Simplicity and understanding of the customer are the two most important elements of a good business plan.
Those who invest in start-ups see a lot of enthusiastic entrepreneurs and their business plans. Some obviously hit the mark. Others, more commonly, are missing important pieces.
Some are idea top-heavy. Others are full of credible numbers but lack a killer concept. The best and ultimately most successful business plans combine both.
Here are some five essential elements of a good plan:
- Elevator pitch. More formerly this is known as the executive summary, but functionally it is the condensed version of the concept that you would be forced to give if you had only a minute or two to summarize. In some ways, this is the most important piece of the entire equation.
- Target market. Who are your potential customers? Many good business ideas lack sufficient customers or a coherent plan to reach them. This is where the entrepreneur needs to do the most intense research prior to preparation of the plan.
- Growth potential. Is there a plan to gain market share? How? A full analysis is necessary of immediate and future competitors. Also, changes in technology must be anticipated, at least broadly, to make sure the growth plan is not built on shifting sands.
- Early investors, managers. It helps to have a team of early investors to help get the business off the ground. It also helps to have a management team in place, or at least a good conceptual framework for a team. A blue-chip team already suited up for duty gives prospective longer-term investors a more comfortable feeling about the plan.
- Cash flow plan. Admittedly, a cash flow plan is akin to a war plan — it only is good until the first battle. However, investors want to see entrepreneurs go through the effort of trying to predict cash flow during the initial months of operation. Detailed planning also can expose a conceptual flaw that can be corrected before it becomes a real problem.
There is nothing more exciting than a good business idea. Only a few ideas, however, are so groundbreaking that they blossom on their own. All good ideas must be accompanied by solid market research and wily instincts about the future. There also must be a coherent and realistic financial structure that allows the great idea to turn into a thriving, profitable business.
Entrepreneurs with the best business plans tend to be the entrepreneurs who succeed most often.