How To Write A Business Plan (2023 Guide)
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Updated: Aug 20, 2022, 2:21am
Table of Contents
Brainstorm an executive summary, create a company description, brainstorm your business goals, describe your services or products, conduct market research, create financial plans, bottom line, frequently asked questions.
Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and dreams, a strong business plan outlines short-term and long-term goals, budget and whatever else you might need to get started. In this guide, we’ll walk you through how to write a business plan that you can stick to and help guide your operations as you get started.
Drafting the Summary
An executive summary is an extremely important first step in your business. You have to be able to put the basic facts of your business in an elevator pitch-style sentence to grab investors’ attention and keep their interest. This should communicate your business’s name, what the products or services you’re selling are and what marketplace you’re entering.
Ask for Help
When drafting the executive summary, you should have a few different options. Enlist a few thought partners to review your executive summary possibilities to determine which one is best.
After you have the executive summary in place, you can work on the company description, which contains more specific information. In the description, you’ll need to include your business’s registered name , your business address and any key employees involved in the business.
The business description should also include the structure of your business, such as sole proprietorship , limited liability company (LLC) , partnership or corporation. This is the time to specify how much of an ownership stake everyone has in the company. Finally, include a section that outlines the history of the company and how it has evolved over time.
Wherever you are on the business journey, you return to your goals and assess where you are in meeting your in-progress targets and setting new goals to work toward.
Numbers-based Goals
Goals can cover a variety of sections of your business. Financial and profit goals are a given for when you’re establishing your business, but there are other goals to take into account as well with regard to brand awareness and growth. For example, you might want to hit a certain number of followers across social channels or raise your engagement rates.
Another goal could be to attract new investors or find grants if you’re a nonprofit business. If you’re looking to grow, you’ll want to set revenue targets to make that happen as well.
Intangible Goals
Goals unrelated to traceable numbers are important as well. These can include seeing your business’s advertisement reach the general public or receiving a terrific client review. These goals are important for the direction you take your business and the direction you want it to go in the future.
The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in the current market or are providing something necessary or entirely new. If you have any patents or trademarks, this is where you can include those too.
If you have any visual aids, they should be included here as well. This would also be a good place to include pricing strategy and explain your materials.
This is the part of the business plan where you can explain your expertise and different approach in greater depth. Show how what you’re offering is vital to the market and fills an important gap.
You can also situate your business in your industry and compare it to other ones and how you have a competitive advantage in the marketplace.
Other than financial goals, you want to have a budget and set your planned weekly, monthly and annual spending. There are several different costs to consider, such as operational costs.
Business Operations Costs
Rent for your business is the first big cost to factor into your budget. If your business is remote, the cost that replaces rent will be the software that maintains your virtual operations.
Marketing and sales costs should be next on your list. Devoting money to making sure people know about your business is as important as making sure it functions.
Other Costs
Although you can’t anticipate disasters, there are likely to be unanticipated costs that come up at some point in your business’s existence. It’s important to factor these possible costs into your financial plans so you’re not caught totally unaware.
Business plans are important for businesses of all sizes so that you can define where your business is and where you want it to go. Growing your business requires a vision, and giving yourself a roadmap in the form of a business plan will set you up for success.
How do I write a simple business plan?
When you’re working on a business plan, make sure you have as much information as possible so that you can simplify it to the most relevant information. A simple business plan still needs all of the parts included in this article, but you can be very clear and direct.
What are some common mistakes in a business plan?
The most common mistakes in a business plan are common writing issues like grammar errors or misspellings. It’s important to be clear in your sentence structure and proofread your business plan before sending it to any investors or partners.
What basic items should be included in a business plan?
When writing out a business plan, you want to make sure that you cover everything related to your concept for the business, an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.
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How to Write a Business Plan, Step by Step
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1. Write an executive summary
2. describe your company, 3. state your business goals, 4. describe your products and services, 5. do your market research, 6. outline your marketing and sales plan, 7. perform a business financial analysis, 8. make financial projections, 9. add additional information to an appendix, business plan tips and resources.
A business plan is a document that outlines your business’s financial goals and explains how you’ll achieve them. A strong, detailed plan will provide a road map for the business’s next three to five years, and you can share it with potential investors, lenders or other important partners.
Here’s a step-by-step guide to writing your business plan.
» Need help writing? Learn about the best business plan software .
This is the first page of your business plan. Think of it as your elevator pitch. It should include a mission statement, a brief description of the products or services offered, and a broad summary of your financial growth plans.
Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.
» MORE: How to write an executive summary in 6 steps
Next up is your company description, which should contain information like:
Your business’s registered name.
Address of your business location .
Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.
Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.
Lastly, it should cover the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.
» MORE: How to write a company overview for a business plan
The third part of a business plan is an objective statement. This section spells out exactly what you’d like to accomplish, both in the near term and over the long term.
If you’re looking for a business loan or outside investment, you can use this section to explain why you have a clear need for the funds, how the financing will help your business grow, and how you plan to achieve your growth targets. The key is to provide a clear explanation of the opportunity presented and how the loan or investment will grow your company.
For example, if your business is launching a second product line, you might explain how the loan will help your company launch the new product and how much you think sales will increase over the next three years as a result.
In this section, go into detail about the products or services you offer or plan to offer.
You should include the following:
An explanation of how your product or service works.
The pricing model for your product or service.
The typical customers you serve.
Your supply chain and order fulfillment strategy.
Your sales strategy.
Your distribution strategy.
You can also discuss current or pending trademarks and patents associated with your product or service.
Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section , explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.
Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.
» MORE: R e a d our complete guide to small business marketing
If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.
You may also include metrics such as:
Net profit margin: the percentage of revenue you keep as net income.
Current ratio: the measurement of your liquidity and ability to repay debts.
Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.
This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.
» NerdWallet’s picks for setting up your business finances:
The best business checking accounts .
The best business credit cards .
The best accounting software .
This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.
Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.
Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.
List any supporting information or additional materials that you couldn’t fit in elsewhere, such as resumes of key employees, licenses, equipment leases, permits, patents, receipts, bank statements, contracts and personal and business credit history. If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.
Here are some tips to help your business plan stand out:
Avoid over-optimism: If you’re applying for a business loan at a local bank, the loan officer likely knows your market pretty well. Providing unreasonable sales estimates can hurt your chances of loan approval.
Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors, taking their mind off your business and putting it on the mistakes you made. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.
Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. You can search for a mentor or find a local SCORE chapter for more guidance.
The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource.
Business Plan Example and Template
Learn how to create a business plan
What is a Business Plan?
A business plan is a document that contains the operational and financial plan of a business, and details how its objectives will be achieved. It serves as a road map for the business and can be used when pitching investors or financial institutions for debt or equity financing .
A business plan should follow a standard format and contain all the important business plan elements. Typically, it should present whatever information an investor or financial institution expects to see before providing financing to a business.
Contents of a Business Plan
A business plan should be structured in a way that it contains all the important information that investors are looking for. Here are the main sections of a business plan:
1. Title Page
The title page captures the legal information of the business, which includes the registered business name, physical address, phone number, email address, date, and the company logo.
2. Executive Summary
The executive summary is the most important section because it is the first section that investors and bankers see when they open the business plan. It provides a summary of the entire business plan. It should be written last to ensure that you don’t leave any details out. It must be short and to the point, and it should capture the reader’s attention. The executive summary should not exceed two pages.
3. Industry Overview
The industry overview section provides information about the specific industry that the business operates in. Some of the information provided in this section includes major competitors, industry trends, and estimated revenues. It also shows the company’s position in the industry and how it will compete in the market against other major players.
4. Market Analysis and Competition
The market analysis section details the target market for the company’s product offerings. This section confirms that the company understands the market and that it has already analyzed the existing market to determine that there is adequate demand to support its proposed business model.
Market analysis includes information about the target market’s demographics , geographical location, consumer behavior, and market needs. The company can present numbers and sources to give an overview of the target market size.
A business can choose to consolidate the market analysis and competition analysis into one section or present them as two separate sections.
5. Sales and Marketing Plan
The sales and marketing plan details how the company plans to sell its products to the target market. It attempts to present the business’s unique selling proposition and the channels it will use to sell its goods and services. It details the company’s advertising and promotion activities, pricing strategy, sales and distribution methods, and after-sales support.
6. Management Plan
The management plan provides an outline of the company’s legal structure, its management team, and internal and external human resource requirements. It should list the number of employees that will be needed and the remuneration to be paid to each of the employees.
Any external professionals, such as lawyers, valuers, architects, and consultants, that the company will need should also be included. If the company intends to use the business plan to source funding from investors, it should list the members of the executive team, as well as the members of the advisory board.
7. Operating Plan
The operating plan provides an overview of the company’s physical requirements, such as office space, machinery, labor, supplies, and inventory . For a business that requires custom warehouses and specialized equipment, the operating plan will be more detailed, as compared to, say, a home-based consulting business. If the business plan is for a manufacturing company, it will include information on raw material requirements and the supply chain.
8. Financial Plan
The financial plan is an important section that will often determine whether the business will obtain required financing from financial institutions, investors, or venture capitalists. It should demonstrate that the proposed business is viable and will return enough revenues to be able to meet its financial obligations. Some of the information contained in the financial plan includes a projected income statement , balance sheet, and cash flow.
9. Appendices and Exhibits
The appendices and exhibits part is the last section of a business plan. It includes any additional information that banks and investors may be interested in or that adds credibility to the business. Some of the information that may be included in the appendices section includes office/building plans, detailed market research , products/services offering information, marketing brochures, and credit histories of the promoters.
