write on the money : with Natsai Musarurwa
In Part 1 last week we covered the first step of putting together a business plan — understanding your target audience. Every type of investor, whether they are a venture capitalist, bank or impact investor, cares about different aspects of your business plan so you need to tailor it to highlight those key areas.
Now after you have figured this out, it’s time to plan your plan.
Knowing the structure of your document before putting pen to paper, or finger to keyboard, will save you a massive amount of time. At Amras Communications (which is the writing consultancy I run, in case you missed last week’s post) we believe that content is fluid and the structure you choose should be the one that tells your story best. I do, however, have a structure I typically follow because I find it works well more often than not, so this week I’ll be sharing that structure and my reasoning behind it.
Though you can exercise some creative freedom in how you structure your business plan it should always begin with an executive summary. As the name suggests, this section is a summary of your business plan and contains all the pertinent points, including your financial highlights. From reading the executive summary alone investors should know enough to decide whether they would consider investing in your company or not; some only read this section before deciding to reject a plan so you really need to put your best foot forward on this part. This isn’t an opportunity to ramble though, keep your executive summary to a maximum of two pages. Some say three is acceptable but that’s pushing it in my opinion. Though this segment comes first, write it last, it’s much easier to summarise something you’ve already written down.
Now assuming your executive summary is convincing enough to compel an investor to read on, first thing they want to do is get to know you, so introduce yourself. The company profile segment usually includes information like a company overview; your vision, mission and core values; details about your products/services; your team’s profiles; shareholding structure; etc. Be sure to make good use of sub headings here (and throughout the rest of your document) so it’s not just one long page to page blurb of information; that can be frustrating and off putting to the reader.
So once someone knows who you are and what you do, next you need to let them know why they should care and you do that with a thorough market analysis. There are different ways of approaching this but the key messages that need to communicated should be the market potential of your business and the factors in the region and industry you operate in that could positively or negatively affect your business and the investment.
First section I recommend you cover under your market analysis is your target market. Starting here helps narrow down other parts of the analysis to only the relevant factors, and knowing your target market is necessary for estimating market size. With certain products it’s tempting to say your target market is “everyone” but that’s never actually the case; not everyone wants to and/or can buy your product. One trick that I like to use is drawing (badly) an animation of the perfect customer(s). This helps me better visualise their characteristics: Are they male or female? Where do they work? How much do they earn? Where do they live? What’s their lifestyle?
Once you have identified who you want to sell to it’s now much easier to identify which market factors apply to your business. Investors want to know the macro factors that could impact their investment, i.e factors that can affect any business in any industry, and micro factors which are specific to the industry you’re in. There are different tools you can use for this analysis but my go to is the PESTLE analysis for macro and Porter’s Five Forces for micro; I also strongly recommend including a SWOT analysis which brings macro and micro together. If you’re not familiar with these there are a lot of great free online resources you can look up.
Now that you know your target market and the factors that could affect how much of that market you can capture, you can make a more educated guess about the market size. Again, there are numerous ways of doing this but what’s key is making sure your estimates are realistic. If you’re too idealistic investors will see right through it.
Next up I like to put the marketing strategy. By putting this section after your market analysis you and your marketing team are far better informed about what strategies will actually get results.
Since we are not marketers at Amras, however, I won’t preach too much about this; for our clients’ business plans we work with industry experts on this section.
Now last, and far from least (arguably the most important part of your plan), is the financial analysis. Doing your projections after you’ve done everything else will allow you to build your assumptions from a more realistic stand point. By now you know how many people you can likely sell to, you understand your target market so you can devise pricing models, you’re aware of any relevant tax policies from doing your macro analysis, and you can better estimate your marketing costs since you know what you want to implement.
I had to be very brief about each section (blame the word limit and my non-belief in lengthy content), but don’t worry, I’ll go into more detail on some of the segments in the coming weeks.
l If you’d like advice on your business plan, our team at Amras Communications is here for you. Even if we don’t write your business plan, we’re happy to help however we can. Call or text us on +263787722016 or email us at firstname.lastname@example.org. We are committed to your success.