COGS) refers to the total cost of selling your products. Other names for COGS are direct costs or cost of sales. Manufacturing businesses use the Costs of Goods Manufactured (COGM) .
• Gross Margin is the figure you get when you subtract your COGS from your sales. In your income statement, you can express it as a percentage of total sales (Gross margin / Sales = Gross Margin Percent).
• Operating Expenses refer to all the expenses you incur from running your business. It exempts the COGS because it stands alone as a core part of your income statement. You also have to exclude taxes, depreciation, and amortization. Your operating expenses include salaries, marketing expenses, research and development (R&D) expenses, and other expenses.
• Total Operating Expenses refers to the sum of all your operating expenses including those exemptions named above under operating expenses.
• Operating Income refers to earnings before interest, taxes, depreciation, and amortization. It is simply known as the acronym EBITDA (earnings before interest, taxes, depreciation, and amortization). Calculating your operating income is simple, all you need to do is to subtract your COGS and total operating expenses from your sales.
• Total Expenses refer to the sum of your operating expenses and your business’ interest, taxes, depreciation, and amortization.
• Net profit shows whether your business has made a profit or taken a loss during a given timeframe.

4. Cash Flow Statement

The cash flow statement tracks the money you have in the bank at any given point. It is often confused with the income statement or the profit and loss statement. They are both different types of financial statements. The income statement calculates your profits and losses while the cash flow statement shows you how much you have in the bank.

5. Balance Sheet

The balance sheet is a financial statement that provides an overview of the financial health of your business. It contains information about the assets and liabilities of your company, and owner’s or shareholders’ equity.

You can get the net worth of your company by subtracting your company’s liabilities from its assets.

6. Exit Strategy

The exit strategy refers to a probable plan for selling your business either to the public in an IPO or to another company. It is the last thing you include in the financial plan, metrics, and projection section.

You can choose to omit the exit strategy from your business plan if you plan to maintain full ownership of your business and do not plan on seeking angel investment or virtual capitalist (VC) funding.

Investors may want to know what your exit plan is. They invest in your business to get a good return on investment.

Your exit strategy does not have to include long and boring details. Ensure you identify some interested parties who may be interested in buying the company if it becomes a success.

Key Questions to Answer with Your Financial Plan, Metrics, and Projection

Your financial plan, metrics, and projection section helps investors, creditors, or your internal managers to understand what your expenses are, the amount of cash you need, and what it takes to make your company profitable. It also shows what you will be doing with any funding.

You do not need to show actual financial data if you do not have one. Adding forecasts and projections to your financial statements is added proof that your strategy is feasible and shows investors you have planned properly.

Here are some key questions to answer to help you develop this section.

• What is your sales forecast for the next year?
• When will your company achieve a positive cash flow?
• What are the core expenses you need to operate?
• How much money do you need upfront to operate or grow your company?
• How will you use the loans or investments?

9. Add an Appendix to Your Business Plan

Adding an appendix to your business plan is optional. It is a useful place to put any charts, tables, legal notes, definitions, permits, résumés, and other critical information that do not fit into other sections of your business plan.

The appendix section is where you would want to include details of a patent or patent-pending if you have one. You can always add illustrations or images of your products here. It is the last section of your business plan.

When writing your business plan, there are details you cut short or remove to prevent the entire section from becoming too lengthy. There are also details you want to include in the business plan but are not a good fit for any of the previous sections. You can add that additional information to the appendix section.

Businesses also use the appendix section to include supporting documents or other materials specially requested by investors or lenders.

You can include just about any information that supports the assumptions and statements you made in the business plan under the appendix. It is the one place in the business plan where unrelated data and information can coexist amicably.

If your appendix section is lengthy, try organizing it by adding a table of contents at the beginning of the appendix section. It is also advisable to group similar information to make it easier for the reader to access them.

A well-organized appendix section makes it easier to share your information clearly and concisely. Add footnotes throughout the rest of the business plan or make references in the plan to the documents in the appendix.

The appendix section is usually only necessary if you are seeking funding from investors or lenders, or hoping to attract partners.

People reading business plans do not want to spend time going through a heap of backup information, numbers, and charts. Keep these documents or information in the Appendix section in case the reader wants to dig deeper.

Common Items to Include in the Appendix Section of Your Business Plan

The appendix section includes documents that supplement or support the information or claims given in other sections of the business plans. Common items you can include in the appendix section include:

• Additional data about the process of manufacturing or creation
• Additional description of products or services such as product schematics
• Additional financial documents or projections
• Articles of incorporation and status
• Backup for market research or competitive analysis
• Bank statements
• Business registries
• Client testimonials (if your business is already running)
• Copies of insurances
• Credit histories (personal or/and business)
• Deeds and permits
• Equipment leases
• Examples of marketing and advertising collateral
• Industry associations and memberships
• Images of product
• Intellectual property
• Key customer contracts
• Legal documents and other contracts
• Letters of reference
• Links to references
• Market research data
• Organizational charts
• Photographs of potential facilities
• Professional licenses pertaining to your legal structure or type of business
• Purchase orders
• Resumes of the founder(s) and key managers
• State and federal identification numbers or codes
• Trademarks or patents’ registrations

Avoid using the appendix section as a place to dump any document or information you feel like adding. Only add documents or information that you support or increase the credibility of your business plan.

Tips and Strategies for Writing a Convincing Business Plan

To achieve a perfect business plan, you need to consider some key tips and strategies. These tips will raise the efficiency of your business plan above average.

1. Know Your Audience

When writing a business plan, you need to know your audience . Business owners write business plans for different reasons. Your business plan has to be specific. For example, you can write business plans to potential investors, banks, and even fellow board members of the company.

The audience you are writing to determines the structure of the business plan. As a business owner, you have to know your audience. Not everyone will be your audience. Knowing your audience will help you to narrow the scope of your business plan.

Consider what your audience wants to see in your projects, the likely questions they might ask, and what interests them.

• A business plan used to address a company's board members will center on its employment schemes, internal affairs, projects, stakeholders, etc.
• A business plan for financial institutions will talk about the size of your market and the chances for you to pay back any loans you demand.
• A business plan for investors will show proof that you can return the investment capital within a specific time. In addition, it discusses your financial projections, tractions, and market size.

2. Get Inspiration from People

Writing a business plan from scratch as an entrepreneur can be daunting. That is why you need the right inspiration to push you to write one. You can gain inspiration from the successful business plans of other businesses. Look at their business plans, the style they use, the structure of the project, etc.

To make your business plan easier to create, search companies related to your business to get an exact copy of what you need to create an effective business plan. You can also make references while citing examples in your business plans.

When drafting your business plan, get as much help from others as you possibly can. By getting inspiration from people, you can create something better than what they have.