Business Plan Template
Here is a basic template that any business can use when developing its business plan:
Section 1: Executive Summary
- Present the company’s mission.
- Describe the company’s product and/or service offerings.
- Give a summary of the target market and its demographics.
- Summarize the industry competition and how the company will capture a share of the available market.
- Give a summary of the operational plan, such as inventory, office and labor, and equipment requirements.
Section 2: Industry Overview
- Describe the company’s position in the industry.
- Describe the existing competition and the major players in the industry.
- Provide information about the industry that the business will operate in, estimated revenues, industry trends, government influences, as well as the demographics of the target market.
Section 3: Market Analysis and Competition
- Define your target market, their needs, and their geographical location.
- Describe the size of the market, the units of the company’s products that potential customers may buy, and the market changes that may occur due to overall economic changes.
- Give an overview of the estimated sales volume vis-à-vis what competitors sell.
- Give a plan on how the company plans to combat the existing competition to gain and retain market share.
Section 4: Sales and Marketing Plan
- Describe the products that the company will offer for sale and its unique selling proposition.
- List the different advertising platforms that the business will use to get its message to customers.
- Describe how the business plans to price its products in a way that allows it to make a profit.
- Give details on how the company’s products will be distributed to the target market and the shipping method.
Section 5: Management Plan
- Describe the organizational structure of the company.
- List the owners of the company and their ownership percentages.
- List the key executives, their roles, and remuneration.
- List any internal and external professionals that the company plans to hire, and how they will be compensated.
- Include a list of the members of the advisory board, if available.
Section 6: Operating Plan
- Describe the location of the business, including office and warehouse requirements.
- Describe the labor requirement of the company. Outline the number of staff that the company needs, their roles, skills training needed, and employee tenures (full-time or part-time).
- Describe the manufacturing process, and the time it will take to produce one unit of a product.
- Describe the equipment and machinery requirements, and if the company will lease or purchase equipment and machinery, and the related costs that the company estimates it will incur.
- Provide a list of raw material requirements, how they will be sourced, and the main suppliers that will supply the required inputs.
Section 7: Financial Plan
- Describe the financial projections of the company, by including the projected income statement, projected cash flow statement, and the balance sheet projection.
Section 8: Appendices and Exhibits
- Quotes of building and machinery leases
- Proposed office and warehouse plan
- Market research and a summary of the target market
- Credit information of the owners
- List of product and/or services
Related Readings
Thank you for reading CFI’s guide to Business Plans. To keep learning and advancing your career, the following CFI resources will be helpful:
- Corporate Structure
- Three Financial Statements
- NEW CFI Template Marketplace
- See all management & strategy resources
- Share this article
Investment Company Business Plan Template
Written by Dave Lavinsky
Investment Company Business Plan
Over the past 20+ years, we have helped over 1,000 entrepreneurs and business owners create business plans to start and grow their investment companies. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through an investment company business plan template step-by-step so you can create your plan today.
Download our Ultimate Business Plan Template here >
What Is a Business Plan?
A business plan provides a snapshot of your investment company as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.
Why You Need a Business Plan
If you’re looking to start an investment company, or grow your existing investment company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your investment company in order to improve your chances of success. Your business plan is a living document that should be updated annually as your company grows and changes.
Sources of Funding for Investment Companies
With regards to funding, the main sources of funding for an investment company are bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Investors, grants, personal investments, and bank loans are the most common funding paths for investment companies.
How to Write a Business Plan for an Investment Company
If you want to start an investment company or expand your current one, you need a business plan. Below we detail what you should include in each section of your own business plan:
Executive Summary
Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of investment company you are operating and the status. For example, are you a startup, do you have an investment company that you would like to grow, or are you operating investment companies in multiple markets?
Next, provide an overview of each of the subsequent sections of your business plan. For example, give a brief overview of the investment company industry. Discuss the type of investment company you are operating. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.
Company Analysis
In your company analysis, you will detail the type of investment company you are operating.
For example, you might operate one of the following types of investment companies:
- Closed-End Funds Investment Company : this type of investment company issues a fixed number of shares through a single IPO to raise capital for its initial investments.
- Mutual Funds (Open-End Funds) Investment Company: this type of investment company is a diversified portfolio of pooled investor money that can issue an unlimited number of shares.
- Unit Investment Trusts (UITs) Investment Company: this type of investment company offers a fixed portfolio, generally of stocks and bonds, as redeemable units to investors for a specific period of time.
In addition to explaining the type of investment company you will operate, the Company Analysis section of your business plan needs to provide background on the business.
Include answers to question such as:
- When and why did you start the business?
- What milestones have you achieved to date? Milestones could include the number of investments made, number of client positive reviews, reaching X amount of clients invested for, etc.
- Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
Industry Analysis
In your industry analysis, you need to provide an overview of the investment industry.
While this may seem unnecessary, it serves multiple purposes.
First, researching the investment industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your strategy, particularly if your research identifies market trends.
The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.
The following questions should be answered in the industry analysis section of your business plan:
- How big is the investment industry (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential market for your investment company? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.
Customer Analysis
The customer analysis section of your business plan must detail the customers you serve and/or expect to serve.
The following are examples of customer segments: companies or employees in specific industries, couples with double income, families with kids, small business owners, etc.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of investment company you operate. Clearly, couples with families and double income would respond to different marketing promotions than corporations, for example.
Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve.
Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.
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Competitive Analysis
Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.
Direct competitors are other investment companies.
Indirect competitors are other options that customers have to purchase from that aren’t direct competitors. This includes robo investors and advisors, company 401Ks, etc. You need to mention such competition as well.
With regards to direct competition, you want to describe the other investment companies with which you compete. Most likely, your direct competitors will be investment companies located very close to your location.
For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:
- What types of clients do they serve?
- What type of investment company are they and what certifications do they have?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide better investment strategies?
- Will you provide services that your competitors don’t offer?
- Will you provide better customer service?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan.
Marketing Plan
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For an investment company, your marketing plan should include the following:
Product : In the product section, you should reiterate the type of company that you documented in your Company Analysis. Then, detail the specific products you will be offering. For example, in addition to an investment company, will you provide insurance products, website and app accessibility, quarterly or annual investment reviews, and any other services?
Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the services you offer and their prices.
Place : Place refers to the location of your company. Document your location and mention how the location will impact your success. For example, is your investment company located in a busy retail district, a business district, a standalone office, etc. Discuss how your location might be the ideal location for your customers.
Promotions : The final part of your investment company marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:
- Advertising in local papers and magazines
- Commercials and billboards
- Reaching out to websites
- Social media marketing
- Local radio advertising
Operations Plan
While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday short-term processes include all of the tasks involved in running your investment company, including researching the stock market, keeping abreast of all investment industry knowledge, updating clients on any new activity, answering client phone calls and emails, networking to attract potential new clients.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to land your Xth client, or when you hope to reach $X in revenue. It could also be when you expect to expand your investment business to a new city.
Management Team
To demonstrate your investment company’s ability to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.
Ideally you and/or your team members have direct experience in managing investment companies. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.
If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing an investment company or successfully advised clients who have achieved a successful net worth.
Financial Plan
Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.
Income Statement : an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.
In developing your income statement, you need to devise assumptions. For example, will you take on one new client at a time or multiple new clients ? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.
Balance Sheets : Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your investment company, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement : Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.
In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing an investment company:
- Cost of investor licensing..
- Cost of equipment and supplies
- Payroll or salaries paid to staff
- Business insurance
- Taxes and permits
- Legal expenses
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office location lease or list of clients that you have acquired.
Putting together a business plan for your investment company is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the investment industry, your competition, and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful investment company.
Investment Company Business Plan FAQs
What is the easiest way to complete my investment company business plan.
Growthink's Ultimate Business Plan Template allows you to quickly and easily complete your Investment Company Business Plan.
What is the Goal of a Business Plan's Executive Summary?
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of investment company you are operating and the status; for example, are you a startup, do you have an investment company that you would like to grow, or are you operating a chain of investment companies?
OR, Let Us Develop Your Plan For You
Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.
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Business Plan for an Investment Company
DEC.20, 2022
1. Investment company Business Plan For Starting Your Own Business
The sample business plan for an investment company outlines the creation of an investment company. The company’s mission is to provide clients with access to a wide range of investment opportunities, including stocks, bonds, mutual funds, and alternative investments. The company will also provide financial planning and wealth management services, including portfolio design, asset allocation, and risk management strategies.
The Investment Company’s business plan includes strategies for marketing and advertising, financial projections, and a detailed description of the company’s services and fees. This is the business Plan for Investors who want to invest in a company with a significant probability of success.
2. Sources Of Financing For Investment Firms
In writing a business plan for an investment company, the sources of financing for investment firms typically include private investors, venture capital firms, angel investors, crowdfunding, and debt capital. Private investors are individuals or groups who invest in the company in exchange for equity or a portion of the profits. Venture capital firms provide financing and advice to companies in exchange for equity. Angel investors are wealthy individuals or groups who invest in companies in exchange for equity. Crowdfunding involves the collection of small amounts of money from a large group of people. Debt capital is a loan secured by the company’s assets and must be repaid with interest.
The most common sources of financing for investment firms are debt financing, equity financing, and derivatives. Debt financing involves loans from banks, other lending institutions, or private investors. Equity financing involves the issuance of stock to raise capital. Derivatives are contracts between two parties that derive their value from an underlying asset or benchmark.
