ABSTRACTA business plan is a formal statement of a set of business goals, the reaso

BUSINESS PLAN

What is a Business Plan?A business plan is a 20 to 40-page document that serves the dual role of being an internal road map for your company and an external sales tool for potential investors, customers, and partners. Your business plan describes the entirety of your venture: the problem you’re solving, your solution, the technology behind it, and the size of your target market, the customers, the competition, your business model, team, financial needs, and exit strategy.The major benefit of writing a business plan is that it forces you to think things through early; it ensures you have well-defined venture goals. Clear goals help generate a clear path for you and your team to follow as you begin to implement your venture.

Change is inevitableStart with a strong, but adjustable plan that you can modify according to your ultimate goals. It’s almost guaranteed that your business plan will change over time as you verify your projections and identify potential problems. View your business plan as a living document; the plan grows as the idea matures. Writing the plan is not a one-time effort.

Nothing but the truthFirst, be careful what you put in your business plan. Someone—perhaps an investor—will hold you to it. For example, the plan normally includes milestones that investors expect you to meet, (and, in fact, your next round of funding may be contingent upon doing so,) so don’t make crazy promises you know you can’t keep. Taking money from an investor because you intentionally or unintentionally provide misleading information is not a game you want to play! Never lie or even exaggerate about your technology, your background or your capabilities. The truth will come out sooner or later.

The business plan covers what you intend to do with your business and how it will be done. The process of writing down what is involved in bringing your idea to reality requires dealing with the why, what, who, how, where, when, and how much of your venture. Writing a business plan forces you to take a deep look at your idea and how you will turn it into a business. Doing so helps you recognize areas that need rethinking or support. Your business plan will typically include the following. Business description—

What do you plan to do; Why are you starting the venture? Market analysis—Who will be your customers; what do they want from

you? Competitor assessment—Who will you compete against; what do these

competitors offer? Marketing plan—How will you reach your customers? Operating plan—How do you plan to implement your idea? Financial plan—How much money will it cost, and where will you get

the necessary funds? Executive summary—What are the fundamentals of the venture?

Who uses a Business Plan?

What is the need or purpose of a business plan?

1. Set specific objectives for managers. Good management requires setting specific objectives and then tracking and following up. I'm surprised how many existing businesses manage without a plan. How do they establish what's supposed to happen? In truth, you're really just taking a short cut and planning in your head--and good for you if you can do it--but as your business grows you want to organize and plan better, and communicate the priorities better. Be strategic. Develop a plan; don't just wing it.

2. Share your strategy, priorities and specific action points with your spouse, partner or significant other. Your business life goes by so quickly: a rush of answering phone calls, putting out fires, etc. Don't the other people in your business life need to know what's supposed to be happening? Don't you want them to know?

3. Deal with displacement. Displacement is probably by far the most important practical business concept you've never heard of. It goes like this: "Whatever you do is something else you don't do." Displacement lives at the heart of all small-business strategy. At least most people have never heard of it.

4. Decide whether or not to rent new space. Rent is a new obligation, usually a fixed cost. Do your growth prospects and plans justify taking on this increased fixed cost? Shouldn't that be in your business plan?

5. Hire new people. This is another new obligation (a fixed cost) that increases your risk. How will new people help your business grow and prosper? What exactly are they supposed to be doing? The rationale for hiring should be in your business plan.

6. Whether you need new assets, how many, and whether to buy or lease them. Use your business plan to help decide what's going to happen in the long term, which should be an important input to the classic make vs. buy. How long will this important purchase last in your plan?

7. Share and explain business objectives with your management team, employees and new hires. Make selected portions of your business plan part of your new employee training.

8. Develop new business alliances. Use your plan to set targets for new alliances, and selected portions of your plan to communicate with those alliances.

9. Deal with professionals. Share selected highlights or your plans with your attorneys and accountants, and, if this is relevant to you, consultants.

10.Sell your business. Usually the business plan is a very important part of selling the business. Help buyers understand what you have, what it's worth and why they want it.