3. Avoid Being Over Optimistic

Many business owners make use of strong adjectives to qualify their content. One of the big mistakes entrepreneurs make when preparing a business plan is promising too much.

The use of superlatives and over-optimistic claims can prepare the audience for more than you can offer. In the end, you disappoint the confidence they have in you.

In most cases, the best option is to be realistic with your claims and statistics. Most of the investors can sense a bit of incompetency from the overuse of superlatives. As a new entrepreneur, do not be tempted to over-promise to get the interests of investors.

The concept of entrepreneurship centers on risks, nothing is certain when you make future analyses. What separates the best is the ability to do careful research and work towards achieving that, not promising more than you can achieve.

To make an excellent first impression as an entrepreneur, replace superlatives with compelling data-driven content. In this way, you are more specific than someone promising a huge ROI from an investment.

4. Keep it Simple and Short

When writing business plans, ensure you keep them simple throughout. Irrespective of the purpose of the business plan, your goal is to convince the audience.

One way to achieve this goal is to make them understand your proposal. Therefore, it would be best if you avoid the use of complex grammar to express yourself. It would be a huge turn-off if the people you want to convince are not familiar with your use of words.

Another thing to note is the length of your business plan. It would be best if you made it as brief as possible.

You hardly see investors or agencies that read through an extremely long document. In that case, if your first few pages can’t convince them, then you have lost it. The more pages you write, the higher the chances of you derailing from the essential contents.

To ensure your business plan has a high conversion rate, you need to dispose of every unnecessary information. For example, if you have a strategy that you are not sure of, it would be best to leave it out of the plan.

5. Make an Outline and Follow Through

A perfect business plan must have touched every part needed to convince the audience. Business owners get easily tempted to concentrate more on their products than on other sections. Doing this can be detrimental to the efficiency of the business plan.

For example, imagine you talking about a product but omitting or providing very little information about the target audience. You will leave your clients confused.

To ensure that your business plan communicates your full business model to readers, you have to input all the necessary information in it. One of the best ways to achieve this is to design a structure and stick to it.

This structure is what guides you throughout the writing. To make your work easier, you can assign an estimated word count or page limit to every section to avoid making it too bulky for easy reading. As a guide, the necessary things your business plan must contain are:

• Table of contents
• Introduction
• Product or service description
• Target audience
• Market size
• Competition analysis
• Financial projections

Some specific businesses can include some other essential sections, but these are the key sections that must be in every business plan.

6. Ask a Professional to Proofread

When writing a business plan, you must tie all loose ends to get a perfect result. When you are done with writing, call a professional to go through the document for you. You are bound to make mistakes, and the way to correct them is to get external help.

You should get a professional in your field who can relate to every section of your business plan. It would be easier for the professional to notice the inner flaws in the document than an editor with no knowledge of your business.

In addition to getting a professional to proofread, get an editor to proofread and edit your document. The editor will help you identify grammatical errors, spelling mistakes, and inappropriate writing styles.

Writing a business plan can be daunting, but you can surmount that obstacle and get the best out of it with these tips.

Business Plan Examples and Templates That’ll Save You Tons of Time

1. hubspot's one-page business plan.

The one-page business plan template by HubSpot is the perfect guide for businesses of any size, irrespective of their business strategy. Although the template is condensed into a page, your final business plan should not be a page long! The template is designed to ask helpful questions that can help you develop your business plan.

Hubspot’s one-page business plan template is divided into nine fields:

• Business opportunity
• Company description
• Industry analysis
• Target market
• Implementation timeline
• Marketing plan
• Financial summary
• Funding required

2. Bplan’s Free Business Plan Template

Bplans' free business plan template is investor-approved. It is a rich template used by prestigious educational institutions such as Babson College and Princeton University to teach entrepreneurs how to create a business plan.

The template has six sections: the executive summary, opportunity, execution, company, financial plan, and appendix. There is a step-by-step guide for writing every little detail in the business plan. Follow the instructions each step of the way and you will create a business plan that impresses investors or lenders easily.

3. HubSpot's Downloadable Business Plan Template

HubSpot’s downloadable business plan template is a more comprehensive option compared to the one-page business template by HubSpot. This free and downloadable business plan template is designed for entrepreneurs.

The template is a comprehensive guide and checklist for business owners just starting their businesses. It tells you everything you need to fill in each section of the business plan and how to do it.

There are nine sections in this business plan template: an executive summary, company and business description, product and services line, market analysis, marketing plan, sales plan, legal notes, financial considerations, and appendix.

4. Business Plan by My Own Business Institute

My Own Business Institute (MOBI) which is a part of Santa Clara University's Center for Innovation and Entrepreneurship offers a free business plan template. You can either copy the free business template from the link provided above or download it as a Word document.

The comprehensive template consists of a whopping 15 sections.

• The Business Profile
• The Vision and the People
• Home-Based Business and Freelance Business Opportunities
• Organization
• Licenses and Permits
• Business Insurance
• Communication Tools
• Acquisitions
• Location and Leasing
• Accounting and Cash Flow
• Opening and Marketing
• Managing Employees
• Expanding and Handling Problems

There are lots of helpful tips on how to fill each section in the free business plan template by MOBI.

5. Score's Business Plan Template for Startups

Score is an American nonprofit organization that helps entrepreneurs build successful companies. This business plan template for startups by Score is available for free download. The business plan template asks a whooping 150 generic questions that help entrepreneurs from different fields to set up the perfect business plan.

The business plan template for startups contains clear instructions and worksheets, all you have to do is answer the questions and fill the worksheets.

There are nine sections in the business plan template: executive summary, company description, products and services, marketing plan, operational plan, management and organization, startup expenses and capitalization, financial plan, and appendices.

The ‘refining the plan’ resource contains instructions that help you modify your business plan to suit your specific needs, industry, and target audience. After you have completed Score’s business plan template, you can work with a SCORE mentor for expert advice in business planning.

6. Minimalist Architecture Business Plan Template by Venngage

The minimalist architecture business plan template is a simple template by Venngage that you can customize to suit your business needs .

There are five sections in the template: an executive summary, statement of problem, approach and methodology, qualifications, and schedule and benchmark. The business plan template has instructions that guide users on what to fill in each section.

7. Small Business Administration Free Business Plan Template

The Small Business Administration (SBA) offers two free business plan templates, filled with practical real-life examples that you can model to create your business plan. Both free business plan templates are written by fictional business owners: Rebecca who owns a consulting firm, and Andrew who owns a toy company.

There are five sections in the two SBA’s free business plan templates.

• Executive Summary
• Company Description
• Service Line
• Marketing and Sales

8. The $100 Startup's One-Page Business Plan

The one-page business plan by the $100 startup is a simple business plan template for entrepreneurs who do not want to create a long and complicated plan . You can include more details in the appendices for funders who want more information beyond what you can put in the one-page business plan.

