The Basics

K e y Topics Covered in This Chapter

r why you need a business plan

a format that tells readers what they want

to know

the importante of the executive summary

e how to handle each section of the plan

stylefeatures that will make your message

stand out
 B usI N E s s P LA N Is a document that explains a
business opportunity, identifies the market to be
served, and provides details about how the entrepre-
neurial organization plans to pursue it. Ideally, the business plan de-
scribes the unique qualifications that the management team brings
to the effort, explains the resources required for success, and provides
a forecast of results over a reasonable time horizon.
Every entrepreneur is encouraged to write a business plan, and
most take that good advice; those who don't quickly learn that ob-
taining outside funding is almost impossible without it. Lenders and
investors want to see a logical and coherent plan before putting their
money at risk. Who wouldn't?
Few entrepreneurs, unfortunately, are skdled at creating a writ-
ten document that simultaneously (1) makes the best case for the
venture, (2) avoids burying the exciting opportunity under a moun-
tain of data, (3) is engaging to read, and (4) gives prospective finan-
ciers the information they need to make a decision.
There are plenty of business plan services available, both in
major cities and online, that can help you develop a document. For
$1,200 and up, these consultants wdl take your information and
work with you to produce a complete, eye-catching plan. There is
also plenty of do-it-yourself software available for the business plan
writer. These plans, however, are only as good as the ideas and fore-
casts you put into them. They are no substitute for the substantial
thnking on which good plans are based, and that is why some ex-
perts suggest that the entrepreneur take control of the entire job.
 Writing a Business Plan 65

This short chapter cannot impart all the information you need
to write an investment-winning plan, nor can it offer details oE what
every plan section should contain. You'll find those details in the
books and articles mentioned in the "For Further Reading" section
of this volume. This chapter aims to impart the serious purposes of
a business plan and explain the key points that readers look for in the
many plans that cross their desks. If you are not a slullful writer, the
final section on style will help you get those points across.

The Purposes of a Business Plan

Ask any entrepreneur why he or she needs a good business plan and
you are likely to receive this answer: "You can't get funding without
one7'This is true, and it explains why many books, advisory services,
s o b a r e , and even M.B.A. courses have been developed to help
people write bulletproof, knock-'em-dead business plans. Many lead-
ing M.B.A. prograrns and venture capitalists even sponsor contests that
offer fnding to whoever writes the most compehng plan. The best
and brightest students flock to these contests, hoping to leave campus
with a degree and financial baclung for a start-up company.
Yes, a solid business plan is essential for any business that seeks
66
outside funding fiom banks, angels," venture capitalists-even rela-
tives. Absent a good plan, creditors and investors won't take you se-
riously. They will conclude (perhaps correctly) that you haven't
identified your customers or figured out how you will deal profitably
with them. The most tolerant funders wdl say "Come back and see
us when you've put together a complete business plan." The less tol-
erant will not give your business a second look.
But seeking funding is not the only reason to develop a solid
plan. There are several others:

The act of writing the plan wdl force you and your team to
think through a l l key elements of your business.

Trusted and experienced outsiders who review your initial

plan will help you identifi weaknesses, rnissed opportunities,
 Entrepreneur's Toolkit

unsupportable assumptions, and overly optimistic projections.

Finding and fixing these problems on paper wdl improve your
prospects with funders and wdl reduce the chance of future
operational failure.

A solid plan can be a blueprint for operating your business over

the first one or two years, increasing the likelihood of success.
The plan will tell you how much you can afford for personnel,
advertising, and other expenses. It w d specie target customers
and success factors.

The plan's financia1 projections can be used as a budget. Actual

results that fall short of planned results wdl prompt you to in-
vestigate and take corrective action.

These various purposes for the business plan suggest that you tai-
lor plans for different purposes. The intended audience should de-
termine how the plan is written and presented.

