If you want your business to be successful, you need to take the time to design a business plan. We say “design” because it is more than just writing a few words that detail a few points about your business. You really need to invest a lot of quality time to design, create and re-work your business plan until it is nearly perfect. Even then, it can change or adapt to new ideas in the coming months or years. After gaining a little experience from developing your business or even while running your business; ideas you initially developed can change and that is normal! It is even possible that you decided to follow a different business direction altogether. Either way, you need to clear a path for your business to follow. This will also help others to get on board with you and your business, such as employees or investors.
From our experience in the real world, there are two business plans. The first one is your business plan that you use as a business template. This business plan clears the path for your business on the road to success; where every detail is discussed in depth. Then there is the business plan that banks and lending companies will see. They don’t care about the frills, the fluff and the in-depth details. They only care about the black and white information. They want to focus on the financial section of your business. How will you make money? What are your products and services? How long will it take to make a profit? The financial section of your business plan will remain highly detailed, but the rest of the business plan will be scaled down and paraphrased from your business plan. It should be sufficient enough for a bank loan officer to briefly read through and have a basic understanding of your business.
For the scope of the coming articles, we will focus on your business plan. It is always easier to start with too much and then scale back. By the time we finish our final installment in this series of articles on ‘Writing a Brewery Business Plan‘, we will make our Rustik Brü Brewing Company business plans available for free download via our website: www.rustikbru.com. So check out the website under ‘Freeware’ from time to time to see if the two business plans are available for download. We welcome any questions or comments you may have about these business plans once they are available.
Due to the complexity of writing a business plan, it makes more sense to break it down into sections. This article will be the first installment of the business plan where we focus on the Executive Summary. This section is very important as it sets the stage for your entire business plan. Many times, investors will use this section as an indication of whether they want to continue reading or not. Ask yourself, does your Executive Summary capture your imagination and vision? Does it intrigue you to read on? Do you get a basic idea of what your business represents?
Before we dive into the sections of writing the Executive Summary, let us explain the purpose of the Executive Summary. Most important is that the Executive Summary is a “summary” of what your business represents. This is the beginning stage of your business plan that attracts interest to your business. This section provides a quick read about the type of business you are designing. Keep it concise, intelligent and no longer than two pages. Don’t use six sentences when three sentences will suffice. Use one paragraph to describe each point. The following is a list of points we will cover:
- What is your business?
- What is the problem your company is going to solve?
- How does your business find the solution?
- Describe the opportunity your business has in the market.
- What is your competitive advantage in the market?
- Summarize your business model.
- Describe your all-star team experience.
- How will you be profitable?
- What do you need to make this business successful?
1. What is your business?
Your leading sentence should be a very compelling statement about your business and what you are setting out to do. This is the sentence that sets the tone for the rest of the Executive Summary. Use a couple of sentences to support your leading sentence by providing a concise description of your unique products and services. If you already have customers or other companies you are working with or have lined up, you can include them here as well.
2. What is the problem your company is going to solve?
It is imperative for your business plan to present a problem (current or emerging) that you are going to solve. If you don’t have a problem to solve, then describe an opportunity you are going to exploit. Some example approaches to solving a problem include increasing revenues, reducing costs, increasing production speed, expanding markets, eliminating inefficiency, or increasing quality. An example of an opportunity may be filling a niche market for a unique set of products and services.
3. How does your business find the solution?
You have stated the problem or the opportunity you are going to exploit. Now you need to describe your plan of attack. You want to be as specific as possible without going into all the details. Avoid using phrases, terms and acronyms that may be industry standard and common to you. Even though this business plan is for you, you must remember that you are also writing this summary for investors, bankers and employees. These people may not have the industry knowledge that you have. Also keep in mind, as you are describing how you will meet your goals, make sure your reader will understand how you will make money.
4. Describe the opportunity your business has in the market.
You have stated the problem or opportunity you are going to exploit and how you plan to solve those issues. Use this paragraph to expand on that by describing your target market. Explain the growth potential, why you feel your business or service is needed, and the kind of revenue you plan to generate. It is important to keep your claims realistic. With a little market research, careful planning, and thoughtful projections, you can come up with realistic claims.
5. What is your competitive advantage in the market?
In all business, there is competition in some form or another. Use a sentence or two to describe what your competitive advantage is, and state it clearly. Here is where you can articulate your unique benefits and advantages.
6. Summarize your business model.
Who are your customers and how will you generate revenue from them? Is your business model leverageable and scalable? One of the most common reasons a business fails is because it does not have enough working capital. Will your business have enough starting and working capital? What do you expect your company to be within three to five years?
7. Describe your all-star team experience.
Why is your company uniquely qualified to be successful? What experience do you, your partners and/or employees have to make this business successful? Don’t just give a blanket statement that your team has a combined experience of 34 years dabbling in your industry. You must state specific skills, specific accomplishments and specific industry notoriety. The background you provide here will help to give your business the credentials and the respect it deserves.
8. How will you be profitable?
When you are pitching to investors, your fundamental promise is that you are going to make them a lot of money. The only way you can do that is if you can achieve a level of success that far exceeds the capital required to do that. Your Summary of Financial Projections should clearly show that. You must take the time to research the cost associated with starting your company. How much will you spend on capital equipment? What licenses will you have to purchase? You must know what your monthly expenses are and document them. How much will your products/services cost to develop? If you have done your market research homework, you should have a good idea of what your selling price points will be. Therefore you will know your profit margin. Your figures must show the ability to make a profit and to be believable. Fail to meet either requisite and you will fail to raise starting capital from investors or banking institutions. You should show five years of revenues, expenses, losses/profits, and cash flow. You should make projections such as number of customers you expect to have and the number of products sold each year.
9. What do you need to make this business successful?
Since you have done your research, received your quotes, and performed your calculations, you will know roughly how much money you will need to make this business venture successful. If you ask anyone who has taken the leap into launching a new business, they will tell you that whatever money you think you will need, multiply that by three. If you are putting together a spreadsheet, have one column listing all the quotes and estimations you have compiled. Then make a second column that multiplies each cost by three. So when you have both numbers, you will see a range of startup capital you will need to be successful. The first column is the minimum amount of money you will need to acquire. The second column is the amount of money you will need to acquire to make sure all the hidden and unexpected costs are covered and you have enough money to get you through the rough spots.
The outline we provided is by no means the only way to write an Execute Summary. There isn’t a template that fits all companies, but we feel it is important to hit each key issue we provided. You can learn from what worked for us. For your business plan, you need to think through what points are most important in your particular case, what points are irrelevant, and what points need emphasis.
The next article in this series will address your Mission Statement, Description of Business and Industrial Description.