11.Valuation of the business for formal transactions related to divorce, inheritance, estate planning and tax issues. Valuation is the term for establishing how much your business is worth. Usually that takes a business plan, as well as a professional with experience. The plan tells the valuation expert what your business is doing, when, why and how much that will cost and how much it will produce.

12.Create a new business. Use a plan to establish the right steps to starting a new business, including what you need to do, what resources will be required, and what you expect to happen.

13.Seek investment for a business, whether it's a startup or not. Investors need to see a business plan before they decide whether or not to invest. They'll expect the plan to cover all the main points.

14.Back up a business loan application. Like investors, lenders want to see the plan and will expect the plan to cover the main points.

15.Grow your existing business. Establish strategy and allocate resources according to strategic priority. You can find more information about growing your business with a business plan by reading.

http://www.entrepreneur.com/article/83818#ixzz2uVRtnDfZ

How to prepare a business plan?Steps to Preparing Your Business Plan1. Research: Get as much information on your proposed business as possible. Talk to those already in business, visit the library, learn all you can from trade associations and trade publications, conduct research on-line and find out what help is available from local and federal government agencies.2. Make your projections: The more you know about your business, the more accurately you can make intelligent projections of sales and potential profits for the first few years. This knowledge is invaluable.3. Capital: Money. Accept the fact that it always requires more money than you’ve anticipated to start, or improve your business. Have enough working capital on hand and back-up resources just in case the new business does not prosper as you had anticipated.4. Competition: Know thy enemy. Study your competition carefully; they’ve been in the trenches and have already experienced what you are about to discover. Read their literature. There is a reason your competitor is in business, and you’d better find out what it is – and how you can turn their customers into your customers.5. Location: Location. Location. If you can’t go to your customer, your customer must come to you – so make it easy. Pick a prime location or invest in targeted advertising.6. Image: What kind of public image do you want to create with your service, merchandise, quality, décor, packaging, personnel vehicles, advertising and pricing? How does that image correspond with the customer you are trying to attract?7. Keep Records: Complete, accurate records are needed to file taxes, to properly manage your bank accounts and most importantly, to give you guidance. Always know where your business stands financially.8. Professional Help: In addition to professional and confidential SCORE counseling, rely on a competent lawyer, accountant, banker and insurance broker to fulfill your business needs. A marketing professional in you corner may also be needed.9. Purchasing: Knowing what, when and where to buy and how to gauge inventory can make or break you. It allows you to conserve working capital, reduce obsolescence and meet and beat the competition. Know what sells.

10. Profits: This is the bottom line for which you are going into business. Make sure that all expenses are accounted for, including your own living costs, possible losses, shrinkage, unseen costs such as fringe benefits and taxes. Then add a legitimate profit to your risk. If the profit does not come out right, perhaps you should rethink your idea.

Outline of a Business PlanBusiness plans vary from company to company, but most use the following outline. A business plan consists of:• The executive summary• The problem or need you’re meeting• Your solution• Technology and IP• Size of opportunity/market• Customers and how you will reach them• Competition• Business model• Team• Financial needs• Exit strategy• Appendices

We’ll look at each individually.

The executive summary is a very important, 2 to 5-page document included at the front of the business plan that summarizes the plan’s main points. It’s not an easy task, but in a few pages you need to convey the essence of the venture. It must be kept short and should contain only the key points from the important sections of the full plan.

The importance of the executive summary can’t be overstated, as it’s often used as a stand-alone document, and can be a powerful selling tool. It may be the only chance you have to catch an investor’s attention; initially, it’s probably the only part of the business plan they’ll read. It’s common for a potential investor to say, “Send me the executive summary, and if that interests me, I’ll get back to you”—so make it good.

The problem you’re solving or the need you’re filling In this introductory section, state the problem you will solve, the need you will fill, or the “pain” you will alleviate. Don’t shy away from aggressive terms and phrases in this section—you want to grab the reader’s attention. For example, let’s say you’re trying to commercialize a treatment for Alzheimer’s disease. You could say, “Alzheimer’s disease is a growing, worldwide problem expected to affect X number of people in the US alone by 2020. Currently there is neither an effective diagnostic tool nor a recognized cure for this crippling ailment, which devastates not only those with the disease but their relatives and friends.” Make people stand up and take notice.