The most important source of financing for an investment company in the business plan investment company is the capital that the company brings in from its own operations.
3. Executive Summary Of Investment Company Business Plan
The business.
The new investment company business plan for an Investment Company is designed to provide an overview of our company’s mission and objectives. We are a full-service investment firm that specializes in providing comprehensive financial advice and services to individuals, families, and business owners. We aim to maximize investment returns and increase our clients’ net worth.
We plan to provide a wide range of services, including portfolio management, asset allocation, retirement planning, estate planning, tax planning, and general financial planning.
Management Of Investment Company
The investment company business plan outlines the management team of experienced financial and legal professionals committed to providing the highest quality of investment management services. Our goal is to create a fully integrated, world-class investment company that provides our clients with a range of innovative and tailored investment solutions.
Customers Of Investment Company
In the investment company business plan template, the customers of our investment company will be individuals, small businesses, and institutions that are looking for a trusted financial partner to help them manage and grow their wealth. We will offer our clients a wide range of services, including portfolio management, retirement planning, estate planning, tax planning, and philanthropic planning. Our goal is to provide our clients with the best advice, products, and services to help them meet their financial goals.
Business Target
The business target for our investment company is to create long-term capital appreciation and wealth for our investors by making prudent investments in start-up and established businesses. Our goal is to be a reliable and trusted partner for our investors and maximize their investment return.
4. Investment Company Summary
Company owner.
Our investment company, JS Investment Group, is owned and operated by John Smith. John Smith is a highly experienced investor and entrepreneur who has successfully founded and managed several small investment company business plans. He deeply understands the investment industry and is passionate about helping others achieve success through strategic investments.
Why The Investment Company Is Being Started
The primary reason for starting an investment company in an investment company business plan sample is to provide clients with a safe and secure place to invest their money. With a wide range of investment options available, our team of experienced financial professionals can help clients make informed decisions about their investments. We also plan to provide clients with up-to-date market analysis and research.
How The Investment Company Will Be Started
The company will seek to raise capital through debt and equity financing. Equity financing will come from the founders and outside investors. The company will also seek to raise capital through debt financing, which will be used to fund the startup costs and ongoing operations of the company. In the business plan for the investment holding company, the company will focus on providing quality investment advice and services to its clients.
The Investment company owner John Smith estimates startup costs based on assets, investments, loans, and expenses in collaboration with financial experts.
JS Investment Group’s start-up requirements include total startup expenses, total assets, total start-up funding, total funding requirements, total assets, total liabilities, total planned investment, total capital, total liabilities, and total funding.
5. Services of Investment Company
The product description section in a business plan for an investment banking company includes services. However, below are the all services offered by our investment company include:
- Investment Advisory: Providing tailored advice and strategies to meet individual, business, and corporate clients’ investment goals.
- Investment Management: The business plan for an investment banking company provides services of designing, constructing, and managing bespoke portfolios for clients, as well as providing ongoing monitoring and rebalancing services.
- Mutual Fund Management: The business plan for an investment management company offers selecting and monitoring mutual funds for clients, as well as providing risk management and portfolio diversification services.
- Estate Planning: Developing strategies for both tax and non-tax-related estate planning objectives.
- Retirement Planning: Assisting clients with the creation of retirement plans and investments to meet their retirement income needs.
- Financial Planning: Helping clients to prepare for their financial future by creating strategies that integrate their investment, tax, insurance, and estate planning goals.
- Risk Management: Identifying and managing investment risks to help clients reach their financial goals.
- Portfolio Analysis: Examining and evaluating portfolios to ensure they are in line with the client’s investment objectives.
- Tax Planning: Developing strategies to minimize the client’s tax liability and maximize after-tax returns.
- Asset Allocation: Designing and implementing asset allocation strategies to help clients meet their long-term financial goals.
6. Marketing Analysis
A marketing analysis is an important part of a sample business plan for an investment company. This analysis provides information on the market in which the company operates, including the size and growth of the market, the competition, and potential growth opportunities.
The investment company market is highly competitive, as investors have a wide range of options when it comes to deciding where to invest their money.
The company will face competition from both traditional and online investment companies. Traditional investment companies offer services such as portfolio management and financial planning. Online investment companies offer services such as stock trading and portfolio management.
In addition to traditional investment companies, investors can choose from online brokers, mutual funds, and other alternative investments. As a result, it is important for an investment company to differentiate itself from the competition and to create a strong value proposition for its customers.
The investment industry is expected to continue to grow as people become more aware of the need for financial planning and the importance of investing.
Market Trends
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In order to compete effectively in the investment company market, it is important to understand the current market trends and identify areas of opportunity.
In the investment company business plan example, one of the most important trends to consider is the shift towards more technology-driven investment strategies. This trend is driven by advancements in technology and increased access to data, which has enabled more sophisticated portfolio management techniques.
Additionally, many investors are increasingly looking to alternative investments such as cryptocurrency, venture capital, and private equity as a way of diversifying their portfolios. Furthermore, an increasing number of investors are turning to online trading platforms as a way of managing their investments. Finally, it is important to consider the potential impact of environmental, social, and governance (ESG) investing on the industry, as ESG-focused investments are gaining traction in the financial markets.
Marketing Segmentation
In the private investment company business plan, the company will target a wide range of potential customers, including individual investors, high-net-worth individuals, family offices, and institutional investors. Each of these customer segments will require different strategies and services, so the company will tailor its marketing and services accordingly.
For individual investors, the company will focus on providing personalized services that are tailored to the specific needs and investment goals of each client. The company will also provide educational resources and tools to help clients make informed decisions about their investments.
For high-net-worth individuals, the company will focus on providing personalized portfolio construction and asset management services.
We plan to target high-net-worth, individuals and institutional clients who are looking for a more personalized approach to investing. We will use a combination of traditional and alternative investment strategies to provide our clients with the best return on their investments. We plan to use our extensive network of banks and other financial institutions to secure the most attractive terms for our clients.
We have identified three key areas of focus when it comes to our business plan. First, we plan to build a strong customer base by offering superior customer service and customer education. Second, we plan to develop our own proprietary financial products and services to offer our clients. Finally, we plan to focus on developing relationships with banks and other financial institutions to ensure that we can offer the best terms for our clients.
Product Pricing
JS Investment Group will use a combination of fixed fees and performance-based fees for our services. For our portfolio management and asset allocation services, we will charge a flat fee of 1% of the total assets under management. For our investment research and risk management services, we will charge a fixed fee of $250 per hour.
For our performance-based fees, we will charge a 20% fee on any profits earned by our clients. This fee will be applied on a quarterly basis and will be calculated based on the performance of the portfolio during that period.
7. Marketing Strategy Of Investment Company
Competitive analysis, eb5 business plan.
The business plan for an investment company covers the company analysis in which the company’s competitive landscape is large and diverse. There are a number of large and well-established firms that have been in the industry for many years. Additionally, there is a large number of small, independent firms that have emerged in recent years.
Sales Strategy
Our sales strategy is to target potential customers through a variety of outlets, including direct mail, email marketing, social media campaigns, and online advertising. We will focus our efforts on targeting potential customers who are likely to be interested in our services, such as high-net-worth individuals, small business owners, and those with an interest in investing. We will also work to build relationships with local financial advisors and other industry professionals in order to develop a strong referral network.
Sales Monthly
The company’s primary source of revenue will be from the sales of investment products, with a focus on monthly sales. The company will also offer financial advice and portfolio management services, for which it will charge a fee. Experts predict the following sales each month for our company.
Sales Yearly
The JS Investment Group will generate revenue by selling various services. Experts predict the following sales yearly for our company.
Sales Forecast
Our sales forecast for the next three years predicts a steady increase in revenue. Below is a forecast of sales for our company:
8. Personnel Plan Of Investment Company
Company staff.
The Company Staff will be responsible for the overall management and operation of the investment company. They will be responsible for recruiting and managing a team of qualified and experienced professionals to ensure the success of the business. The JS Investment Group operations will require the following employees:
The management staff includes:
- Marketing Manager
- Operation Manager
- Investment Manager
The operational team includes:
- Front Desk Coordinator
- Investment Advisor
- Security Guards
Other Staff includes:
- Administrative Assistant
- Tax Planner
- Receptionist
Average Salary of Employees
The investment holding company business plan includes the average salary of employees, which varies according to the role of employees and services. We will offer competitive salaries to all our employees to ensure we attract and retain the best talent. The average salary of our employees will be approximately $40,000 per year.
9. Financial Plan For Investment Company
In collaboration with financial experts, John Smith assessed the company’s financial needs and developed a financial plan for sample of investment company business plan. A three-year financial plan outlines the company’s development.
Important Assumptions
The following are important assumptions for the financial plan of the investment company:
Deviations, however, are expected to be limited to levels that do not impact the investment company’s major financial goals.
Brake-even Analysis
The following is a breakdown of the investment company’s fixed and variable costs:
The following table shows an analysis of monthly break-evens of an investment company
Projected Profit and Loss
The following is the projected profit and loss for an investment company.
Profit Monthly
Profit Yearly
Gross Margin Monthly
Gross Margin Yearly
Projected Cash Flow
The following column diagram shows cash flow projections.
The following table shows the pro forma cash flow of an private equity firm business plan . The cash flow statement includes cash received from operations, cash received from operations, and general assumptions.