There are five sections in the one-page business plan such as overview, ka-ching, hustling, success, and obstacles or challenges or open questions. You can answer all the questions using one or two sentences.

9. PandaDoc’s Free Business Plan Template

The free business plan template by PandaDoc is a comprehensive 15-page document that describes the information you should include in every section.

There are 11 sections in PandaDoc’s free business plan template.

• Executive summary
• Business description
• Products and services
• Operations plan
• Management organization
• Financial plan
• Conclusion / Call to action
• Confidentiality statement

You have to sign up for its 14-day free trial to access the template. You will find different business plan templates on PandaDoc once you sign up (including templates for general businesses and specific businesses such as bakeries, startups, restaurants, salons, hotels, and coffee shops)

PandaDoc allows you to customize its business plan templates to fit the needs of your business. After editing the template, you can send it to interested parties and track opens and views through PandaDoc.

10. Invoiceberry Templates for Word, Open Office, Excel, or PPT

InvoiceBerry is a U.K based online invoicing and tracking platform that offers free business plan templates in .docx, .odt, .xlsx, and .pptx formats for freelancers and small businesses.

Before you can download the free business plan template, it will ask you to give it your email address. After you complete the little task, it will send the download link to your inbox for you to download. It also provides a business plan checklist in .xlsx file format that ensures you add the right information to the business plan.

Alternatives to the Traditional Business Plan

A business plan is very important in mapping out how one expects their business to grow over a set number of years, particularly when they need external investment in their business. However, many investors do not have the time to watch you present your business plan. It is a long and boring read.

Luckily, there are three alternatives to the traditional business plan (the Business Model Canvas, Lean Canvas, and Startup Pitch Deck). These alternatives are less laborious and easier and quicker to present to investors.

Business Model Canvas (BMC)

The business model canvas is a business tool used to present all the important components of setting up a business, such as customers, route to market, value proposition, and finance in a single sheet. It provides a very focused blueprint that defines your business initially which you can later expand on if needed.

The sheet is divided mainly into company, industry, and consumer models that are interconnected in how they find problems and proffer solutions.

Segments of the Business Model Canvas

The business model canvas was developed by founder Alexander Osterwalder to answer important business questions. It contains nine segments.

• Key Partners: Who will be occupying important executive positions in your business? What do they bring to the table? Will there be a third party involved with the company?
• Key Activities: What important activities will production entail? What activities will be carried out to ensure the smooth running of the company?
• The Product’s Value Propositions: What does your product do? How will it be different from other products?
• Customer Segments: What demography of consumers are you targeting? What are the habits of these consumers? Who are the MVPs of your target consumers?
• Customer Relationships: How will the team support and work with its customer base? How do you intend to build and maintain trust with the customer?
• Key Resources: What type of personnel and tools will be needed? What size of the budget will they need access to?
• Channels: How do you plan to create awareness of your products? How do you intend to transport your product to the customer?
• Cost Structure: What is the estimated cost of production? How much will distribution cost?
• Revenue Streams: For what value are customers willing to pay? How do they prefer to pay for the product? Are there any external revenues attached apart from the main source? How do the revenue streams contribute to the overall revenue?

Lean Canvas

The lean canvas is a problem-oriented alternative to the standard business model canvas. It was proposed by Ash Maurya, creator of Lean Stack as a development of the business model generation. It uses a more problem-focused approach and it majorly targets entrepreneurs and startup businesses.

Lean Canvas uses the same 9 blocks concept as the business model canvas, however, they have been modified slightly to suit the needs and purpose of a small startup. The key partners, key activities, customer relationships, and key resources are replaced by new segments which are:

• Problem: Simple and straightforward number of problems you have identified, ideally three.
• Solution: The solutions to each problem.
• Unfair Advantage: Something you possess that can't be easily bought or replicated.
• Key Metrics: Important numbers that will tell how your business is doing.

Startup Pitch Deck

While the business model canvas compresses into a factual sheet, startup pitch decks expand flamboyantly.

Pitch decks, through slides, convey your business plan, often through graphs and images used to emphasize estimations and observations in your presentation. Entrepreneurs often use pitch decks to fully convince their target audience of their plans before discussing funding arrangements.

Considering the likelihood of it being used in a small time frame, a good startup pitch deck should ideally contain 20 slides or less to have enough time to answer questions from the audience.

Unlike the standard and lean business model canvases, a pitch deck doesn't have a set template on how to present your business plan but there are still important components to it. These components often mirror those of the business model canvas except that they are in slide form and contain more details.

Using Airbnb (one of the most successful start-ups in recent history) for reference, the important components of a good slide are listed below.

• Cover/Introduction Slide: Here, you should include your company's name and mission statement. Your mission statement should be a very catchy tagline. Also, include personal information and contact details to provide an easy link for potential investors.
• Problem Slide: This slide requires you to create a connection with the audience or the investor that you are pitching. For example in their pitch, Airbnb summarized the most important problems it would solve in three brief points – pricing of hotels, disconnection from city culture, and connection problems for local bookings.
• Solution Slide: This slide includes your core value proposition. List simple and direct solutions to the problems you have mentioned
• Customer Analysis: Here you will provide information on the customers you will be offering your service to. The identity of your customers plays an important part in fundraising as well as the long-run viability of the business.
• Market Validation: Use competitive analysis to show numbers that prove the presence of a market for your product, industry behavior in the present and the long run, as well as the percentage of the market you aim to attract. It shows that you understand your competitors and customers and convinces investors of the opportunities presented in the market.
• Business Model: Your business model is the hook of your presentation. It may vary in complexity but it should generally include a pricing system informed by your market analysis. The goal of the slide is to confirm your business model is easy to implement.
• Marketing Strategy: This slide should summarize a few customer acquisition methods that you plan to use to grow the business.
• Competitive Advantage: What this slide will do is provide information on what will set you apart and make you a more attractive option to customers. It could be the possession of technology that is not widely known in the market.
• Team Slide: Here you will give a brief description of your team. Include your key management personnel here and their specific roles in the company. Include their educational background, job history, and skillsets. Also, talk about their accomplishments in their careers so far to build investors' confidence in members of your team.
• Traction Slide: This validates the company’s business model by showing growth through early sales and support. The slide aims to reduce any lingering fears in potential investors by showing realistic periodic milestones and profit margins. It can include current sales, growth, valuable customers, pre-orders, or data from surveys outlining current consumer interest.
• Funding Slide: This slide is popularly referred to as ‘the ask'. Here you will include important details like how much is needed to get your business off the ground and how the funding will be spent to help the company reach its goals.
• Appendix Slides: Your pitch deck appendix should always be included alongside a standard pitch presentation. It consists of additional slides you could not show in the pitch deck but you need to complement your presentation.