Your solution In this section, state in general terms how you will solve the problem, fill the need, or alleviate the pain. Continuing with the Alzheimer’s example, you could say, “Our solution is based on technology originally developed by, and licensed from, Massachusetts General Hospital. It is based on using the same molecule to act as either a diagnostic test in conjunction with an MRI machine or as a therapeutic cure. Initial tests have provided very positive results for both applications and, so far, there have been no signs of toxicity in laboratory mice.”

Your technology and IP In this section, provide more detail about your technology. Explain specifically how it works, but don’t overdo the technological details; the explanation should be comprehensible to an intelligent layman with some knowledge of the field.

Tell your audience if the technology is yours or licensed (or optioned), and, if so, from whom and under what general conditions. Describe the status of your IP protection. What patents have been granted, applied for, will be applied for? Supply the patent numbers or the application numbers if you’ve already published. If you’re protected by other forms of IP, include them.

Be careful not to reveal any truly confidential/proprietary information at this stage because it’s rare that you will have signed a CDA (confidential disclosure agreement) with the person receiving the plan. By same token, don’t be so paranoid that you fail to discuss enough of your idea to help people understand the concept. Venture capitalists will rarely, if ever, sign a CDA—if they do, it’s usually in the due diligence or later phases of your relationship. You and your management team need to sit down (preferably with an advisor, mentor, or IP counsel) and decide ahead of time just how much you will reveal without a CDA.

Size of opportunity/market If you’re creating a brand new market it can be difficult to gauge its potential size. For example, in the 1940s, the estimated number of future computer purchases was between 10 and 100. If you’re introducing a better technology into an existing market, the estimate can be more accurate. But regardless, you and your potential investors need to feel comfortable that the potential market is large enough to sustain a profitable business.

Customers and how you will reach them Points to emphasize In this section include who your target customers are, your strategy for selling to them, what channels you will use, and when. The more your can demonstrate an understanding of your target markets and customers, the better. The ideal situation is to already have actual, satisfied, paying customers; this adds credibility when looking for funding, particularly if they supply letters of reference. Of course this may not be possible in the early

stages of your venture, but never forget the power of a paying customer to make potential investors feel good (i.e., sign a check.)

Competition As with customers, the better you know the competition, the better you look. Who are your competitors? Are they selling the same or different technology? Who is already in the field, and who are the likely new entrants? Are they both domestic and foreign? What are their strengths and weaknesses?

Business model A business model is a general outline of the way your company will make a profit and how long it will take you to become profitable, or at least become cash flow positive. The most basic business model is simply producing a product or service and selling it directly to customers; if revenues are greater than production and business costs, the company makes a profit. In this section you need to explain how and where you will design or manufacture your product (in-house, outsource, to whom, etc.,) as well as what the basis for generating revenue will be (e.g., selling advertising as part of a search engine.) In addition you can use this section to explain your competitive advantage and why it’s sustainable in the long term. Demonstrate your awareness of the major risks in each category (technical, market, business, and environmental risks) and show that you’ve thought about ways to minimize them when and if they arise. In addition, it looks good to investors if you can demonstrate that your management team is sufficiently experienced to deal with unpredictable risks and problems should they occur. This leads us to team.

Team Use this section to convince potential investors that they can trust you and your team with their money. Does your team:• have the knowledge, experience, diverse skill sets, integrity, drive, persistence, and passion required to make it happen, in spite of the adversity and obstacles that are likely to arise along the way?• understand its limitations? Are you willing to seek help and listen, even if it means hiring your own replacement or boss?• work with solid, experienced directors and advisors?

Although important, this section of the plan is only the first step in the convincing process. Personal interactions and the due diligence process also play an important role.