Projected Balance Sheet
Below is a projected balance sheet of an investment holding Company Business Plan that shows data about the pro forma balance sheet, total current assets, total long-term assets, total assets, current subtotal liabilities, total liabilities, total capital, and total liabilities.
Business Ratios
The following table shows business ratios, ratio analysis, and total assets.
10. Get the Expertise to Create a Winning Business Plan!
“Start Your Investment Company with Professional Assistance: Get the Support of OGS Capital’s Expert Team!”
At OGS Capital, our experienced consultants provide professional assistance to help you start and grow your investment company. Our team has in-depth knowledge and expertise in launching businesses, and we understand the complexities of the investment industry. We can provide expert advice and guidance to help you create and execute a custom sample business plan for investment holding company that will ensure your investment company’s success.
We can help you with the entire process of developing your business, from crafting a comprehensive financial plan to finding appropriate funding sources. With our knowledge and resources, we can help you create a detailed business plan that will serve as a roadmap for your business.
- What is the main business of an investment company? The main business of an investment company is to manage investments and provide financial advice and solutions to their clients. They may provide services such as portfolio management, asset allocation, retirement planning and financial planning. They may also offer a variety of other services such as stock and bond trading, insurance, estate planning and tax planning.
- Can I create my own investment company? Yes, you can create your own investment company. The process involves registering the company with the SEC, registering with the state in which you will be doing business, setting up the necessary accounts and paperwork, and finding clients. You should also consult a qualified accountant, lawyer, and financial adviser to ensure you have all the appropriate information and documents in place.
- How much does it cost to start an investment firm? The cost of starting an investment firm will vary depending on the type of firm you are looking to establish and the services you plan to provide. Typically, startup costs can range from $5,000 to $50,000, depending on the complexity of the business. Costs may include office equipment, legal and accounting fees, licensing fees, technology costs, marketing costs, and other miscellaneous costs.
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Making an Investment Plan: A Step-by-Step Guide
Making an investment plan involves more than just choosing a few stocks to put money in. You have to consider your current financial situation and your goals for the future. It’s also important to define your timeline and how much risk you’re willing to take on in order to determine your optimal asset allocation. All of these steps help to mitigate any risk you might encounter in the stock market. In turn, planning before you invest your hard-earned money is extremely wise. This may require a lot of research or consulting with a financial advisor to help talk you through your unique financial situation.
Step #1: Assess Your Current Financial Situation
The first step in making an investment plan for the future is to define your present financial situation. You need to figure out how much money you have to invest. You can do this by making a budget to evaluate your monthly disposable income after expenses and emergency savings. This will allow you to determine how much you can reasonably afford to invest.
It’s also important to consider how accessible, or liquid, you need your investments to be. If you might need to cash in on your investment quickly, you would want to invest in more liquid assets , like stocks , rather than in something like real estate.
Step #2: Define Financial Goals
The next step in making an investment plan is to define your financial goals . Why are you investing? What are you hoping to earn money for? This can be anything from buying a car in a few years to retiring comfortably many years down the road.
You must also define your goal timeline, or time horizon. How quickly do you want to make money from your investments? Do you want to see quick growth, or are you interested in seeing investment growth over time?
All of your goals can be summed up in three main categories: safety, income and growth. Safety is when you are looking to maintain your current level of wealth, income is when you want investments to provide active income to live off of and growth is when you want to build wealth over the long term. You can determine the best investment path for you based on which of these three categories your goals fall into.
Step #3: Determine Risk Tolerance and Time Horizon
The next step in crafting your investment plan is to decide how much risk you are willing to take. Generally speaking, the younger you are, the more risk you can take, since your portfolio has time to recover from any losses. If you are older, you should seek less risky investments and instead invest more money upfront to spur growth.
Additionally, riskier investments have the potential for significant returns – but also major losses. Taking a chance on an undervalued stock or piece of land could prove fruitful, or you could lose your investment. If you are looking to build wealth over years, you may want to choose a safer investment path.
Determining your time horizon is fairly simple compared to its risk counterpart. The term essentially means about when do you want to begin pulling from your investments for your ultimate financial goal. For the vast majority of Americans, time horizon is basically synonymous with retirement.
By figuring out your risk tolerance and time horizon, you can build a reliable asset allocation for yourself. This entails taking your investor profile, figuring out what you should invest in and what percentage of your overall portfolio each investment type should take up. Try using SmartAsset’s asset allocation calculator to get started.
Step #4: Decide What to Invest In
The final step is to decide where to invest. There are many different accounts you can use for your investments. Your budget, goals and risk tolerance will help guide you towards the right types of investment for you. Consider securities like stocks, bonds and mutual funds, long-term options like 401(k) plans and IRAs, bank savings accounts or CDs, and 529 plans for education savings. You can even invest in real estate, art and other physical items.
Wherever you device to invest, make sure to diversify your portfolio . You don’t want to put all of your money into stocks and risk losing everything if the stock market crashes, for example. It’s best to allocate your assets to a few different investment types that fit in with your goals and risk tolerance in order to maximize your growth and stability.
Once you reach this step in the process, it may be appropriate to find a financial advisor . An advisor can help you determine the best ways to invest your money based on your current financial situation and goals.
Step #5: Monitor and Rebalance Your Investments
Once you have made your investments, it’s not wise to just leave them alone. Every so often, you should check in to see how your investments are performing and decide if you need to rebalance.
For example, maybe you aren’t putting enough money into your investments monthly and you aren’t on track to reach your goals, or maybe you’re depositing more than you need to and you’re ahead of schedule. Maybe you want to move your money to a more stable investment as you get closer to achieving your long-term goals, or maybe your investments are performing well and you want to take on even more risk to reach your goals sooner.
Once you feel like your investment plan is in good shape, you’ll want to consider rebalancing your portfolio . This involves bringing your portfolio’s composition back to its intended asset allocation. For instance, let’s say your stock investments performed much better than the rest of your portfolio. In order to keep your proper asset allocation in place, it may make sense to sell some of your stocks and redistribute that money to other investment types. These could include bonds, CDs, ETFs and more.
Bottom Line
Just like anything else in the realm of personal finance, becoming a good investor requires research and experience. If it’s your first time investing, the experience will come, so focus on soaking up information about the different types of investments that are available to you. Once you’re ready to move forward with investing you get to then start your research on finding the best brokerage to work with.
Investing Tips for Beginners
- If you’re new to the investment game, don’t hesitate to ask for help from a professional. Financial advisors typically specialize in investing and financial planning, making them great partners for newbies. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now .
- Start investing sooner rather than later. Once you have an emergency fund in place and your debts in check, start investing. The sooner you start, the more risk you can afford to take and the more investment growth you’ll experience over time.
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Investment plan at a glance
Any business venture is associated with investment. An investment concerns a long-term commitment of financial funds in material and immaterial assets. Investments not only affect a company’s fixed assets but indirectly its current assets as well. Investment planning is an integral component of strategic business planning. The business plan should consider investments as part of finance planning.
Investments are not only associated with a high capital expenditure and a long-term capital commitment, but investment decisions also have a decisive impact on a company’s cost structure. Before investing money in a business venture, you should therefore closely examine how much capital you need to invest in order to realize the project.
The capital requirement of an investment is determined as part of an investment plan. This provides a basis for investment calculations and the profitability forecast. That means it's necessary to list all costs related to an investment in order to assess the business.
In the following, we show you how to prepare an investment plan as part of a business plan for strategic or operational business planning.
What is an investment plan?
Structure and composition of an investment plan, the investment plan as part of the business plan.
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An investment plan refers to a table that lists all investment items and corresponding costs linked to a particular investment. Here, it’s important to be aware that the investment plan only encompasses the expenses incurred as one-off costs in connection with the investment and during the start-up phase.
An overview of the ongoing monthly costs (such as staff costs) is drawn up in the operating expense plan, independently from the investment plan.
The investment plan and the operating expense plan subsequently form part of the capital requirements plan.
The investment plan is a list of all nonrecurring costs incurred during the start-up phase of an investment. Together with the operating expense plan – detailing a company’s ongoing costs – the investment plan is integrated in capital requirements planning. In turn, the capital requirements plan is part of the finance plan of the business plan.
In business practice, an investment plan is always created when an investment decision has to be made – usually for one of the following reasons:
- Initial investment: Initial investment refers to the procurement of all operationally required assets in connection with founding the company.
- Replacement investment: Replacing an asset of the company with a new asset is called a replacement investment.
- Rationalization investment: Rationalization investment denotes investments that result in a cost saving.
- Expansion investment: If the expansion of business operations necessitates the procurement of assets, this is referred to as an expansion investment.
As part of a comprehensive finance plan, the investment plan is not only the basis for the business plan but also a guideline for financing . It thus represents a prerequisite for raising capital. You should present the itemization in a transparent and structured manner so capital providers like banks or private investors get an overview of all expenses associated with the investment. Generally, you’ll only receive an investment loan if your backers are able to see where you’d like to use the borrowed funds.
In an investment plan, you draw up a list of all one-off expenses for all investment items associated with an investment, including the costs incurred during the start-up phase for advance financing . If it concerns an initial investment for incorporating a business, the investment plan will also contain all costs associated with establishing the company .