It is important to support your calculations with pictorial renditions. Infographics, such as pie charts or bar graphs, will be more effective in presenting the information than just listing numbers. For example, a six-month graph that shows rising profit margins will easily look more impressive than merely writing it.

Lastly, since a pitch deck is primarily used to secure meetings and you may be sharing your pitch with several investors, it is advisable to keep a separate public version that doesn't include financials. Only disclose the one with projections once you have secured a link with an investor.

Advantages of the Business Model Canvas, Lean Canvas, and Startup Pitch Deck over the Traditional Business Plan

• Time-Saving: Writing a detailed traditional business plan could take weeks or months. On the other hand, all three alternatives can be done in a few days or even one night of brainstorming if you have a comprehensive understanding of your business.
• Easier to Understand: Since the information presented is almost entirely factual, it puts focus on what is most important in running the business. They cut away the excess pages of fillers in a traditional business plan and allow investors to see what is driving the business and what is getting in the way.
• Easy to Update: Businesses typically present their business plans to many potential investors before they secure funding. What this means is that you may regularly have to amend your presentation to update statistics or adjust to audience-specific needs. For a traditional business plan, this could mean rewriting a whole section of your plan. For the three alternatives, updating is much easier because they are not voluminous.
• Guide for a More In-depth Business Plan: All three alternatives have the added benefit of being able to double as a sketch of your business plan if the need to create one arises in the future.

Business Plan FAQ

Business plans are important for any entrepreneur who is looking for a framework to run their company over some time or seeking external support. Although they are essential for new businesses, every company should ideally have a business plan to track their growth from time to time.  They can be used by startups seeking investments or loans to convey their business ideas or an employee to convince his boss of the feasibility of starting a new project. They can also be used by companies seeking to recruit high-profile employee targets into key positions or trying to secure partnerships with other firms.

Business plans often vary depending on your target audience, the scope, and the goals for the plan. Startup plans are the most common among the different types of business plans.  A start-up plan is used by a new business to present all the necessary information to help get the business up and running. They are usually used by entrepreneurs who are seeking funding from investors or bank loans. The established company alternative to a start-up plan is a feasibility plan. A feasibility plan is often used by an established company looking for new business opportunities. They are used to show the upsides of creating a new product for a consumer base. Because the audience is usually company people, it requires less company analysis. The third type of business plan is the lean business plan. A lean business plan is a brief, straight-to-the-point breakdown of your ideas and analysis for your business. It does not contain details of your proposal and can be written on one page. Finally, you have the what-if plan. As it implies, a what-if plan is a preparation for the worst-case scenario. You must always be prepared for the possibility of your original plan being rejected. A good what-if plan will serve as a good plan B to the original.

A good business plan has 10 key components. They include an executive plan, product analysis, desired customer base, company analysis, industry analysis, marketing strategy, sales strategy, financial projection, funding, and appendix. Executive Plan Your business should begin with your executive plan. An executive plan will provide early insight into what you are planning to achieve with your business. It should include your mission statement and highlight some of the important points which you will explain later. Product Analysis The next component of your business plan is your product analysis. A key part of this section is explaining the type of item or service you are going to offer as well as the market problems your product will solve. Desired Consumer Base Your product analysis should be supplemented with a detailed breakdown of your desired consumer base. Investors are always interested in knowing the economic power of your market as well as potential MVP customers. Company Analysis The next component of your business plan is your company analysis. Here, you explain how you want to run your business. It will include your operational strategy, an insight into the workforce needed to keep the company running, and important executive positions. It will also provide a calculation of expected operational costs.  Industry Analysis A good business plan should also contain well laid out industry analysis. It is important to convince potential investors you know the companies you will be competing with, as well as your plans to gain an edge on the competition. Marketing Strategy Your business plan should also include your marketing strategy. This is how you intend to spread awareness of your product. It should include a detailed explanation of the company brand as well as your advertising methods. Sales Strategy Your sales strategy comes after the market strategy. Here you give an overview of your company's pricing strategy and how you aim to maximize profits. You can also explain how your prices will adapt to market behaviors. Financial Projection The financial projection is the next component of your business plan. It explains your company's expected running cost and revenue earned during the tenure of the business plan. Financial projection gives a clear idea of how your company will develop in the future. Funding The next component of your business plan is funding. You have to detail how much external investment you need to get your business idea off the ground here. Appendix The last component of your plan is the appendix. This is where you put licenses, graphs, or key information that does not fit in any of the other components.

The business model canvas is a business management tool used to quickly define your business idea and model. It is often used when investors need you to pitch your business idea during a brief window.

A pitch deck is similar to a business model canvas except that it makes use of slides in its presentation. A pitch is not primarily used to secure funding, rather its main purpose is to entice potential investors by selling a very optimistic outlook on the business.

Business plan competitions help you evaluate the strength of your business plan. By participating in business plan competitions, you are improving your experience. The experience provides you with a degree of validation while practicing important skills. The main motivation for entering into the competitions is often to secure funding by finishing in podium positions. There is also the chance that you may catch the eye of a casual observer outside of the competition. These competitions also provide good networking opportunities. You could meet mentors who will take a keen interest in guiding you in your business journey. You also have the opportunity to meet other entrepreneurs whose ideas can complement yours.

Exlore Further

• 12 Key Elements of a Business Plan (Top Components Explained)
• 13 Sources of Business Finance For Companies & Sole Traders
• 5 Common Types of Business Structures (+ Pros & Cons)
• How to Buy a Business in 8 Steps (+ Due Diligence Checklist)

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Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

How to Evaluate a Business Plan

by Evangeline Marzec

Published on 16 Oct 2019

Whether you're an investor, an entrepreneur or a business skills teacher, you'll be exposed to a wide variety of business plans and should have a solid, somewhat standard approach to conducting a business plan assessment. Analyze each section individually, and then look at the plan as a whole to determine the viability of the business and the likelihood of its success in the manner proposed. Also consider the writing skills and attention to detail that went into formulating the plan.

Read and Understand the Executive Summary

The first step in a business plan assessment is reading the business' executive summary. This should be a concise "elevator pitch", not a summary of the business plan. In one or two pages, it should convey the market opportunity and the uniquely compelling features of the business that will help it meet that opportunity. The executive summary should excite you and make you want to turn to the next page. If it doesn't, the entrepreneur might lack marketing or writing skills, or it may indicate that the idea itself is not going to fly.

Analyze Opportunity in the Market

Evaluate the market opportunity. Ideally, the market should be growing at least 10% per year and have a substantial potential relative to the size of the business and investment. For example, a small company seeking an investment of $50,000 should see a potential market of $5 million.

The larger the potential market and the faster it is growing, the greater the opportunity in the market. Look to the exhibits and appendices to ensure that the business actually has done the necessary market research and can back up any claims.

Evaluate the Company's Business Strategy

Examine the company strategy for capturing its market. The plan must clearly describe the problem the company is solving or need it is meeting for customers, and then propose a solution. This is the crux of a business plan assessment.