Financial needs This section should include:• The amount of money the venture is seeking and over what time frame• How the money will be used• The major assumptions involved• When you will achieve cash flow break-even and profitability

Don’t discuss how much equity the team is willing to give up for the investment needed. That discussion, hopefully, will occur later on, if the business plan, slide show and elevator speech have gone well. The detailed financial calculations (e.g., profit and loss balance sheet, cash flow statement, use of funds), along with detailed assumptions, should be contained in the appendix. These financials must bear out and be consistent with your statements throughout the plan.

Exit strategy The exit strategy details how investors will get their money back (hopefully with a healthy return) and exit your company. Some exit strategies options are:• Initial public offering• Merger/acquisition• Buyout by a strategic partner

Get everyone on the same pageWhen the business plan is done, make sure that everyone on your management team understands it and believes in it. You want everyone on your team to be able to demonstrate a complete knowledge of both the technical and non-technical aspects of the business. In other words, your team members must not only understand their individual specialty but also understand and communicate the fundamental purpose, goals, and business strategy of the venture. Investors want to see the total package.

Finally, be passionate about your idea and your venture! If you’re not excited and passionate about your idea, why should anyone else be?

The slide showThe slide show is a PowerPoint presentation given in front of investors. It should be brief (about 20 minutes), punchy, and tell your story clearly and succinctly. Make sure it includes the major components of your business plan, but keep the details to a minimum unless asked. Some general tips:• Keep it short. The audience will ask lots of questions if they’re interested. Your job is to make the presentation interesting enough that they keep asking questions and invite you and your team back for further discussions, or send someone to your facility to see what you’re doing.• Stay away from techno-speak, unless there is a technologist in the room who asks specific questions. Even then, be careful not to lose the rest of your audience. Sometimes it’s useful to schedule a separate meeting with the technologist after the initial presentation.• Ask about the next steps in the funding process before you leave the room.• Learn as much as you can about your audience before the presentation, and tailor it to their needs and interests.

• Rehearse, rehearse, and rehearse! Use advisors, mentors, and each other during rehearsals to role-play as tough audiences, provide honest feedback, and prepare answers to likely questions ahead of time.• If you’re using a projector, don’t handout the hardcopy until you are finished.• Look directly at the audience, not at the screen behind you.• Know in advance how the equipment in the room works (very important!)• Speak slowly and clearly.• Answer questions honestly. If you don’t know the answer, say so, and tell them you’ll find out.• One presenter is usually best—usually the team leader/CEO. However, the leader should not answer all the questions. Make sure all team members get involved.• When answering questions, don’t be defensive, but don’t allow people to steamroll you either.

The elevator speechAnother important skill is to be able to explain your plan in 60 seconds or less (the amount of time you might have riding an elevator with a prospective funder). Your elevator pitch is a clear, simple, and concise description of the problem your venture solves, how it solves the problem, and the benefits involved. It should also express your passion. In person, it can be used to get the listener to ask for more information, or schedule a meeting.

A good elevator speech isn’t an easy thing to pull off. Write it down, revise it, and practice it until you have it right. Use your mentors and advisors for help; all team members need to know it cold.

FINANCING A BUSINESS PLANThis critical section discusses the various forms of capital available to you, their advantages and drawbacks, and the ramifications of acquiring the funding for you and your venture.

In this section, you learn:• The different forms of capital, including:› Personal debt› Equity› Grants› Customer advances› License payments› Bank loans› Real revenues and profit• That not all money is the same—each form of funding comes with its own set of expectations, obligations, and responsibilities• What investors are looking for in your venture?