We illustrate the structure of an investment plan using the example of an initial investment and apply the following outline for this purpose:
- Capital requirement for the (formal) incorporation of the company
- Capital requirement for ongoing operating expenses in the start-up phase
- Capital requirement for investments in fixed assets
- Capital requirement for investments in current assets
- Expenses for debt servicing
If your planned investment concerns an initial investment, you should list the costs of incorporation in the investment plan separately. The capital requirement for formally establishing the company includes all expenses incurred in preparing the founding process – for example consulting costs as well as fees for registration, permits or notary certifications.
Moreover, investments are usually associated with expenses for material and immaterial assets . A distinction is made between fixed and current assets. Fixed assets are all assets you procure as part of investing for continuous use in operations – such as equipment, machines or vehicles as well as immaterial assets like licenses and patents. Assets such as goods, materials or resources used for disposal, consumption or processing – and are therefore held by the company only temporarily – are allocated to current assets.
For investments which you wish to fund entirely or partly using borrowed funds, you should also indicate the expenses for interest and repayment installments in the investment plan.
- Rent deposit
- Legal advisors
- Tax advisors
- Business advisors
- Business registration
- Development of a corporate design
- Opening event
- Opening advertising
- Website setup
- Market information
- Registrations/approvals
- Entry into the commercial register
- Reserves for start phase, follow-up investments and unforeseen costs
- Patent, license and franchise fees
- Plots/real estate including incidental costs
- Production equipment, machines and tools
- Operating and office equipment
- Communication technology (PCs, telephones, etc.)
- Materials and goods inventory
- Raw, auxiliary and operating materials
- Interest on founding loan/bank credit
All the above details are added up in the investment plan. The final amount of the investment plan indicates how much capital you need in the initial phase of the investment to implement the planned project.
Make sure that you have specific offers for the individual cost items. Only then will you ensure that the amount of the necessary investment is determined as thoroughly as possible.
As part of the finance plan , the investment plan is also part of the business plan. It is typically combined with an operating expense plan in the finance plan.
While the investment plan only covers one-off costs and additional expenses during the start-up phase, the operating expense plan provides backers with an overview of the ongoing costs of your company.
Operating expenses include:
- Staff costs (including wage and incidental wage costs) as well as your own salary as managing director for stock corporations (all costs including incidental wage costs)
- If relevant, a management wage (to ensure personal living costs for sole proprietorships and partnerships)
- Rent, tenancy and leasing
- Heating, electricity, water and gas
- Market development expenses (advertising and marketing)
- Motor vehicle costs
- Travel costs
- Telephone, fax and internet
- Office materials
- Contributions (to chambers of commerce and professional associations, for example)
- Consulting (lawyers, business consultants and tax advisors)
- Other expenses
By adding the investment amount determined in the investment plan to the total from the operating expense plan, you obtain the capital requirements of your business venture.
You show how you cover this capital requirement in the financing plan – another part of the finance plan. Since investment projects are typically funded by a combination of equity capital, subsidized loans and bank credit, it is critical that you take interest and repayments into consideration when planning capital requirements. Intermediate bottlenecks can be identified by means of a liquidity forecast .
In addition, it’s important to ensure that all operating costs as well as your cost of living are covered by your company alone following the budgeted start-up phase and that there are no fears of long-term losses. You can calculate whether your investment makes financial sense using a profitability forecast , which likewise forms part of the finance plan. If you’d like to assess how your investment compares to alternative options, an investment appraisal technique such as the net present value method can be helpful.
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Before a business idea can be implemented, it is necessary to create a business plan. This serves as the founder’s roadmap, and summarizes all necessary information about planning and finances. However, the business plan is also highly relevant for investors as well as potential financial and funding institutions, since it is a decision-making factor for loans and grants. Due to its importance and...
Cash flow statements provide the recipients of quarterly or annual financial reports with an overview of the company’s use of funds. They help investors assess their financial and economic situation. Depending on the company’s focus, preparation of the cash flow statement must comply with the requirements laid out by the FASB and in the IAS 7. In this article, we give you a short introduction into...
There are a number of very important tasks involved with starting your own business. In order to do these tasks justice, it is absolutely necessary to create a business plan. This should always be done in writing. But what are the contents of a buiness plan, what functions does it fulfill, and what is its structure like? We provide a complete overview for all prospective business founders.
How profitable is your investment? Net present value provides you with an answer to this question. You calculate it within the framework of a dynamic investment calculation method by discounting the surplus that is generated by the investment. We’ll explain how this actually works with the help of a step-by-step practical example.
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What Is a Business Plan?
Understanding business plans, how to write a business plan, elements of a business plan, special considerations.
- Business Plan FAQs
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Business Plan: What It Is, What's Included, and How To Write One
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
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A business plan is a document that defines in detail a company's objectives and how it plans to achieve its goals. A business plan lays out a written road map for the firm from marketing , financial, and operational standpoints. Both startups and established companies use business plans.
A business plan is an important document aimed at a company's external and internal audiences. For instance, a business plan is used to attract investment before a company has established a proven track record. It can also help to secure lending from financial institutions.
Furthermore, a business plan can serve to keep a company's executive team on the same page about strategic action items and on target for meeting established goals.
Although they're especially useful for new businesses, every company should have a business plan. Ideally, the plan is reviewed and updated periodically to reflect goals that have been met or have changed. Sometimes, a new business plan is created for an established business that has decided to move in a new direction.
Key Takeaways
- A business plan is a document describing a company's core business activities and how it plans to achieve its goals.
- Startup companies use business plans to get off the ground and attract outside investors.
- A business plan can also be used as an internal guide to keep an executive team focused on and working toward short- and long-term objectives.
- Businesses may create a lengthier traditional business plan or a shorter lean startup business plan.
- Good business plans should include an executive summary and sections on products and services, marketing strategy and analysis, financial planning, and a budget.
Want Funding? You Need a Business Plan
A business plan is a fundamental document that any new business should have in place prior to beginning operations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they'll provide capital to new businesses.
Operating without a business plan usually is not a good idea. In fact, very few companies are able to last very long without one. There are benefits to creating (and sticking to) a good business plan. These include being able to think through ideas before investing too much money in them and working through potential obstacles to success.
A good business plan should outline all the projected costs and possible pitfalls of each decision a company makes. Business plans, even among competitors in the same industry, are rarely identical. However, they can have the same basic elements, such as an executive summary of the business and detailed descriptions of its operations, products and services, and financial projections. A plan also states how the business intends to achieve its goals.
While it's a good idea to give as much detail as possible, it's also important that a plan be concise to keep a reader's attention to the end.
A well-considered and well-written business plan can be of enormous value to a company. While there are templates that you can use to write a business plan, try to avoid producing a generic result. The plan should include an overview and, if possible, details of the industry of which the business will be a part. It should explain how the business will distinguish itself from its competitors.
Start with the essential structure: an executive summary, company description, market analysis, product or service description, marketing strategy, financial projections, and appendix (which include documents and data that support the main sections). These sections or elements of a business plan are outlined below.
When you write your business plan, you don’t have to strictly follow a particular business plan outline or template. Use only those sections that make the most sense for your particular business and its needs.
Traditional business plans use some combination of the sections below. Your plan might also include any funding requests you're making. Regardless, try to keep the main body of your plan to around 15-25 pages.
The length of a business plan varies greatly from business to business. Consider fitting the basic information into a 15- to 25-page document. Then, other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and included as appendices.
As mentioned above, no two business plans are the same. Nonetheless, they tend to have the same elements. Below are some of the common and key parts of a business plan.
- Executive summary: This section outlines the company and includes the mission statement along with any information about the company's leadership, employees, operations, and location.
- Products and services: Here, the company can outline the products and services it will offer, and may also include pricing, product lifespan, and benefits to the consumer. Other factors that may go into this section include production and manufacturing processes, any patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
- Market analysis: A firm needs a good handle on its industry as well as its target market. This section of the plan will detail a company's competition and how the company fits in the industry, along with its relative strengths and weaknesses. It will also describe the expected consumer demand for a company's products or services and how easy or difficult it may be to grab market share from incumbents.
- Marketing strategy: This section describes how the company will attract and keep its customer base and how it intends to reach the consumer. A clear distribution channel must be outlined. The section also spells out advertising and marketing campaign plans and the types of media those campaigns will use.
- Financial planning: This section should include a company's financial planning and projections. Financial statements, balance sheets, and other financial information may be included for established businesses. New businesses will include targets and estimates for the first few years plus a description of potential investors.
- Budget: Every company needs to have a budget in place. This section should include costs related to staffing, development, manufacturing, marketing, and any other expenses related to the business.
Unique Business Plans Help
The best business plans aren't generic ones created from easily accessed templates. A company should entice readers with a plan that demonstrates its singularity and potential for success.
Types of Business Plans
Business plans help companies identify their objectives and remain on track to meet goals. They can help companies start, manage themselves, and grow once up and running. They also act as a means to attract lenders and investors.
Although there is no right or wrong business plan, they can fall into two different categories—traditional or lean startup. According to the Small Business Administration (SBA) , the traditional business plan is the most common. It contains a lot of detail in each section. These tend to be longer than the lean startup plan and require more work.
Lean startup business plans, on the other hand, use an abbreviated structure that highlights key elements. These business plans aren't as common in the business world because they're short—as short as one page—and lack detail. If a company uses this kind of plan, it should be prepared to provide more detail if an investor or lender requests it.
Financial Projections
A complete business plan must include a set of financial projections for the business. These forward-looking financial statements are often called pro-forma financial statements or simply the " pro-formas ." They include an overall budget, current and projected financing needs, a market analysis, and the company's marketing strategy.