Closely examine the alignment between problem and solution. Will the company actually address that need? This evaluation must take into account the product or service being offered, the operational capacity and efficiency with which the business actually can produce its product, and the quality of the proposed marketing efforts.

Examine the Business Environment

The business plan should describe the competitive landscape in which the company operates, preferably by referencing Porter's 5 Forces or another well-established tool. Look for detailed breakdowns and analyses of each of it competitors, and of how the company is different and better than the competition in a particular niche. This section should include the regulatory environment and mention any costs or necessary delays associated with regulations.

Porter's 5 Forces is an evaluation model that looks closely at the five competitive forces at play in the business landscape. These forces are present in every industry and by evaluating how they manifest in an individual industry, one can gauge that industry's strengths and weaknesses. Porter's 5 Forces are:

• Competition in the industry
• Potential of new entrants in the industry
• Power of suppliers
• Power of customers
• Threat of substitutes

Evaluate the Leadership Team

Look for experience, integrity and passion in the executive team. Read bios and brief highlights of each executive's strengths and expertise should accompany standard business information such as headquarters and corporate structure. The company should have experienced advisers, either formally or informally.

It is paramount that the principals involved in the business convey their passion and drive toward success with this project. If the founders haven't invested their own capital into the business, or plan on keeping their “day jobs” while running the business, they might lack faith in the project.

Crunch the Numbers and Understand the Finances

Ensure that the financial projections are both promising and realistic. Most entrepreneurs vastly overstate their company's potential, starting with the market size and market share. Financial figures should be based on historical data if available, or very conservative projections if the company is not yet profitable. Entrepreneurs that project capturing 20% market share in the first two years probably have unrealistic expectations.

Investigate the returns provided by the investment. Good business plans include exit strategies for pulling the initial investment back out of the company, and have a realistic valuation of their shares.

View the Business Plan as a Living Document

Evaluate the business plan as a whole document, and as a reflection of a real-world company. Determine whether the market need is adequate, the company's offerings are compelling, the management team experienced and committed, and the financial statements realistic. Does this company as a whole have a chance of success?

Prioritize Your Opportunities with This Checklist

by Doug Andrew

Summary .   

How do you evaluate the myriad of business opportunities you face every day? Should you speak at that event? Author a book? Attend a strategy summit? As you face an opportunity, or as you seek the opportunities you’d like to pursue, try ranking them according to five critical factors. 1.) Will this opportunity utilize your unique talents and abilities? 2.) Will it have an impact on people? 3.) Is this an opportunity for you to grow? 4.) Is it creating value for the business? 5.) Does it create opportunities for referrals to new customers? Rank your answers to these questions on a scale of -1 to +5 (Starting with a -1 highlights that some aspects of a project are actually a net negative – such as speaking to the wrong audience or the wrong industry). Then, tally your score. An opportunity that scores a 15 or lower may not be worth considering, while a score of 20 or higher would be a clear win.

How do you evaluate a business opportunity? The world is replete with SWOT mechanisms for evaluating a prospective new product offering, as well as with opportunity assessment templates for evaluating a project against overall business goals, customer impact, strategic potential, and competitive urgency. These instruments play a vital role in acquisitions, new products and features, and even the new divisions of business you’d like to deploy.

Partner Center

Business Plan Evaluation Criteria: Measuring Success: Criteria for Evaluating Startup Business Plans

1. the gateway to your business plan, 2. understanding your competitive landscape, 3. painting the picture of your business, 4. structuring for success, 5. connecting with your customer, 6. the core of your business offering, 7. mapping the financial future, 8. securing the capital to grow.

At the heart of every successful business plan lies a compelling opening that not only encapsulates the essence of the venture but also serves as a beacon, guiding potential investors through the intricacies of the proposal. This pivotal component must succinctly convey the core business idea , its market viability, unique value proposition, and the roadmap for growth. It's the crystallization of the business concept, distilled into a narrative that is both engaging and informative.

1. Purpose and Vision : Begin by articulating the company's mission and the long-term vision it harbors. For instance, a startup aiming to revolutionize the renewable energy sector might state, "Our mission is to harness innovative solar technologies to power a greener future for all."

2. Market Analysis : Detail the research that pinpoints the market need. A deep dive into market trends could reveal, "With an annual growth rate of 7%, the solar energy market is ripe for a disruptive entrant that can offer affordable and efficient solutions."

3. Product/Service Overview : Describe the product or service, emphasizing its uniqueness and the problem it solves. An example could be, "Our solar panels utilize a proprietary graphene-based material, increasing efficiency by 30% over traditional models."

4. Business Model : Outline how the company will generate revenue , highlighting any innovative approaches. For example, "Adopting a subscription model, customers can access our energy solutions for a low monthly fee, eliminating the high upfront costs typically associated with solar installations."

5. Leadership : Introduce the team, focusing on experience and past successes. "Led by a PhD in Photovoltaic Research and a seasoned entrepreneur, our team has the expertise to bring this technology to market successfully."

6. Financial Projections : Provide a snapshot of financial forecasts , with a brief explanation of the underlying assumptions. "Projected to break even within two years, our financial model assumes a conservative adoption rate of 0.5% in our target market."

7. Funding Requirements : Clearly state the capital needed and its intended use. "Seeking $2 million in seed funding to finalize product development and launch a pilot program in three key markets."

8. Milestones : Share the roadmap with key milestones. "Within 12 months, we plan to secure two utility patents, complete the pilot program, and initiate mass production."

By weaving these elements into a narrative, the opening of a business plan can effectively capture the attention of stakeholders and set the stage for a detailed exploration of the business proposition. It's not merely an introduction; it's the gateway through which all potential journeys with the company begin.

The Gateway to Your Business Plan - Business Plan Evaluation Criteria: Measuring Success: Criteria for Evaluating Startup Business Plans

In the realm of startups, the ability to identify and understand competitors is not merely a strategic asset; it's an essential compass guiding your business through the tumultuous seas of the market. A comprehensive analysis of the competitive landscape equips entrepreneurs with the foresight to anticipate market shifts, the wisdom to understand their rivals' strengths and weaknesses, and the agility to position their venture for optimal growth.

1. Competitor Identification : Begin by cataloging potential competitors, both direct and indirect. For instance, a new entrant in the e-commerce space would consider not only other e-commerce platforms but also brick-and-mortar stores as part of their competitive landscape.

2. Market Positioning : Assess where each competitor stands in the market. A SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) can reveal much about where your startup might fit into the existing market tapestry. For example, if a competitor's weakness is customer service, your startup could capitalize on this by prioritizing a customer-centric approach .