Suggested Format
Many venture capital firms review more than a thousand business
plans every year-and fund only a few. This means that they don't
have time to figure out what you're trying to say. Nor do they have
time to deal with people who haven't given them the information
they need. The same is true of banks and angel investors. Assurning
that you have a worthy idea, you will improve the odds of success if
you can grab the reader's attention and keep it. To do this, you must
address readers' concerns in a well-organized way.
Figure 5-1 contains a prototype format for a company we will
call Lo-Carbo Foods Company, a manufacturer of packaged break-
fast and snack foods having low carbohydrate levels. It aims to capi-
talize on the growing popularity in North America and Europe of
low-carb diets. The company's research estimates that twenty-nine
million Americans and eight rnilhon Europeans are now following
low-carb diets, which U.S. government studies have confirmed to
be effective in weight reduction and weight control.
 Writing a Business Plan
FIGURE 5- 1

Prototype Business Plan Format

Lo-Carbo Incorporated Business Plan

I. Contents
II. ExecutiveSummary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
III. TheOpportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
IV. The Company and Its Products (or Services) and Strategy . . . . . . . . . . . . . . . . .12
v. The Management Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
VI. Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
VII. OperatingPlan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Vlll. FinancialPlan ..................................................... 25

Appendix

Rsums of management team members. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..30

Supporting rnarket research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..32
Sales projections for initial products .................................. .40

There is nothing sacred about the format shown here. In fact, you
would be wise to tailor your plan format to the likely interests of your
readers, just as you would custornize the rsum you develop when
seeking employrnent. Thus, you should follow the first rule of every
form of writing: Know your audience. The goal in every case is to
give readers the information they need to make a decision. (For an-
other format and tips on plan writing, see the CIT/SBA tutoria1 at
www.smallbizlending.corn/resources/workshop/sba.h,or consult
the appropriate publications cited in the "For Further Reading" sec-
tion of this book.)
Let's consider each major section of this document in greater
detail.

Contents and Executive Summary

The Contents section (or table of contents) makes it easy for readers to
see at a glance what the plan has to offer and where it can be located.
 68 Entrepreneufs Toolkit

The contents should be followed by an executive summary, a short

section of two to three pages. In terms of sehng your plan to finan-
cial backers, this is the most important part of the entire document,
so take the time to get it right. The executive surnmary is not a pref-
ace or an introduction; instead, it is a snapshot of the entire plan,
something that explains your business to an intelhgent reader in only
a few rninutes. A well-written executive summary captures the in-
terest and attention of readers and prepares them for what follows.

The Opportunity

There is no point in starting or expanding a business unless the en-

trepreneur has identified a lucrative opportunity. Use this section to
describe that opportunity: the market factors driving it, its current
size, and its projected size in the years ahead. The point is to get read-
ers to see and appreciate the business opportunity you have identified.
So describe the opportunity in terms that are clear and compehng.
For the Lo-Carbo Foods Company, for example, you would use
this section to describe the latest findings about rampant obesity in the
United States and signs of the sarne in Western Europe. You would
point to research estirnating that twenty-nine d o n Americans and
eight d o n Europeans are now following low-carb diets, and you
would cite independent scientific studies that confirm the effective-
ness of low-carbohydrate diets. An overview of consumer spending on
health foods and weight control foods rnight also be provided here.
Use this section also to highlight the econornics underlying the
opportunity and the factors that d drive its success, such as market
penetration, product innovation, and so on. But don't get carried
away. Keep it brief, focused, and upbeat.
This is also a suitable place to cite the magnitude of the funding
being sought and to explain how it will be used in pursuing the op-
portunity. For example, the Lo-Carbo plan rnight include some-
' thinglike this:

h-Carbo is seeking $2.75 million in funding to pursue this opportu-

nity. The bulk ofthose funds will be used to exploit its current ruccess
 Writing a Business Plan 69

and growing interest in the mmpany>sexisting products by a national

vendor of high-protein/low-carbohydrate foods.
Although it is important to document the opportunity with ob-
jective data, don't turn this section into a boring "data dump." Don't
allow your compelling story to be buried under a mountain of facts.
Instead, summarize the data and explain its implications for in-
vestors. Put the actual documentation in an appendix.