Other Considerations for a Business Plan
A major reason for a business plan is to give owners a clear picture of objectives, goals, resources, potential costs, and drawbacks of certain business decisions. A business plan should help them modify their structures before implementing their ideas. It also allows owners to project the type of financing required to get their businesses up and running.
If there are any especially interesting aspects of the business, they should be highlighted and used to attract financing, if needed. For example, Tesla Motors' electric car business essentially began only as a business plan.
Importantly, a business plan shouldn't be a static document. As a business grows and changes, so too should the business plan. An annual review of the company and its plan allows an entrepreneur or group of owners to update the plan, based on successes, setbacks, and other new information. It provides an opportunity to size up the plan's ability to help the company grow.
Think of the business plan as a living document that evolves with your business.
A business plan is a document created by a company that describes the company's goals, operations, industry standing, marketing objectives, and financial projections. The information it contains can be a helpful guide in running the company. What's more, it can be a valuable tool to attract investors and obtain financing from financial institutions.
Why Do Business Plans Fail?
Even if you have a good business plan, your company can still fail, especially if you do not stick to the plan! Having strong leadership with focus on the plan is always a good strategy. Even when following the plan, if you had poor assumptions going into your projections, you can be caught with cash flow shortages and out of control budgets. Markets and the economy can also change. Without flexibility built in to your business plan, you may be unable to pivot to a new course as needed.
What Does a Lean Startup Business Plan Include?
The lean startup business plan is an option when a company prefers a quick explanation of its business. The company may feel that it doesn't have a lot of information to provide since it's just getting started.
Sections can include: a value proposition, a company's major activities and advantages, resources such as staff, intellectual property, and capital, a list of partnerships, customer segments, and revenue sources.
Small Business Administration. " Write Your Business Plan ."
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How to Write a Winning Business Plan
- Stanley R. Rich
- David E. Gumpert
The business plan admits the entrepreneur to the investment process. Without a plan furnished in advance, many investor groups won’t even grant an interview. And the plan must be outstanding if it is to win investment funds. Too many entrepreneurs, though, continue to believe that if they build a better mousetrap, the world will beat […]
The Idea in Brief
You’ve got a great idea for a new product or service—how can you persuade investors to support it? Flashy PowerPoint slides aren’t enough; you need a winning business plan. A compelling plan accurately reflects the viewpoints of your three key constituencies: the market , potential investors , and the producer (the entrepreneur or inventor of the new offering).
But too many plans are written solely from the perspective of the producer. The problem is that, unless you’ve got your own capital to finance your venture, the only way you’ll get the funding you need is to satisfy the market’s and investors’ needs.
Here’s how to grab their attention.
The Idea in Practice
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; e.g., saving $10,000 per year in chemical use may mean a lot to a modest company but not to a Du Pont.
- 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.
The business plan admits the entrepreneur to the investment process. Without a plan furnished in advance, many investor groups won’t even grant an interview. And the plan must be outstanding if it is to win investment funds.
Too many entrepreneurs, though, continue to believe that if they build a better mousetrap, the world will beat a path to their door. A good mousetrap is important, but it’s only part of meeting the challenge. Also important is satisfying the needs of marketers and investors. Marketers want to see evidence of customer interest and a viable market. Investors want to know when they can cash out and how good the financial projections are. Drawing on their own experiences and those of the Massachusetts Institute of Technology Enterprise Forum, the authors show entrepreneurs how to write convincing and winning business plans.
A comprehensive, carefully thought-out business plan is essential to the success of entrepreneurs and corporate managers. Whether you are starting up a new business, seeking additional capital for existing product lines, or proposing a new activity in a corporate division, you will never face a more challenging writing assignment than the preparation of a business plan.
Only a well-conceived and well-packaged plan can win the necessary investment and support for your idea. It must describe the company or proposed project accurately and attractively. Even though its subject is a moving target, the plan must detail the company’s or the project’s present status, current needs, and expected future. You must present and justify ongoing and changing resource requirements, marketing decisions, financial projections, production demands, and personnel needs in logical and convincing fashion.
Because they struggle so hard to assemble, organize, describe, and document so much, it is not surprising that managers sometimes overlook the fundamentals. We have found that the most important one is the accurate reflection of the viewpoints of three constituencies.
1. The market, including both existing and prospective clients, customers, and users of the planned product or service.
2. The investors, whether of financial or other resources.
3. The producer, whether the entrepreneur or the inventor.
Too many business plans are written solely from the viewpoint of the third constituency—the producer. They describe the underlying technology or creativity of the proposed product or service in glowing terms and at great length. They neglect the constituencies that give the venture its financial viability—the market and the investor.
Take the case of five executives seeking financing to establish their own engineering consulting firm. In their business plan, they listed a dozen types of specialized engineering services and estimated their annual sales and profit growth at 20%. But the executives did not determine which of the proposed dozen services their potential clients really needed and which would be most profitable. By neglecting to examine these issues closely, they ignored the possibility that the marketplace might want some services not among the dozen listed.
Moreover, they failed to indicate the price of new shares or the percentage available to investors. Dealing with the investor’s perspective was important because—for a new venture, at least—backers seek a return of 40% to 60% on their capital, compounded annually. The expected sales and profit growth rates of 20% could not provide the necessary return unless the founders gave up a substantial share of the company.
In fact, the executives had only considered their own perspective—including the new company’s services, organization, and projected results. Because they had not convincingly demonstrated why potential customers would buy the services or how investors would make an adequate return (or when and how they could cash out), their business plan lacked the credibility necessary for raising the investment funds needed.
We have had experience in both evaluating business plans and organizing and observing presentations and investor responses at sessions of the MIT Enterprise Forum. We believe that business plans must deal convincingly with marketing and investor considerations. This reading identifies and evaluates those considerations and explains how business plans can be written to satisfy them.
The MIT Enterprise Forum
Organized under the auspices of the Massachusetts Institute of Technology Alumni Association in 1978, the MIT Enterprise Forum offers businesses at a critical stage of development an opportunity to obtain counsel from a panel of experts on steps to take to achieve their goals.
In monthly evening sessions the forum evaluates the business plans of companies accepted for presentation during 60- to 90-minute segments in which no holds are barred. The format allows each presenter 20 minutes to summarize a business plan orally. Each panelist reviews the written business plan in advance of the sessions. Then each of four panelists—who are venture capitalists, bankers, marketing specialists, successful entrepreneurs, MIT professors, or other experts—spends five to ten minutes assessing the strengths and weaknesses of the plan and the enterprise and suggesting improvements.
In some cases, the panelists suggest a completely new direction. In others, they advise more effective implementation of existing policies. Their comments range over the spectrum of business issues.
Sessions are open to the public and usually draw about 300 people, most of them financiers, business executives, accountants, lawyers, consultants, and others with special interest in emerging companies. Following the panelists’ evaluations, audience members can ask questions and offer comments.
Presenters have the opportunity to respond to the evaluations and suggestions offered. They also receive written evaluations of the oral presentation from audience members. (The entrepreneur doesn’t make the written plan available to the audience.) These monthly sessions are held primarily for companies that have advanced beyond the start-up stage. They tend to be from one to ten years old and in need of expansion capital.
The MIT Enterprise Forum’s success at its home base in Cambridge, Massachusetts has led MIT alumni to establish forums in New York, Washington, Houston, Chicago, and Amsterdam, among other cities.
Emphasize the Market
Investors want to put their money into market-driven rather than technology-driven or service-driven companies. The potential of the product’s markets, sales, and profit is far more important than its attractiveness or technical features.
You can make a convincing case for the existence of a good market by demonstrating user benefit, identifying marketplace interest, and documenting market claims.
Show the User’s Benefit
It’s easy even for experts to overlook this basic notion. At an MIT Enterprise Forum session an entrepreneur spent the bulk of his 20-minute presentation period extolling the virtues of his company’s product—an instrument to control certain aspects of the production process in the textile industry. He concluded with some financial projections looking five years down the road.
The first panelist to react to the business plan—a partner in a venture capital firm—was completely negative about the company’s prospects for obtaining investment funds because, he stated, its market was in a depressed industry.
Another panelist asked, “How long does it take your product to pay for itself in decreased production costs?” The presenter immediately responded, “Six months.” The second panelist replied, “That’s the most important thing you’ve said tonight.”
The venture capitalist quickly reversed his original opinion. He said he would back a company in almost any industry if it could prove such an important user benefit—and emphasize it in its sales approach. After all, if it paid back the customer’s cost in six months, the product would after that time essentially “print money.”
The venture capitalist knew that instruments, machinery, and services that pay for themselves in less than one year are mandatory purchases for many potential customers. If this payback period is less than two years, it is a probable purchase; beyond three years, they do not back the product.
The MIT panel advised the entrepreneur to recast his business plan so that it emphasized the short payback period and played down the self-serving discussion about product innovation. The executive took the advice and rewrote the plan in easily understandable terms. His company is doing very well and has made the transition from a technology-driven to a market-driven company.
Find out the Market’s Interest
Calculating the user’s benefit is only the first step. An entrepreneur must also give evidence that customers are intrigued with the user’s benefit claims and that they like the product or service. The business plan must reflect clear positive responses of customer prospects to the question “Having heard our pitch, will you buy?” Without them, an investment usually won’t be made.
How can start-up businesses—some of which may have only a prototype product or an idea for a service—appropriately gauge market reaction? One executive of a smaller company had put together a prototype of a device that enables personal computers to handle telephone messages. He needed to demonstrate that customers would buy the product, but the company had exhausted its cash resources and was thus unable to build and sell the item in quantity.