3. market Share analysis : Understanding the distribution of market share among competitors can highlight market leaders and laggards. This is crucial for identifying market gaps . A startup specializing in sustainable packaging might find a niche market poorly served by the current leaders who focus on cost-efficiency over sustainability.

4. Product and Service Comparison : Evaluate how your offerings stack up against the competition. Features, quality, pricing, and after-sales service are all critical factors. A tech startup might offer a superior product but at a higher price point, necessitating a value proposition that justifies the premium.

5. customer Feedback and trends : analyzing customer reviews and feedback on competitors' products can provide insights into what consumers value and the pain points they experience. A mobile app startup could use this data to refine their user interface, ensuring a more intuitive user experience than the competition.

6. strategic Alliances and partnerships : Sometimes, the competitive landscape includes potential partners that can help your business grow. A startup in the renewable energy sector might partner with local governments or NGOs to promote sustainable energy solutions .

7. Regulatory Environment : The impact of regulations on your competitors and how they adapt can offer strategic insights. A fintech startup needs to be acutely aware of financial regulations and how they affect competitors' operations.

By meticulously dissecting the competitive landscape , startups can carve out a strategic position that leverages their unique strengths while mitigating risks posed by their rivals. This analysis is not a one-time effort but an ongoing process that evolves with the market and the startup's own growth trajectory. Through this lens, the success of a business plan is not judged solely by its internal coherence but by how well it responds to and capitalizes on the external competitive environment.

Understanding Your Competitive Landscape - Business Plan Evaluation Criteria: Measuring Success: Criteria for Evaluating Startup Business Plans

When assessing the viability of a startup , the essence of the enterprise is captured not just in its financial projections or market analysis, but in the vivid depiction of its core identity. This narrative is a mosaic of purpose, vision, and operational strategy, each piece a testament to the company's potential to thrive.

1. Purpose and Vision : Begin by articulating the founding principles that serve as the company's compass. For instance, a tech startup might be anchored in the mission to democratize access to education through innovative online platforms, envisioning a world where knowledge knows no boundaries.

2. Operational Strategy : Detail the operational facets that will translate vision into reality. Consider a boutique that sources artisanal products globally; its operational strategy might involve a robust supply chain , partnerships with local artisans, and a commitment to ethical sourcing.

3. Market Positioning : Define the company's niche in the competitive landscape. A renewable energy firm, for example, might position itself as a pioneer in affordable solar solutions for off-grid communities, distinguishing its offerings from larger, less community-focused competitors.

4. Growth Potential : Elucidate on the scalability of the business model . A food delivery service could illustrate this by highlighting its adaptable logistics system, capable of expanding to new regions without compromising service quality.

5. Leadership and Team : The expertise and passion of the people behind the venture often sway investors. A biotech startup's team, boasting PhDs and industry veterans, can instill confidence in the company's ability to navigate complex R&D processes.

6. unique Selling proposition (USP) : Identify what sets the company apart. A mobile gaming studio might boast a proprietary technology that reduces game development time by half, promising a faster go-to-market strategy than its peers.

By weaving these elements into a cohesive narrative, a startup can present a compelling picture that resonates with stakeholders, painting not just a business, but a vision brought to life through strategic execution. This section, therefore, is not merely a description; it is the embodiment of the startup's heartbeat, each throb a promise of innovation and growth.

Painting the Picture of Your Business - Business Plan Evaluation Criteria: Measuring Success: Criteria for Evaluating Startup Business Plans

In the realm of startups, the blueprint for internal architecture is as critical as the business idea itself. It's the scaffold that supports growth, dictates workflow, and shapes the culture. A well-structured organization is like a symphony orchestra, where each section plays in harmony, yet the contribution of each instrument is pivotal.

1. Hierarchical vs. Flat : Traditional hierarchies, with their clear chain of command, offer stability and clarity of roles. For instance, a tech startup may have a cto whose directives flow down to team leads and then to junior developers. Conversely, a flat structure, often favored by modern startups, promotes agility and open communication. A social media marketing firm might opt for this, with teams collaborating without rigid lines of authority.

2. Centralized vs. decentralized Decision-making : Centralization can streamline decisions, ensuring they align with the company's vision. A centralized approach might be exemplified by a franchise model, where the head office dictates the operations. Decentralization, on the other hand, empowers individual departments or regional offices to make decisions, akin to a multinational corporation allowing local offices to tailor strategies to their market.

3. Role Specialization vs. cross-Functional teams : Specialized roles can increase efficiency and expertise, as seen in a manufacturing startup where tasks are divided minutely. Yet, cross-functional teams, which are interdisciplinary, foster innovation and adaptability, much like in a biotech startup where scientists, engineers, and business developers work side by side to bring a product to market.

4. Formal vs. Informal Communication Channels : Formal communication, with its protocols and procedures, ensures that information is disseminated systematically. An example is a finance startup that relies on formal reports for decision-making . Informal channels, however, can speed up problem-solving and foster a more personal work environment, as seen in creative agencies where brainstorming sessions and casual chats spark ideas.

5. Performance Metrics : Clear metrics and KPIs are indispensable for evaluating success. A sales-driven startup might track progress through customer acquisition costs and lifetime value, while a service-oriented startup may focus on client satisfaction scores and retention rates.

By examining these dimensions, startups can tailor their organizational structure to their unique needs, ensuring that the foundation they build today is robust enough to support the successes of tomorrow. The key is to align structure with strategy, culture with goals, and processes with people.

Structuring for Success - Business Plan Evaluation Criteria: Measuring Success: Criteria for Evaluating Startup Business Plans

In the realm of startups, the bridge between a product and its market viability is often constructed through adept customer engagement. This pivotal aspect of a business plan not only forecasts the potential reach but also serves as a testament to the company's understanding of its target demographic. It's a multifaceted endeavor that demands a keen insight into consumer behavior, preferences, and the channels through which they can be most effectively reached.

1. Understanding the Audience : The first step is to develop a customer persona. For instance, a tech startup might focus on millennials who value innovation and convenience. This demographic might be best engaged through social media platforms like Instagram or TikTok, using interactive content such as polls or live Q&A sessions.

2. Value Proposition : Clearly articulating what sets the product apart is crucial. Take, for example, a company that offers a revolutionary plant-based meat alternative. Their marketing strategy could highlight the product's benefits , such as its environmental friendliness and health advantages, to appeal to eco-conscious consumers.

3. customer Journey mapping : Outlining the path from discovery to purchase helps in identifying key touchpoints . A SaaS company could use targeted ads to lead potential customers to a free trial , followed by personalized follow-up emails to convert them into paying users.

4. Feedback Loop : Establishing a system for collecting and acting on customer feedback ensures continuous improvement. A mobile app developer might implement in-app surveys to gather user input, which can then inform future updates and features.

5. Loyalty Programs : Encouraging repeat business through rewards can solidify a customer base . A coffee shop might introduce a loyalty card that offers a free drink after a certain number of purchases, incentivizing customers to return.