The Company, Its Products (or Services),and Strategy

Use this section to describe the company, explain how it is orga-

nized, and state its essential purpose. Here is an example:

Lo-Carbo is a Colorado-based corporation. It was founded in 2001

with the goal ofserving a growing interest in a high-protein and low-
carbohydrate diet. lts experienced management team has developed and
test-marketed severa1 low-carbohydrate products, prirnarily breakfst and
snackfoods. These products are not merely low in carbohydrates; tests
have confirmed that they are also tasty and satizfyin~qualitiesthat
dflerentiate themfrom other low-carb foods, The products are as follows:

Mellow Morning, a whole wheat and barley breakfast cereal with

48 percentfewer carbohydrates than leading conventional breakfast
cereals. Mellow Morning meets the specifications ofthe leading low-
carb diets.

Crackle Brackle, a crisped, steel-cut oatmeal product for breakfast

eating and for baking. Like Mellow Morning, Crackle Brackle meets
the spec@ations of leading low-carb diets.
Compadre Lo-Carb Chips, the company's tortilla chip. It too meets
low-carb diet requirements while beingJavofu1 and satisfying.

Each ofthese products was well received in market tests (see the
Appendix for details) and is currently being sold through two regional
health food stores: Nutrirnarket Stores, Inc., and Pleasant lialley Farms,
Inc. Other products are in development.
 Entrepreneur's Toolkit

GOALS. Don't forget to include a subsection about the goals of

the company and its business strategy. Investors w d want to know
how you plan to grow. If there is a chance that the company wdl be-
come a tempting acquisition target for a larger, less innovative com-
petitor, mention this possibility. Here is an example:

h-Carbo has three goals:

1. To broaden its product line

2. To expand market penetration through stores and through a private

labeling agreement with one ofthe major diet companies (currently
in negotiations)
3. To expand the business to the point where it either becomes a domi-
nant player in the low-carbohydrate food niche or is acquired by one
of the packagedfood industvy giants. In this industry, small compa-
nies with one or two successftll pvoducts are often bought out at pre-
mium prices.
If your company's products are not yet market-ready, you should
reveal your plans for product rollouts. Also include an artist's rendering
of the final physical product. If your products are market-ready, go be-
yond the written description; include hgh-quality photographs.

Y O U R STRATEGY . Include in this or a separate section a discus-

sion of the company's strategy. Strategy is about differentiation and
competitive advantage. Explain what is different about your com-
pany's approach to the marketplace and how that difference will give
it a sustainable competitive advantage. Differentiation may reside in
the product or service-for example, a technically superior semi-
conductor that provides greater value to customers. O n the other
hand, differentiation may reside in your approach to customers, as in
Dell's initial decision to sell custom-configured personal computers
directly to users, bypassing the retail channel.
What makes your product or service, or means of delivery, dif-
ferent-and more desirable-in the eyes of customers? How wdl
that difference translate into a competitive advantage that will pro-
 Writing a Business Plan 71

duce profits and growing equity value? Investors want clear answers
to these questions. Spell them out here.

This "Company" section is also a fitting location

O W N ER S H IP .
for ownership information:

Who are the current owners, and what percentages do they

control?

How is ownership evidenced-for example, in terms of com-

mon and preferred stock?

e Have any options, warrants, or convertible bonds that could

expand ownership been issued?

* Which owners are involved in the day-to-day worlungs of the

business?

The Management Tearn

Investors are keen to know about the people behind the business,
whom they see as key assets. Specifically, what experiences or qual-

1s your competitive advantage based on a proprietary technol-

ogy or process? 1s that technology or process patented or
"patentable"? Does the company own patents, copyrights, or
valuable trademarks? If it does, when will they expire?
Many businesses are formed around one or another piece of
intellectual property. Some are key assets that impact competi-
tive advantage over a period of time. Readers of your plan d
want to know what steps you've taken to protect that property
and to keep technical and market know-how within the organ-
ization, where it will produce revenues and profits for investors.
,
72 Entrepreneur's Toolkit

ifications do they bring to the enterprise?"When I receive a business

plan," writes professor-practitioner Bill Sahlman, "I always read the
rsum section first. Not because the people part of the new venture
is the most important, but because without the right team, none of
the other parts really matter.'"