The seven forms of capitalSeven different forms of capital are available to you as an entrepreneur. We’ll go into detail on each form in a moment, but first there are a few things you should know about capital.First, the money needed to start and operate your new venture can, and usually does, come from many different sources. Some sources are more relevant than others, depending on where your venture is in its life cycle: personal debt, equity, and grants usually come earlier, while customer advances, license payments, bank loans and revenues come later. Some sources are more difficult to obtain than others; for instance, the large majority (greater than 80%) of technology startups do not receive venture capital (VC) money. Each source of funding has a different set of obligations and responsibilities that goes along with it.And lastly, it does not always make sense to accept money just because it is offered. Some money isn’t good for your health—for example, accepting money from unsophisticated angel investors who then try to manage your company; or from venture capitalists with a timeline and set of expectations

very different from yours. This can severely affect how you operate your business—or even whether you are able to operate your business at all.Personal debtMost ventures start with the founders’ own money. Often this means going into debt. The founder can max out credit cards, take a second mortgage, borrow from whomever she can, or loan her own savings to the company. While this is an easy option if you happen to be wealthy, it usually provides only limited funds—usually in the range of $100K-$200K—and comes with the potential for personal financial ruin. You could lose your house, and could end up making enemies out of friends if you can’t repay on them on time, or worse, not at all. While this sounds terrible, keep in mind that entrepreneurship is all about taking risks, and that, historically, most ventures have been started with some of the founders’ own money.EquityEquity financing is the purchase of shares of stock in return for money invested in the company. A company typically has no formal obligation to repay equity. You give your investor a piece of paper called a stock certificate in exchange for a cash investment. The catch is that the investor expects there will be a liquidation event, at some point your company will be sold or go public. The investors will sell their stock, and hope to make a big profit.Like all forms of capital, equity has an upside and a downside. The upside is that investors share your viewpoint because they take the risk with you. They get their reward when you do. If you need additional equity to grow, investors often have extensive contacts and can help. Investor cash can help attract top-notch management teams.The downside? The founder gives up a percentage of her company’s ownership. She loses a measure of control, and outsiders even have a say over her salary. (Although this is not always bad, as having outside investors can help keep you on your toes!) Another danger of equity is that a company can get into the “more where that came from” syndrome, always looking for investors but never making a profit.

People who can have an equity share in your company include:• Yourself—as mentioned above, some founders invest their own money, usually in the earliest stages. Founders usually have equity even without putting in money, however, as they receive it for starting the company, creating the technology, etc.

• Friends, Family and Fools (FFF)—this money is also early-stage and tends to be smaller in amount than angel or VC dollars. The money is generally invested out of friendship and is based on less sophisticated, or no, due diligence. Further, FF&F investors are typically unable to help the founders with advice/mentoring, customer or other contacts, recruiting, etc.• Angels—angel investors are high net worth individuals who often invest for both fun and profit. Angels usually invest from $25K to $100-$200K. Angel groups, which consist of professionally managed angels banded together, might invest up to $1 to $2 million.• Venture capitalists—though you’ve probably heard a lot about them, VCs fund a very small percentage of all startup companies. Each VC group has its own criteria regarding the industry it invests in, the size of the investment, the stage at which it will invest, etc. However, almost all VCs invest significant dollars and are looking for a 10x or more return on investment.• Strategic partners—many new ventures form a partnership with a larger company (particularly true in biotech.) The larger company may make an equity investment (usually for 5-20% of the company). The partnership may sometimes involve a license, or the large company may only wish to have a “window” on the technology and an option to license it or buy the company if things go well. Partnership money is usually invested after you’ve developed a proof of concept or prototype, but sometimes the partner will produce or pay for the prototype itself.• The public—an Initial Public Offering (IPO) is a liquidity event. This is the part where investors have an opportunity to get their money out, hopefully with a significant gain. IPOs do not provide funds early in the life of the venture and normally only make sense after the company has a history of real revenues and profits.GrantsGrants are inexpensive: there is no interest charged, no need to pay it back, and you don’t give up any equity. There are two popular government programs that give grants to high-tech companies: the SBIR (Small Business Innovation Research Program) and STTR (Small Business Technology Transfer). These grants are distributed in two phases, with the first providing up to $100K to pay for a proof of concept, and the second up to $1 million for development. Solicitations are usually twice a year; many workshops around the country provide information on applying for the grants. (For a good explanation and more information on SBIR/STTR, visit http://grants.nih.gov/grants/funding/sbir.htmA Cooperative Research & Development Agreement (CRADA) is a grant in which a government lab works with a company to develop or test a particular technology/product. The government doesn’t provide any money to the company, but CRADAs can be an excellent way to obtain skills and