6. Partnerships and Collaborations : Aligning with other businesses or influencers can expand reach . A fashion startup might collaborate with a well-known influencer to create a capsule collection, tapping into the influencer's following.

7. data-Driven decisions : utilizing analytics to refine strategies is essential. An online retailer could analyze website traffic data to optimize their ad spend, focusing on the most effective channels and times of day.

By weaving these strategies into the fabric of a business plan, startups can demonstrate a robust understanding of how to not only reach but also resonate with their intended audience. This, in turn, can significantly bolster the plan's credibility in the eyes of potential investors and stakeholders.

Connecting with Your Customer - Business Plan Evaluation Criteria: Measuring Success: Criteria for Evaluating Startup Business Plans

At the heart of every startup lies the value proposition—a unique blend of products or services that sets the company apart from its competitors. This value proposition is not just a mere list of offerings but the very essence of what the business promises to deliver to its customers. It's a strategic asset, carefully crafted to meet the needs and desires of the target market, while also providing a sustainable competitive advantage .

1. Market Alignment : The offerings must resonate with the market's current demands and future trends. For instance, a startup specializing in renewable energy solutions might offer a range of solar panels, battery storage systems , and energy management software , aligning with the growing global emphasis on sustainability.

2. Innovation and Differentiation : It's crucial that the offerings are not just another drop in the ocean. They should stand out through innovation, quality, or unique features. A tech startup might develop a proprietary algorithm that predicts consumer behavior with greater accuracy than existing models.

3. Scalability : The ability to scale the offerings can determine the long-term success of a startup . A software-as-a-service (SaaS) company, for example, should design its architecture to handle an increasing number of users without compromising performance.

4. Customer Value : The ultimate test of any product or service is the value it provides to the customer. A food delivery service that offers not just convenience but also promotes healthy, organic eating caters to a growing niche market that values wellness.

5. Revenue Potential : The offerings should have a clear path to generating revenue. A mobile app startup might offer a free version to attract users and a premium version with additional features as a revenue stream.

6. Adaptability : In a rapidly changing business environment, the ability to adapt offerings to new market conditions is vital. A fashion retail startup might use data analytics to quickly adjust its inventory based on trending styles and consumer feedback.

By weaving these elements into the fabric of the business plan, a startup can demonstrate a deep understanding of its core offerings and their role in driving the company's growth and success. This approach not only satisfies the evaluators looking for a robust business model but also lays a solid foundation for the startup's journey ahead.

The Core of Your Business Offering - Business Plan Evaluation Criteria: Measuring Success: Criteria for Evaluating Startup Business Plans

In the realm of startup ventures, the ability to forecast and articulate the financial trajectory is paramount. This not only demonstrates a command over the numbers but also reflects a deep understanding of the market dynamics, cost structures, and revenue streams. It's a multifaceted exercise that extends beyond mere number-crunching; it's about painting a picture of a company's future with a palette of assumptions, trends, and financial strategies.

1. Assumption Analysis : Every projection begins with a set of assumptions. These are the bedrock upon which all forecasts are built. For instance, a startup in the renewable energy sector might base its revenue projections on the assumption of regulatory support and technological advancements. The key is to make these assumptions realistic and justifiable.

2. Revenue Streams : Identifying and predicting revenue streams is crucial. A SaaS business, for example, might have subscriptions, pay-per-use, and service fees as different streams. Each requires its own model and growth trajectory based on market research and historical data.

3. Cost Structure : A thorough breakdown of fixed and variable costs helps in understanding the cash flow needs. A tech startup might have significant upfront development costs followed by lower operational costs , which should be reflected in the projections.

4. Profitability Timeline : Investors are particularly interested in when the business will break even and how the profit margins will evolve. A mobile app startup might project a longer runway before breaking even due to user acquisition costs , but expect higher margins once scale is achieved.

5. Scenario Planning : It's wise to present best-case, worst-case, and most likely scenarios. This shows preparedness for different market conditions. For example, an e-commerce startup might show how a change in consumer behavior could affect sales.

6. Investment Requirements : Clearly outlining the capital needed and its uses can build investor confidence . A biotech firm might need substantial investment in R&D before it can generate revenue, which should be clearly projected.

7. financial Ratios and metrics : key performance indicators like customer Acquisition cost (CAC), Lifetime Value (LTV), burn rate, and others give a quick snapshot of financial health and sustainability.

By integrating these elements into the financial section of a business plan , startups can provide a comprehensive view of their financial future. For instance, a startup specializing in AI for healthcare could illustrate its projections by showing how an increase in AI adoption in hospitals could lead to a significant uptick in its revenue over the next five years, while also detailing the R&D costs associated with developing new algorithms. This level of detail and foresight is what can set a business plan apart and truly measure its potential for success.

Mapping the Financial Future - Business Plan Evaluation Criteria: Measuring Success: Criteria for Evaluating Startup Business Plans

In the journey of a startup, the phase of capital acquisition is pivotal. It's a period marked by strategic maneuvers and persuasive pitches, where founders translate their vision into a compelling narrative for potential investors. This narrative is not just about the numbers; it's a holistic view of the company, its market potential, and the team's ability to execute the plan. The request for funding is more than an appeal for money; it's a testament to the company's readiness to scale and a reflection of its long-term viability .

1. Investor Alignment : Investors seek more than just financial returns; they look for alignment with their own portfolio strategy and values. For instance, a venture capitalist with a focus on sustainable energy is more likely to fund a startup that promises innovation in renewable resources.

2. market analysis : A thorough market analysis demonstrates that the startup understands its competitive landscape. Take the example of a tech startup seeking funds to develop an AI-powered tool. A deep dive into current market trends, existing competitors, and potential market share is crucial to justify the investment.

3. Financial Projections : Realistic financial projections are the backbone of any funding request. They should include not only optimistic scenarios but also contingency plans. For example, a SaaS company might project a 20% market penetration within five years, but also outline plans for different market conditions.

4. Use of Funds : Clearly articulating how the capital will be used can make or break the deal. If a biotech firm is seeking \$10 million, detailing that \$4 million will go towards R&D, \$3 million for staffing, and the rest for marketing and operations, provides transparency and builds trust .

5. Exit Strategy : Investors are interested in knowing the exit strategy, whether it's an IPO, acquisition, or another route. A mobile gaming startup might attract investors by showing a clear path to acquisition by a larger gaming conglomerate.

By weaving these elements into the funding request, startups can present a robust case for investment. It's a delicate balance of showcasing potential while remaining grounded in reality, and the ability to do so effectively can significantly influence an investor's decision. The ultimate goal is to ensure that both the startup and the investors are embarking on a mutually beneficial journey towards growth and success.