Where are the founders from?

e Where have they been educated?

Where have they worked-and for whom?
What have they accomplished-profssionally and person-
ally-in the past?
What is their reputation within the business comrnunity?
What experience do they have that is directly relevant to the
opportunity they are pursuing?
What slulls, abilities, and knowledge do they have?

How realistic are they about the venture's chances for success
and the tribulations it will face?

Who else needs to be on the team?

Are they prepared to recruit high-quahty people?

How will they respond to adversity?

Do they have the mettle to make the inevitable hard choices

that must be made?

How cornrnitted are they to this venture?

What are their motivations?

SOURCE: WiEarn A. Sahlman, "How to Write a Great Business Plan," Harvard Business Review,
July-August 1997, 101. Used with perrnission.
 Writing a Business Plan

HereS how Lo-Carbo's business plan describes its people:

The management team is made up ofloanne Galloway, D E Philip

Lindstrom, Gunter Schwartx, and Carlos Talavera. Tgethev, they bring
exceptional technical expertise and business experience to the enterprise.
Joanne Galloway hasjjeen years ofproduct and general manage-
ment experience with packaged food companies, most recently with
Gigantic Foods Corporation.
Philip Lindstrom has a Ph.D. in nutrition. He joined the company
in 2002 after workingfor ten years in product development for Be-
hemoth Foods.
Gunther Schwartx, the team's manufacturing expert, has been in
the processed foods business for twelve years with both Behemoth
Foods and Food Science Laboratories, a contract food research otgan-
ixation. Among Mr. Schwartx's accomplishments is the extrusion
process used to manufacture Snackarinos and Caloritos, two highly
succesrftrl packaged snack brands owned by Behemoth Foods.
Carlos Talavera left his position as vice president ofmarketing at
Healthtone, a leading packaged foods company, to join Galloway
and Lindstrom in founding h-Carbo.
Note: Complete rsums can be found in the appendix.
Most plans use an organization chart to indicate the reporting
relationships among key personnel. A table indicating names, titles,
and salaries is also useful, as in table 5-1.
Assurning that your company is a corporation, t h s is also an ap-
propriate place to identi@ the board of directors. You should indi-
cate the names of board members, their positions on the board, their
professional backgrounds, and their history of involvement with the
company.

Marketing Plan

If the "people" section of your business plan gets the most attention
Tom readers, the marketing plan runs a close second. Investors know
74 Entrepreneuis Toolkit
TABLE 5- 1

Lo-Carbo Inc., Key Personnel

Position Salary

Joanne Galloway CEO $85,000

Philip Lindstrom VP Product Developrnent $75,000
Gunther Schwartz VP Manufacturing $75,000
Carlos Talavera VP Sales & Marketing $75,000
Edward Johnson Financia1consultant Day rate
Diane Wolfe Adrninstrative assistant $40,000

that marketing is the activity most associated with success or failure.

An attractive product or service is essential, but a company will fail
if it cannot connect with customers. A sound and realistic marketing
plan is the best assurance that a solid customer connection will be
made. The plan should be clear about all aspects of marketing, in-
cluding the following:

Identification of customers

The number of potential customers and potential sales revenues

The requirements of various customer segments

The importance of purchase convenience, rapid delivery, prod-

uct custornization, and so on for these segrnents

Ways to effectively access each segment-through distributors,

a captive sales force, direct mail, e-commerce, or whatever

Appropriate sales and promotion approaches

An analysis of how purchase decisions are made

Customer price sensitivity

The cost of acquiring and retaining customers

The strengths and weaknesses of competitors and ways that com-

petitors are Uely to react when the company enters the market
 Writing a Business Plan 75

Every corporation must, by law, have a board of directors. But

the entrepreneur should go beyond the requirements of the law
in enlisting members. A board shouldn't be just a bunch of
warm bodies. Instead, it should be an effective sounding board
for ideas and a source of sage advice.
Recruiting board members should be a matter of the highest
importance. You want people who have abundant business ex-
perience and, if technology is essential to the business, consid-
erable scientific or engineering know-how. Board members
should also be respected in the broader business cornrnunity.
Their capabilities and integrity wdl speak volumes to whoever
reads your business plan, financiers in particular.