equipment, and to test a product. For more information on CRADAs, see http://www.usgs.gov/tech-transfer/what-crada.htmlAnd then of course there is the world of private grants. There are numerous foundations and other organizations around the country (including the NCIIA) that provide funds to technology entrepreneurs.. Several websites are devoted to this topic—The Foundation Center (www.foundationcenter.org) is a good starting place.Business plan competitions provide another kind of grant money. If your school runs a business plan competition, you’re probably already familiar with its benefits. Not only do you get the chance to win some hard cash for your business, you have a motive to get your business plan written, and probably some guidelines to help you make it work. Customer advancesAn often-overlooked source of capital is customer advances. If a customer needs your product badly enough they may provide up-front, progress, or milestone payments prior to actual delivery of the final product. However, unless you are doing contract research or are running a product development company, it’s rare to obtain an advance until the product or service has been at least partially developed. Customer advances rarely serve as start-up capital.License paymentsLicense payments—up-front and milestone payments—are a useful source of capital. They do not have to be repaid, require no interest payments, and do not require giving up equity. You do, however, have to give up some rights to the use of your technology.License payments may be paid at the very early stages of a company—generally as soon as you have applied for a patent. Some companies use licensing as a financing strategy by licensing their technology to markets that they are not interested in, or capable of, pursuing.

Bank loansBank loans are rarely a source of capital until a company has revenue and profits, or at least significant physical assets that could be used as collateral for a loan. That said, loans have a few things going for them: there’s no dilution of ownership, as the original owners keep it all. As long as the debt payments are made, the owners give up no operational control. And the company has a strong impetus to turn a profit as soon as possible because the owners must make cash to serve the debt and have access to additional credit.

There’s a downside too, of course: not all companies have access to debt financing; lenders want collateral in land, equipment, or a patent. If the company doesn’t make payments, it loses the collateral.Another interesting thing to note about bank loans: when you don’t need the money, banks are happy to lend it to you. If your need is great, your ability to pay back probably isn’t so good, and then they’re less likely to lend to you.Revenues and profitsRevenues and profits are the holy grail of financing. Though self-funding may restrict rapid growth, and outside investment or debt may be appropriate for you, being able to use your profits to fund your company is the right position to be in. It is possible to do this: one example is the BOSE Corporation, which never took outside equity, yet has $2 billion in revenue and is still private and profitable. BOSE accomplished this by using real profits invested back in the business to grow and prosper.What are investors looking for?After all we’ve said about the different forms of capital and what they mean to you and your venture, how do you position yourself so that you look good to potential funders? You can get inside investors’ heads by thinking about the six criteria by which they assess businesses. Here are some basic questions that an investor asks in each of these categories. Review this list and see whether your idea/venture really has a chance of making it, or perhaps doesn’t have what it takes.Management. Is the management team proven? If it’s not proven, what are its attributes? How can the missing elements be filled with additional seasoned managers? How committed is this team to the business? Angels and VCs will look closely at your management team.Market. How big is the market for this product or service? Typically, a VC wants to see a market for a technology product that is, in total, greater than $1 billion. A good market is one in which customers feel real pain, where they will readily adopt your product because of an immediate and urgent need.Competition. Is this company the first to market? Is it defining the market? Will it be able to quickly gain market share at least in a specific segment or niche? How many competitors are out there? How good are they?Product/technology. Is the product difficult to replicate? Does it have some proprietary position (meaning patents or other intellectual property protection)? Will it take the competition a long time to replicate what the company does?

Ability to forecast results. Does the business plan present a credible story that suggests that the company can forecast results? The financial plan is a financial expression of your business strategy. It shows the interrelation of timelines, functions, and hires, and reflects a detailed understanding of the business.

