Quick tips on writing a good business plan

EMPHASIZE MARKET NEEDS
To make a convincing case that a substantial market exists, establish market interest and document your claims.

Establish market interest
Provide evidence that customers are intrigued by your claims about the benefits of the new product or service:

• Let some customers use a product prototype; then get written evaluations.
• Offer the product to a few potential customers at a deep discount if they pay part of the production cost. This lets you determine whether potential buyers even exist.
• Use “reference installations”— statements from initial users, sales reps, distributors, and would-be customers who have seen the product demonstrated.

Document your claims
You've established market interest. Now use data to support your assertions about potential growth rates of sales and profits.

• Specify the number of potential customers, the size of their businesses, and the size that is most appropriate to your offering. Remember: Bigger isn't necessarily better.
• Show the nature of the industry; e.g., franchised weight-loss clinics might grow fast, but they can decline rapidly when competition stiffens. State how you will continually innovate to survive.
• Project realistic growth rates at which customers will accept — and buy — your offering. From there, assemble a credible sales plan and project plant and staffing needs.

ADDRESS INVESTOR NEEDS

Cashing out
Show when and how investors may liquidate their holdings. Venture capital firms usually want to cash out in three to seven years; professional investors look for a large capital appreciation.

Making sound projections
Give realistic, five-year forecasts of profitability. Don't skimp on the numbers, get overly optimistic about them, or blanket your plan with a smog of figures covering every possible variation.

The price
To figure out how much to invest in your offering, investors calculate your company's value on the basis of results expected five years after they invest. They'll want a 35 to 40% return for mature companies — up to 60% for less mature ventures. To make a convincing case for a rich return, get a product in the hands of representative customers — and demonstrate substantial market interest.