For your plan to be credible, these issues should be supported

with solid market intelligence. Surnrnarize that supporting intelli-
gence here, and refer readers to whatever market research you've
provided in the appendix.

Operating Plan

Whether you're in the business of designing products, manufactur-

ing them, acting as a distributor, or running an e-cornrnerce site, you
are faced with a host of operational issues. What supplier relation-
shps do you have or envision? How much inventory wdl be re-
quired? If you are a manufacturer, wdl you follow a job shop or
continuous flow operation? Which day-to-day operating chores wll
be handled internally, and which will be outsourced?
An operations plan considers the many details of converting in-
puts to outputs that customers value. What is your plan?

Financia1 Plan

If a company is already operating, it dhave (or should have) a set of

financia1statements: a balance sheet, an income statement, and a cachjow
76 Entrepreneur's Toolkit

~tatement.~ In a nutshell, the balance sheet describes what the company

owns-its assets-and how those assets have been financed (through
liabilities and the funds of the current owners) as of a particular date.
The income statement reveals the company's revenues, what it
spent to gain those revenues, and the interest and taxes it paid over a
specified period. Finally, the cash flow statement teus readers the
sources and uses of cash during the same period. Together, these
three financial statements reveal much to the trained eye of potential
investors. (Note: If you are not f a d a r with these statements, see
appendix A for an explanation of the basics.)
Generally, it's best to place the full financial statements in the ap-
pendix to your business plan. Use this space for key data Tom those
statements-data that will give readers the big picture of your busi-
ness and its intended future. Key among these data are your sales and
expense projections, described earlier in this book as a pro forma in-
come statement. For a company such as Lo-Carbo, readers would be
interested in a breakout of key items in the statement, such as the an-
ticipated revenues from various channels of distribution, as shown in
table 5-2. Here we see anticipated sales and sales growth by channel
and the percentage of sales represented by each.

TABLE 5 - 2

Forecast Revenues by Distribution Channel

(in $000 and % of Sales)

Net sales

Health food stores 112 100 160 80 200 38

Supermarkets O O 40 20 80 15

Private label business O O O O 240 46

Total Sales 112 100 200 100 520 99.

 Writing a Business Plan

TABLE 5- 3

Forecast Marketing Expenses (in $000 and % of Sales)

2005 % 2006 Yo 2007 Yo

Marketing expenses

Sales commissions 11 10 20 9 52 9

Research 70 63 80 36 85 15

Promotion 20 18 32 15 50 9

Total expense 101 91 132 60 187 33

Consider doing the same for key categories of operating ex-

penses, such as marketing cost, as shown in table 5-3.
Naturally, sales projections and other item in these pro forma
statements are based on assumptions. Experienced investors are keenly
aware of this and wdl want to know what those assumptions are and
why you made them. Make that part of your discussion.

Every business plan is a combination of style and substance. Not

being wordsrniths, most entrepreneurs concentrate on the substance
and shortchange the style. That's unfortunate, because inattention to
style makes a plan dull and difficult to read.
One remedy is to work with a writer who has experience in
business plan writing. Another is to be your own wordsmith and
observe the rules of good writing: Use words sparingly, keep sen-
tences simple, make the most of design elements, and use graphcs
judiciously.
78 Entrepreneur's Toolkit

Some people learn best fiom written material. Others are more
receptive to the spoken word. Still others-and that includes
most of us-learn from pictures and graphic representations of
numerical data. So it's a good idea to use graphics to surnmarize
your financia1 data.
Harvard professor Bdl Sahlman suggests a "time to positive
cash flow" graph like the one shown here. This image helps the
investor see at a glance the expected depth and duration of neg-
ative cash flow, as well as the relationshp between the invest-
ment and the potential return. "The ideal, needless to say," says
Sahlman, "is to have cash flow early and ofien. But most in-
vestors are intrigued by the picture even when the cash outflow
is high and long-as long as the cash inflow is more so."