Why is a Business Plan Important?Nearly all business experts agree on one thing: the importance of drafting a business plan. A lot of new businesses are carried away and figure their passion and optimism are enough to build a successful company. Others say they were just too busy to develop a formal business plan. But operating without a plan can prove even more time-consuming in the long run.The benefits of having a business planThe time you invest in your business plan will pay off many times over. Some of the most obvious benefits you can gain from business planning include An opportunity to test out a new idea to see if it holds real promise of

success A clear statement of your business mission and vision A set of values that can help you steer your business through times of

trouble A blueprint you can use to focus your energy and keep your company on

track Benchmarks you can use to track your performance and make midcourse

corrections A clear-eyed analysis of your industry, including opportunities and threats A portrait of your potential customers and their buying behaviors A rundown of your major competitors and your strategies for facing them An honest assessment of your company’s strengths and weaknesses A roadmap and timetable for achieving your goals and objectives A description of the products and services you offer An explanation of your marketing strategies An analysis of your revenues, costs, and projected profits A description of your business model, or how you plan to make money

and stay in business An action plan that anticipates potential detours or hurdles you may

encounter A handbook for new employees describing who you are and what your

company is all about

A résumé you can use to introduce your business to suppliers, vendors, lenders, and others

What can go wrong without a business plan?The many benefits of having a business plan should be enough to convince you. But in case you’re still wavering, consider what can go wrong if you don’t take time to plan. You risk Running out of cash before you open your doors because you haven’t

anticipated your start-up costs Missing sales projections because you don’t really know who your

customers are and what they want Losing customers because your quality or service falls short Becoming overwhelmed by too many options because you never took the

time to focus on a mission and vision for your company Going bankrupt because you don’t have a rational business model or a

plan for how to make money

http://www.dummies.com/how-to/content/why-is-a-business-plan-important.html

Top 10 Business Plan MistakesEvery business should have a business plan. Unfortunately, despite the fact that many of the underlying businesses are viable, the vast majority of plans are hardly worth the paper they're printed on. Most "bad" business plans share one or more of the following problems:1. The plan is poorly written. Spelling, punctuation, grammar and style are all important when it comes to getting your business plan down on paper. Although investors don't expect to be investing in a company run by English majors, they are looking for clues about the underlying business and its leaders when they're perusing a plan. When they see one with spelling, punctuation and grammar errors, they immediately wonder what else is wrong with the business. But since there's no shortage of people looking for capital, they don't wonder for long--they just move on to the next plan.Before you show your plan to a single investor or banker, go through every line of the plan with a fine-tooth comb. Run your spell check--which should catch spelling and punctuation errors, and have someone you know with strong "English teacher" skills review it for grammar problems.Style is subtler, but it's equally important. Different entrepreneurs write in different styles. If your style is "confident," "crisp," "clean," "authoritative" or "formal," you'll rarely have problems. If, however, your style is "arrogant," "sloppy," "folksy," "turgid" or "smarmy," you may turn off potential investors, although it's a fact that different styles appeal to different investors. No matter what style you choose for your business plan, be sure it's consistent throughout the plan, and that it fits your intended audience and your business. For instance, I once met a conservative Midwest banker who funded an Indian-Japanese fusion restaurant partly because the plan was--like the restaurant concept--upbeat, trendy and unconventional.2. The plan presentation is sloppy. Once your writing's perfect, the presentation has to match. Nothing peeves investors more than inconsistent margins, missing page numbers, charts without labels or with incorrect units, tables without headings, technical terminology without definitions or a missing table of contents. Have someone else proofread your plan before you show it to an investor, banker or venture capitalist. Remember that while you'll undoubtedly spend months working on your plan, most investors won't give it more than 10 minutes before they make an initial decision about it. So if they start paging through your plan and can't find the section on "Management," they may decide to move on to the next, more organized plan in the stack.