The executives wondered how to get around the problem. The MIT panel offered two possible responses. First, the founders might allow a few customers to use the prototype and obtain written evaluations of the product and the extent of their interest when it became available.
Second, the founders might offer the product to a few potential customers at a substantial price discount if they paid part of the cost—say one-third—up front so that the company could build it. The company could not only find out whether potential buyers existed but also demonstrate the product to potential investors in real-life installations.
In the same way, an entrepreneur might offer a proposed new service at a discount to initial customers as a prototype if the customers agreed to serve as references in marketing the service to others.
For a new product, nothing succeeds as well as letters of support and appreciation from some significant potential customers, along with “reference installations.” You can use such third-party statements—from would-be customers to whom you have demonstrated the product, initial users, sales representatives, or distributors—to show that you have indeed discovered a sound market that needs your product or service.
You can obtain letters from users even if the product is only in prototype form. You can install it experimentally with a potential user to whom you will sell it at or below cost in return for information on its benefits and an agreement to talk to sales prospects or investors. In an appendix to the business plan or in a separate volume, you can include letters attesting to the value of the product from experimental customers.
Document Your Claims
Having established a market interest, you must use carefully analyzed data to support your assertions about the market and the growth rate of sales and profits. Too often, executives think “If we’re smart, we’ll be able to get about 10% of the market” and “Even if we only get 1% of such a huge market, we’ll be in good shape.”
Investors know that there’s no guarantee a new company will get any business, regardless of market size. Even if the company makes such claims based on fact—as borne out, for example, by evidence of customer interest—they can quickly crumble if the company does not carefully gather and analyze supporting data.
One example of this danger surfaced in a business plan that came before the MIT Enterprise Forum. An entrepreneur wanted to sell a service to small businesses. He reasoned that he could have 170,000 customers if he penetrated even 1% of the market of 17 million small enterprises in the United States. The panel pointed out that anywhere from 11 million to 14 million of such so-called small businesses were really sole proprietorships or part-time businesses. The total number of full-time small businesses with employees was actually between 3 million and 6 million and represented a real potential market far beneath the company’s original projections—and prospects.
Similarly, in a business plan relating to the sale of certain equipment to apple growers, you must have U.S. Department of Agriculture statistics to discover the number of growers who could use the equipment. If your equipment is useful only to growers with 50 acres or more, then you need to determine how many growers have farms of that size, that is, how many are minor producers with only an acre or two of apple trees.
A realistic business plan needs to specify the number of potential customers, the size of their businesses, and which size is most appropriate to the offered products or services. Sometimes bigger is not better. For example, a saving of $10,000 per year in chemical use may be significant to a modest company but unimportant to a Du Pont or a Monsanto.
Such marketing research should also show the nature of the industry. Few industries are more conservative than banking and public utilities. The number of potential customers is relatively small, and industry acceptance of new products or services is painfully slow, no matter how good the products and services have proven to be. Even so, most of the customers are well known and while they may act slowly, they have the buying power that makes the wait worthwhile.
At the other end of the industrial spectrum are extremely fast-growing and fast-changing operations such as franchised weight-loss clinics and computer software companies. Here the problem is reversed. While some companies have achieved multi-million-dollar sales in just a few years, they are vulnerable to declines of similar proportions from competitors. These companies must innovate constantly so that potential competitors will be discouraged from entering the marketplace.
You must convincingly project the rate of acceptance for the product or service—and the rate at which it is likely to be sold. From this marketing research data, you can begin assembling a credible sales plan and projecting your plant and staff needs.
Address Investors’ Needs
The marketing issues are tied to the satisfaction of investors. Once executives make a convincing case for their market penetration, they can make the financial projections that help determine whether investors will be interested in evaluating the venture and how much they will commit and at what price.
Before considering investors’ concerns in evaluating business plans, you will find it worth your while to gauge who your potential investors might be. Most of us know that for new and growing private companies, investors may be professional venture capitalists and wealthy individuals. For corporate ventures, they are the corporation itself. When a company offers shares to the public, individuals of all means become investors along with various institutions.
But one part of the investor constituency is often overlooked in the planning process—the founders of new and growing enterprises. By deciding to start and manage a business, they are committed to years of hard work and personal sacrifice. They must try to stand back and evaluate their own businesses in order to decide whether the opportunity for reward some years down the road truly justifies the risk early on.
When an entrepreneur looks at an idea objectively rather than through rose-colored glasses, the decision whether to invest may change. One entrepreneur who believed in the promise of his scientific-instruments company faced difficult marketing problems because the product was highly specialized and had, at best, few customers. Because of the entrepreneur’s heavy debt, the venture’s chance of eventual success and financial return was quite slim.
The panelists concluded that the entrepreneur would earn only as much financial return as he would have had holding a job during the next three to seven years. On the downside, he might wind up with much less in exchange for larger headaches. When he viewed the project in such dispassionate terms, the entrepreneur finally agreed and gave it up.
Investors’ primary considerations are:
Cashing out
Entrepreneurs frequently do not understand why investors have a short attention span. Many who see their ventures in terms of a lifetime commitment expect that anyone else who gets involved will feel the same. When investors evaluate a business plan, they consider not only whether to get in but also how and when to get out.
Because small, fast-growing companies have little cash available for dividends, the main way investors can profit is from the sale of their holdings, either when the company goes public or is sold to another business. (Large corporations that invest in new enterprises may not sell their holdings if they’re committed to integrating the venture into their organizations and realizing long-term gains from income.)
Venture capital firms usually wish to liquidate their investments in small companies in three to seven years so as to pay gains while they generate funds for investment in new ventures. The professional investor wants to cash out with a large capital appreciation.
Investors want to know that entrepreneurs have thought about how to comply with this desire. Do they expect to go public, sell the company, or buy the investors out in three to seven years? Will the proceeds provide investors with a return on invested capital commensurate with the investment risk—in the range of 35% to 60%, compounded and adjusted for inflation?
Business plans often do not show when and how investors may liquidate their holdings. For example, one entrepreneur’s software company sought $1.5 million to expand. But a panelist calculated that, to satisfy their goals, the investors “would need to own the entire company and then some.”
Making Sound Projections
Five-year forecasts of profitability help lay the groundwork for negotiating the amount investors will receive in return for their money. Investors see such financial forecasts as yardsticks against which to judge future performance.
Too often, entrepreneurs go to extremes with their numbers. In some cases, they don’t do enough work on their financials and rely on figures that are so skimpy or overoptimistic that anyone who has read more than a dozen business plans quickly sees through them.
In one MIT Enterprise Forum presentation, a management team proposing to manufacture and market scientific instruments forecast a net income after taxes of 25% of sales during the fourth and fifth years following investment. While a few industries such as computer software average such high profits, the scientific instruments business is so competitive, panelists noted, that expecting such margins is unrealistic.
In fact, the managers had grossly—and carelessly—understated some important costs. The panelists advised them to take their financial estimates back to the drawing board and before approaching investors to consult financial professionals.
Some entrepreneurs think that the financials are the business plan. They may cover the plan with a smog of numbers. Such “spreadsheet merchants,” with their pages of computer printouts covering every business variation possible and analyzing product sensitivity, completely turn off many investors.
Investors are wary even when financial projections are solidly based on realistic marketing data because fledgling companies nearly always fail to achieve their rosy profit forecasts. Officials of five major venture capital firms we surveyed said they are satisfied when new ventures reach 50% of their financial goals. They agreed that the negotiations that determine the percentage of the company purchased by the investment dollars are affected by this “projection discount factor.”
The Development Stage
All investors wish to reduce their risk. In evaluating the risk of a new and growing venture, they assess the status of the product and the management team. The farther along an enterprise is in each area, the lower the risk.
At one extreme is a single entrepreneur with an unproven idea. Unless the founder has a magnificent track record, such a venture has little chance of obtaining investment funds.
At the more desirable extreme is a venture that has an accepted product in a proven market and a competent and fully staffed management team. This business is most likely to win investment funds at the lowest costs.
Entrepreneurs who become aware of their status with investors and think it inadequate can improve it. Take the case of a young MIT engineering graduate who appeared at an MIT Enterprise Forum session with written schematics for the improvement of semiconductor-equipment production. He had documented interest by several producers and was looking for money to complete development and begin production.
The panelists advised him to concentrate first on making a prototype and assembling a management team with marketing and financial know-how to complement his product-development expertise. They explained that because he had never before started a company, he needed to show a great deal of visible progress in building his venture to allay investors’ concern about his inexperience.
Once investors understand a company qualitatively, they can begin to do some quantitative analysis. One customary way is to calculate the company’s value on the basis of the results expected in the fifth year following investment. Because risk and reward are closely related, investors believe companies with fully developed products and proven management teams should yield between 35% and 40% on their investment, while those with incomplete products and management teams are expected to bring in 60% annual compounded returns.
Investors calculate the potential worth of a company after five years to determine what percentage they must own to realize their return. Take the hypothetical case of a well-developed company expected to yield 35% annually. Investors would want to earn 4.5 times their original investment, before inflation, over a five-year period.
After allowing for the projection discount factor, investors may postulate that a company will have $20 million annual revenues after five years and a net profit of $1.5 million. Based on a conventional multiple for acquisitions of ten times earnings, the company would be worth $15 million in five years.