45% 200%

rate of return per year

SOURCE: William A. Sahlman, "How to Write a Great Business Plan," Harvard Business Reviau,
July-August 1997, 104.
 Writing a Business Plan

Use Words Sparingly

In the business world, shorter is always better if it cornrnunicates the

required information. So heed Rule 17 in Strunk and White's time-
less Elements ofStyEe, and ornit needless words.

Vigorous writing is concise. A sentence should contain no unnecessary

wovds; a pavagvaph no unnecessavy sentences;for the sarne reason that a
dvawing should have no unnecessary lines and a machine no unneces-
sary parts. This requires not that the writer make a11 his sentences shovt,
ov that he avoid a11 detail and treat his subjects only in outline, but that
every word t e l l ~ . ~

This quote from Strunk and White is itself a perfect model of

their rule. They use no unnecessary words; every word makes a con-
tribution. Economy of words has two big benefits for the business
plan writer: Your key messages wdl stand out, and economy of
words saves your reader's valuable time.

Use Simple Sentences

The sentence is the basic unit of written expression. Most sentences

make a statement. The statement can be simple or complex. Con-
sider these:

1. The growing popularity of low-carbohydrate diets has created

a business opportunity for makers of low-carb foods.

2. On the one hand we witness rising levels o obesity among

chddren and adults, both in North America and in Western
Europe, which in turn have increased the popularity of low-
carb diets, which in turn have created a business opportunity
for Lo-Carb Company and other makers of low-carb foods.

The first sentence, unlike the second, is spare and to the point.
It wdl more likely register with readers. It does not contain all the
80 Entrepreneur's Toolkit

information found in the second. If that information is important, it

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

Use Design Elements to Lighten the Readeds Load

Readers of your business plan are busy people who have learned to
slum; they drdl down only to relevant details. You can facilitate their
slumming through the use of design elements. Design elements in-
clude headings, subheads, and short blocks of text. Even white space
can be used as a design element. All are useful in long documents.
Used judrciously, they can

make your written documents more inviting to the reader

improve reader comprehension

help speed the reader through your material

U S E HE A DI N G S AN D SUBHEADS .Headings and subheads signal

that a new or related topic is about to begin. They give your work
greater eye appeal and "slumrnability." You can also use headings and
subheads to impart key ideas. For example, our heading "Use Head-
ings and Subheads" is also a key idea. A time-constrained reader can
gather the key points of any section in your business plan by simply
reading these headings and subheads.

Long, uninterrupted blocks

B R E A K U P L O N G BL O C K S O F TEXT.
of text are off-putting to readers and are difficult to slum. Headings
and subheads can help you break those blocks into identifiable small
bites. So can short paragraphs. Some experts recomrnend that para-
 Writing a Business Plan 81

graphs average no more than two hundred words-about five sen-

tences, or 1.5 inches of single-spaced typing.
Nurnbered lists are another effective way to break up long, in-
timidating blocks of text and to increase the irnpact. You can use
nurnbered lists to surnrnarize key points or to get your ideas across
quickly, as in the following example:

Our study ofthe market for low-carb foods uncovered four primary
channels for reaching end-use customers:
1. Health food retail stores (currently 34,000 in the U.S. alone)

2. Stand-alone low-carb food stores (currently only 43, but growing

quickly in numbers)
3 . Traditional grocery stores (health food section)
4. Private labeling ofproducts sold through one or more ofthe low-
carb diet plans

Notice how the numbered list breaks up the page and gets con-
clusions across in a way that they cannot be rnissed.
Bullets can serve the sarne purposes as nurnbered lists. Bullets
are sometimes the best way to get idormation across clearly and
succinctly-if not elegantly. For example, you might use a bulleted
list when you

want to highlight a sequence of actions

need to organize a list of items

need to list parts of a whole

Bullets (or numbers) are not needed when your list has only one
or two elements. In these cases you can usually get by saying some-
thing like this:

Focus groups identijied two problems with our competitor's low-carb

tortilla chips: They taste like cardboard and cause gastric distress.
 Entrepreneur's Toolkit

Let Graphics Teu Part of the Story

Business plans inevitably contain lots of numerical data. When it

comes to transrnitting numerical data quickly, bar charts and pie
charts are hard to beat. Readers can see at a glance what they would
otherwise have to extract Grom many tedious lines of verbiage and
numbers. Which of the following would you rather read? Which of
the following would make a more memorable impression?
Text-only example:

Our survey found that 2 percent of the people who come downtown in
a typical day do so by bicycle. Some 9 percent arrive by public trans-
portation. Thirty-jive percent respond that they walk to the downtown,
while the largest single group-54 percent-arrive by automobile.

Text and graphics example (see figure 5-2):

According to our survey, people arrive downtown by various means,

most by automobile.

Don't get carried away with design elements. Word processing

software gives you an arsenal of design features: boldface, italics,
dozens of font sizes and styles, clip art, chart-malung tools, and
so forth. Used judiciously, these add to the appearance and read-
abdity of your text. Overuse them, however, and you wdl cre-
ate the opposite effect and make your work appear amateurish.
So keep it simple.
There is no general rule about the appropriateness and inap-
propriateness of design features. Every piece is unique. When in
doubt, obtain a professionally produced business plan of another
company and use it as a model.
 Writing a Business Plan
F I G U R E 5- 2

How People Reach the Downtown

Public Transport Bike

Notice that tehng the story with a graphic doesn't necessarily

save space, but it gives your audience a break from reading text, and
it generally has more impact.

Final Thoughts
As you develop your business plan, always keep the interests of your
readers in rnind. Put yourself in their place. Your audience is looking
for convincing evidence that you have found a real business oppor-
tunity-one with substantial growth possibilities. Considering the
risks they will be taking with their money, they want to see major
upside potential.
Your plan's readers will alo be looking for clear indications that
you have done your homework-that you understand the market,
have targeted the right customers, and have developed a sound strat-
egy for profitably transacting business with them. Prospective in-
vestors want assurance that you and the management team have the
knowledge, experience, and drive to turn an opportunity into a
profitable business. And what is important to potential lenders and
84 Entrepreneur's Toolkit

Business plan software programs are available for $200 or less.

Business PlanPro is one example. Some matchmaker firms even
offer downloadable templates that provide the basic structure of
the plan and ask you to "fill in the blanks" for the component
parts, including cash flow and sales projections. For software and
templates, search the Internet using "business plan" and "busi-
ness plan software" as keywords.

investors should be just as important to you. So as you write your

plan, stop periodically and ask yourself, 1s this a real opportunity?
Do I understand the market and the customers I hope to attract? Can
we really make this thing work?
Finally, tell your readers how they will get their money out of
the company.
Investors want an exit strategy: a buyout by management, an ac-
quisition by another company, an initial public offering of shares,
and so on. Even if you plan to be in the business for the long haul,
your investors want liquidity at some point-and the sooner the
better.

Summing Up

Keep the audience foremost in your rnind as you develop your

business plan.

Your business plan should tell readers in a compelling way

everything they need to know to make a decision.

Although the principal reason for writing a business plan is to

obtain outside funding, the act of writing it will force the man-
agement team to thnk through all key elements of the business.
 Writing a Business Plan 85

The executive summary should, in compelling terms, explain

the opportunity, tell why it is timely, show how your company
plans to pursue it, describe your expected results, and provide a
thumbnail sketch of the company and the management team.

Among other things, the plan should state the company's goals
and explain how investors will eventually cash out.

Pay attention to style. Use as few words as necessary to get your

points across. Avoid long, complex sentences when possible.
Make your document easy to skim by using headings, sub-
heads, white space, and numbered and bulleted lists to break up
blocks of text.