Securing the Capital to Grow - Business Plan Evaluation Criteria: Measuring Success: Criteria for Evaluating Startup Business Plans

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Six Criteria for Assessing New Business Opportunities

Entrepreneurs often begin with innovative ideas, but succeeding in a new business also requires objective assessment procedures. If your gut tells you a product, service or existing business is a risk you want to take, use objective measurements to better determine its likelihood of success. The bottom line is profitability. By using a number of business assessment tools, you can reduce your risk of buying or starting an enterprise that fails.

Assess the company's financial performance or potential financial performance. Evaluate historical sales revenues, profit margins of products and services, recent sales trends and cash flow. Examining cash flow lets you determine when you will get your money in and how much credit you might need to obtain. For example, your business might have excellent sales, but if the customers don't pay for 60 days, you might have to delay your salary, operate using your savings while you wait for your bills to be paid, or take out a loan to buy materials. If you are launching a new business, look for trade association data that shows financial trends for similar companies and expected trends for the coming year.

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Concept of swot, measurability characteristics of a market segment, three important financial ratios for competitors, what do cash flow statements have to do with liquidity, how to fill out a swot.

A thorough sales assessment will give you insight into how sales have taken place and where you might improve them. Spot trends by analyzing where products are selling and to what types of customers. For example, if a business is selling exclusively through independent retailers, you might have a chance to grow market share by entering mass retailers. Items with high profit margins might be producing most of the company's profits, but causing it to lose sales. Adding low-margin items might help it expand. Certain geographic territories with low sales may not be underperforming, but are simply underserved, offering opportunities to grow the business.

Market Data

Researching the marketplace will help determine if it is being underserved or possibly saturated. Detailed demographic data can show that even if the marketplace contains significant competition, you have an opportunity to successfully introduce a new business or improve the performance of an existing one. Demographics such as gender, age, race and marital status will help you better understand who your potential customers are. Analyzing the price points of your competitors will also give you insight into why people might be buying a particular product or service. Look at market trends, such as sales during the last three years, and look for advances in technology that might affect the marketplace. For example, a shift from PCs to mobile devices causes a decrease in demand for traditional hardware and software and more demand for smartphone apps.

Assets and Liabilities

Look at the assets of an existing business to determine how it depends on them. The business might depend on a recipe, trademark, copyright or patent for its unique selling proposition. A company's location, specific manufacturing process, grandfathered agreements or no-compete agreements with a supplier might be giving the business an edge, without which it would struggle to compete. A franchise might be thriving because of a restricted territory it owns or specific benefit it has been receiving from the owner's status as a minority. Check the assets of any business you plan to purchase to determine what would happen if you lose them. Look for liabilities, such as debts, lawsuits and expiring contracts and assets.

Relationships

Key factors in a small business's success often include personnel, endorsements and relationships. Key personnel, such as a well-known chef, IT whiz or top sales performer can make or break a business. Having a professional sports league or a celebrity endorse a business might be key to driving its sales. Having official sponsor, supplier or partner status of a trade association or other organization can also boost sales. Assess the impact of losing a key relationship on sales and revenue, and look at contracts before you buy a business that relies on any.

Opportunity Costs

Look at what entering a new business will cost you, in terms of lost revenue, personal time or sales connected to other business or opportunities you have. For example, using your cash to buy a business reduces your ability to pay down debt, lower interest payments, improve or upgrade current facilities, increase advertising and make other investments with that cash. You will need to devote your personal time to the new business. Accurately assess the number of hours you will need to spend on a new business venture and calculate the revenue your time would generate spent on another opportunity.

• Entrepreneur: Idea Evaluation Checklist
• U.S. Department of Small Business Administration: Do Your Market Research

Steve Milano is a journalist and business executive/consultant. He has helped dozens of for-profit companies and nonprofits with their marketing and operations. Steve has written more than 8,000 articles during his career, focusing on small business, careers, personal finance and health and fitness. Steve also turned his tennis hobby into a career, coaching, writing, running nonprofits and conducting workshops around the globe.

More From Forbes

Why A Thoughtful Business Plan Is Essential For Success

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Starting a business is an exciting journey, full of opportunities and challenges. For women entrepreneurs, particularly those transitioning from corporate life to entrepreneurship, the path can feel daunting. But with the right roadmap (a well-thought-out business plan), you can navigate the uncertainties and set your business up for success.

A business plan is more than just a document; it's your blueprint for building and growing your business. It outlines your goals, strategies, and the steps you need to take to achieve them. A strong business plan not only guides your decisions but also communicates your vision to potential investors, partners, and employees.

Here’s why a business plan is crucial and how you can create one that will steer your business toward success.

The Importance of a Well-Thought-Out Business Plan

1. clarifies your vision and objectives.

As you build out your business plan it forces you to think deeply about your business idea and if it’s a viable idea. What exactly are you trying to achieve? What are your short-term and long-term goals? By putting these thoughts on paper, you create a clear vision that will guide every decision you make.

2. Helps You Understand Your Market

Researching and writing a business plan requires you to analyze your market. Who are your competitors? Who is your target audience? What are the market trends? This understanding helps you position your business strategically and identify opportunities for growth.

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Best 5% interest savings accounts of 2024, 3. defines your strategy.

A business plan includes your marketing strategy, sales approach, and operational plan and outlines how you will achieve objectives. This strategic framework ensures that your efforts are aligned and focused on achieving your goals.

4. Secures Funding

If you need financial support to start or grow your business, a well-prepared business plan is essential. Investors and lenders want to see a clear plan for how you will generate revenue and repay any loans. A business plan that demonstrates a thorough understanding of your industry and a solid strategy is more likely to attract funding.

5. Guides Your Decision-Making

A business plan serves as a reference point, helping you make informed decisions that align with your long-term goals. By consistently referring to your business plan, you ensure that every decision contributes to the overarching vision and objectives of your business, ultimately driving growth and success.

6. Tracks Your Progress

A business plan includes milestones and key performance indicators (KPIs) that allow you to track your progress. Regularly reviewing your business plan helps you stay on course, adjust your strategies as needed, and celebrate your successes.

The bottom line is that creating a business plan is a crucial step in turning your entrepreneurial dreams into reality. It’s your roadmap, guiding you through the complexities of starting and growing a business. For women entrepreneurs, especially those transitioning from a corporate career, a well-thought-out business plan can provide the clarity, confidence, and direction needed to succeed. Take the time to craft a business plan that reflects your vision and sets the foundation for a thriving, profitable business.

Melissa Houston, CPA is the author of Cash Confident: An Entrepreneur’s Guide to Creating a Profitable Business and the founder of She Means Profit . As a Business Strategist for small business owners, Melissa helps women making mid-career shifts, to launch their dream businesses, and also guides established business owners to grow their businesses to more profitably.

The opinions expressed in this article are not intended to replace any professional or expert accounting and/or tax advice whatsoever.

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