Ten Critical Elements of a Winning Business Plan

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Digital Library > Building and Inspiring an Organization > Business plans"Ten Critical Elements of a Winning Business Plan"

The financial experts agree: the business plan is the most crucial element of a loan application. Regardless of what type of investor you approach — a traditional bank lender, venture capitalist, angel, or any of the many others — before they even consider your loan request, they will want to review your business plan. In this article from Entrepreneurial Edge Magazine, Tom Canfield, president of the Enterprise Corporation of Pittsburgh, says these ten questions should be answered in your business plan.

The financial experts agree: The business plan is the most crucial element of a loan application. Regardless of what type of investor you approach — a traditional bank lender, venture capitalist, angel, or any of the many others — before they even consider your loan request, they will want to review your business plan. Tom Canfield, president of the Enterprise Corporation of Pittsburgh, says these 10 questions should be answered in your business plan:

Is Your Plan Organized So Key-Concepts Leap Out at the Reader?

Those key concepts should include an executive summary, a description of your product or service, an assessment of the market, and a description of the management team, as well as financial projections and capital requirements.

Is Your Product or Service and Business Mission Clear and Easy to Understand? Are You Focused on All Phases of Your Business — Idea, Feasibility, Verification, Demonstration and Commercialization?Concentrate on explaining tasks and use of your resources to increase your chances for success. Also, make sure you specify where you are currently in product development.

Who is Your Customer?Mention the customer group, size, growth and ways to reach them. Also, include your projected market share vs. the competition's share.

How Much Better is Your Product or Service than the Competition's?

If possible, provide customer references or testimonials.

Do You Have an Unfair Advantage? Is Your Product or Service Unique? Patented? Proprietary? Defensible?

If so, make sure you mention this.

Do You Have a Favorable Cost Structure?

Provide the proper gross margins, dynamics of price, volume and variable and fixed costs.

Can the Management Team Build a Business

Be sure to include relevant industry experience, proven track records and startup experience. If you realize that you will need additional management personnel, be up front about it.

How Much Money Do You Need?

Provide potential investors with cash flow statements, income statements and balance sheets. Provide these monthly for the first year, quarterly for the next two years, then annually until the end of the fifth year.

How Will Your Investors Get a Cash Return?

With the answers to these questions, you'll be able to create a document to distribute to potential investors. But, not all investors are the same. Some prefer a one-page summary while others want to read a three- to five-page profile, and still others demand a thick, highly detailed business plan. To meet the expectations of all potential investors, prepare all three types of communication packages. Before making your presentation, find out how many people will attend and make enough copies of each package for everyone.

About the Writer: Tom Canfield, president of the Enterprise Corporation of Pittsburgh.

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