3. The plan is incomplete. Every business has customers, products and services, operations, marketing and sales, a management team, and competitors. At an absolute minimum, your plan must cover all these areas. A complete plan should also include a discussion of the industry, particularly industry trends, such as if the market is growing or shrinking. Finally, your plan should include detailed financial projections--monthly cash flow and income statements, as well as annual balance sheets--going out at least three years.4. The plan is too vague. A business plan is not a novel, a poem or a cryptogram. If a reasonably intelligent person with a high school education can't understand your plan, then you need to rewrite it. If you're trying to keep the information vague because your business involves highly confidential material, processes or technologies, then show people your executive summary first (which should never contain any proprietary information). Then, if they're interested in learning more about the business, have those sign incompete and nondisclosure agreements before showing them the entire plan. [Be forewarned, however: Many venture capitalists and investors will not sign these agreements since they want to minimize their legal fees and have no interest in competing with you in any case.]5. The plan is too detailed. Do not get bogged down in technical details! This is especially common with technology-based startups. Keep the technical details to a minimum in the main plan--if you want to include them, do so elsewhere, say, in an appendix. One way to do this is to break your plan into three parts: a two- to three-page executive summary, a 10- to 20-page business plan and an appendix that includes as many pages as needed to make it clear that you know what you're doing. This way, anyone reading the plan can get the amount of detail he or she wants.6. The plan makes unfounded or unrealistic assumptions. By their very nature, business plans are full of assumptions. The most important assumption, of course, is that your business will succeed! The best business plans highlight critical assumptions and provide some sort of rationalization for them. The worst business plans bury assumptions throughout the plan so no one can tell where the assumptions end and the facts begin. Market size, acceptable pricing, customer purchasing behavior, time to commercialization--these all involve assumptions. Wherever possible, make sure you check your assumptions against benchmarks from the same industry, a similar industry or some other acceptable standard. Tie your assumptions to facts.A simple example of this would be the real estate section of your plan. Every company eventually needs some sort of real estate, whether it's office space,

industrial space or retail space. You should research the locations and costs for real estate in your area, and make a careful estimate of how much space you'll actually need before presenting your plan to any investors or lenders.7. The plan includes inadequate research. Just as it's important to tie your assumptions to facts, it's equally important to make sure your facts are, well, facts. Learn everything you can about your business and your industry--customer purchasing habits, motivations and fears; competitor positioning, size and market share; and overall market trends. You don't want to get bogged down by the facts, but you should have some numbers, charts and statistics to back up any assumptions or projections you make. Well-prepared investors will check your numbers against industry data or third party studies--if your numbers don't jibe with their numbers, your plan probably won't get funded.8. You claim there's no risk involved in your new venture. Any sensible investor understands there's really no such thing as a "no risk" business. There are always risks. You must understand them before presenting your plan to investors or lenders. Since a business plan is more of a marketing tool than anything else, I'd recommend minimizing the discussion of risks in your plan. If you do mention any risks, be sure to emphasize how you'll minimize or mitigate them. And be well prepared for questions about risks in later discussions with investors.9. You claim you have no competition. It's absolutely amazing how many potential business owners include this statement in their business plans: "We have no competition."If that's what you think, you couldn't be further from the truth. Every successful business has competitors, both direct and indirect. You should plan for stiff competition from the beginning. If you can't find any direct competitors today, try to imagine how the marketplace might look once you're successful. Identify ways you can compete, and accentuate your competitive advantages in the business plan.10. The business plan is really no plan at all. A good business plan presents an overview of the business--now, in the short term, and in the long term. However, it doesn't just describe what the business looks like at each of those stages; it also describes how you'll get from one stage to the next. In other words, the plan provides a "roadmap" for the business, a roadmap that should be as specific as possible. It should contain definite milestones--major targets that have real meaning for your business. For instance, reasonable milestones might be "signing the 100th client" or "producing

10,000 units of product." The business plan should also outline all the major steps you need to complete to reach each milestone.

ConclusionWriting a business plan is hard work--many people spend a year or

more writing their plan. In the early, drafting stages, business plan software can be very helpful. But the hard part is developing a coherent picture of the business that makes sense, is appealing to others and provides a reasonable road map for the future. Your products, services, business model, customers, marketing and sales plan, internal operations, management team and financial projections must all tie together seamlessly. If they don't, you may not ever get your business off the ground.