If the company wants $1 million of financing, it should grow to $4.5 million after five years to satisfy investors. To realize that return from a company worth $15 million, the investors would need to own a bit less than one-third. If inflation is expected to average 7.5% a year during the five-year period, however, investors would look for a value of $6.46 million as a reasonable return over five years, or 43% of the company.
For a less mature venture—from which investors would be seeking 60% annually, net of inflation—a $1 million investment would have to bring in close to $15 million in five years, with inflation figured at 7.5% annually. But few businesses can make a convincing case for such a rich return if they do not already have a product in the hands of some representative customers.
The final percentage of the company acquired by the investors is, of course, subject to some negotiation, depending on projected earnings and expected inflation.
Make It Happen
The only way to tend to your needs is to satisfy those of the market and the investors—unless you are wealthy enough to furnish your own capital to finance the venture and test out the pet product or service.
Of course, you must confront other issues before you can convince investors that the enterprise will succeed. For example, what proprietary aspects are there to the product or service? How will you provide quality control? Have you focused the venture toward a particular market segment, or are you trying to do too much? If this is answered in the context of the market and investors, the result will be more effective than if you deal with them in terms of your own wishes.
An example helps illustrate the potential conflicts. An entrepreneur at an MIT Enterprise Forum session projected R&D spending of about half of gross sales revenues for his specialty chemical venture. A panelist who had analyzed comparable organic chemical suppliers asked why the company’s R&D spending was so much higher than the industry average of 5% of gross revenues.
The entrepreneur explained that he wanted to continually develop new products in his field. While admitting his purpose was admirable, the panel unanimously advised him to bring his spending into line with the industry’s. The presenter ignored the advice; he failed to obtain the needed financing and eventually went out of business.
Once you accept the idea that you should satisfy the market and the investors, you face the challenge of organizing your data into a convincing document so that you can sell your venture to investors and customers. We have provided some presentation guidelines in the insert called “Packaging Is Important.”
Packaging Is Important
A business plan gives financiers their first impressions of a company and its principals.
Potential investors expect the plan to look good, but not too good; to be the right length; to clearly and cisely explain early on all aspects of the company’s business; and not to contain bad grammar and typographical or spelling errors.
Investors are looking for evidence that the principals treat their own property with care—and will likewise treat the investment carefully. In other words, form as well as content is important, and investors know that good form reflects good content and vice versa.
Among the format issues we think most important are the following:
The binding and printing must not be sloppy; neither should the presentation be too lavish. A stapled compilation of photocopied pages usually looks amateurish, while bookbinding with typeset pages may arouse concern about excessive and inappropriate spending. A plastic spiral binding holding together a pair of cover sheets of a single color provides both a neat appearance and sufficient strength to withstand the handling of a number of people without damage.
A business plan should be no more than 40 pages long. The first draft will likely exceed that, but editing should produce a final version that fits within the 40-page ideal. Adherence to this length forces entrepreneurs to sharpen their ideas and results in a document likely to hold investors’ attention.
Background details can be included in an additional volume. Entrepreneurs can make this material available to investors during the investigative period after the initial expression of interest.
The Cover and Title Page
The cover should bear the name of the company, its address and phone number, and the month and year in which the plan is issued. Surprisingly, a large number of business plans are submitted to potential investors without return addresses or phone numbers. An interested investor wants to be able to contact a company easily and to request further information or express an interest, either in the company or in some aspect of the plan.
Inside the front cover should be a well-designed title page on which the cover information is repeated and, in an upper or a lower corner, the legend “Copy number______” provided. Besides helping entrepreneurs keep track of plans in circulation, holding down the number of copies outstanding—usually to no more than 20—has a psychological advantage. After all, no investor likes to think that the prospective investment is shopworn.
The Executive Summary
The two pages immediately following the title page should concisely explain the company’s current status, its products or services, the benefits to customers, the financial forecasts, the venture’s objectives in three to seven years, the amount of financing needed, and how investors will benefit.
This is a tall order for a two-page summary, but it will either sell investors on reading the rest of the plan or convince them to forget the whole thing.
The Table of Contents
After the executive summary include a well-designed table of contents. List each of the business plan’s sections and mark the pages for each section.
Even though we might wish it were not so, writing effective business plans is as much an art as it is a science. The idea of a master document whose blanks executives can merely fill in—much in the way lawyers use sample wills or real estate agreements—is appealing but unrealistic.
Businesses differ in key marketing, production, and financial issues. Their plans must reflect such differences and must emphasize appropriate areas and deemphasize minor issues. Remember that investors view a plan as a distillation of the objectives and character of the business and its executives. A cookie-cutter, fill-in-the-blanks plan or, worse yet, a computer-generated package, will turn them off.
Write your business plans by looking outward to your key constituencies rather than by looking inward at what suits you best. You will save valuable time and energy this way and improve your chances of winning investors and customers.
- SR Mr. Rich has helped found seven technologically based businesses, the most recent being Advanced Energy Dynamics Inc. of Natick, Massachusetts. He is also a cofounder and has been chairman of the MIT Enterprise forum, which assists emerging growth companies.
- DG Mr. Gumpert is an associate editor of HBR, where he specializes in small business and marketing. He has written several HBR articles, the most recent of which was “The Heart of Entrepreneurship,” coauthored by Howard. H. Stevenson (March–April 1985). This article is adapted from Business Plans That Win $$$ : Lessons from the MIT Enterprise Forum, by Messrs. Rich and Gumpert (Harper & Row, 1985). The authors are also founders of Venture Resource Associates of Grantham, New Hampshire, which provides planning and strategic services to growing enterprises.
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How to Write a Business Plan For Investors (That They Will Love)
You want to write a great business plan that investors will love, but you have no idea how. luckily, the experts at bizplan have given us some great tips check out this in-depth, point-by-point breakdown of how to write an awesome business plan..
April 14th, 2022 | By: The Startups Team | Tags: Development , Pitching , Leadership , Growth , Product , Management , Team , Communication , Pitch Decks , Customers , Scaling , Planning
A good business plan does more than just inform readers about what your company does, how you earn money, or what you want to do. It persuades the reader that your company is awesome, gets them excited about the opportunity to get involved, and makes them want to help you succeed.
But how do you write a good business plan for investors? You probably didn’t go to business school and if you’re a first-time founder, it can be really hard to figure out how to do something so technical. But don’t worry! This guide will walk you through how to write a business plan for investors, will help you answer the most important questions about your business, and will show you the best ways to illustrate them. We’ve also thrown in some additional resources you can turn to for help.
And if that’s still not enough, Bizplan is giving Startups.com readers 50 percent off their first month of business planning services. Check it out here .
The Big Picture
There are 14 important sections of a business plan. But that is by no means an excuse to write out your entire life story on paper. The average business plan should be around 15 pages — no more than 20.
In the past, the average business plan was anywhere from 40 to 100 pages, and guess what they found out? No one was reading all of that. So don’t let important information about your company get lost in a jumble of words. Investors look for founders who can provide the most value in the least amount of time, and your business plan is a great indication of that ability.
The Big Questions
By the time readers are done reading your business plan, they should have a clear understanding of the following: Why (Why this? Why now? Why you? Why them?) and how (How will you make money? How will you get customers? How will you grow your business?).
These questions should be answered throughout your business plan, and should prove to those reading it that your company has the right product, market, team, time, and strategy to make them a return on their investment.
So without further adieu, here is a breakdown of writing a business plan for investors:
1. Executive Summary
The Executive Summary is an introduction to the main ideas that you will discuss in the rest of the plan. If an investor read only the Executive Summary and nothing else, you’d want them to be able to walk away with a clear understanding of the main highlights of your business and why it’s exciting.
A good Executive Summary includes quick, one to two sentence overviews of the following information: mission statement, product/service summary, market opportunity summary, traction summary, next steps, and vision statement.
Pro tip: Although the Executive Summary comes first, it is often helpful to write it last because you’ll have worked through everything by then.
2. Investment Opportunity
The Investment Opportunity section is where you tell investors what your goals are, why they are integral in helping you achieve those goals, and what they have to gain from getting involved with your company. This includes:
- Your Funding Goal : How much money do you need to move forward
- Terms : What will investors get in exchange for their investment?
- Use of Funds : How do you plan to use those funds? (Hint: a 6-figure salary for yourself isn’t what they’re looking for here)
- Milestones : What will you be able to achieve with their investment?
Again, the most important question to answer here is why: Why should investors want to be a part of your company, and why is now the time for them to get involved? Identify the three to four key factors that make your company a great opportunity and make sure they’re included in this section.
3. Team Overview
This is where you introduce your team and how you’ll work together to bring the business to life. An ideal Team Overview section makes the case not only that your team is the right team for the job, but that you’re the only team for the job.
In order to do this, you need to create a bio for each member of the team. Each team bio should include: the team member’s name; their title and position at the company; their professional background; any special skills they have developed as a result of their past experience; their role and responsibilities at your company; and what makes them uniquely qualified to take that role on.
Pro Tip: This is not the time or place for cheesy fun facts or hobbies. Aim for three to five concise sentences on each team member.
4. Market Opportunity
Before you do a deep dive into what your company does, it’s important to set the stage and provide readers with some insight about why you’re starting this company in the first place. A good market opportunity section addresses two key points: The problem that your product/service solves, and the industry trends that make now the time for your company to succeed.
When writing the “problem” part of this section, consider two questions: What problems do your target customers face that your product/service solves? What annoyances or inconveniences do they face that your company helps to eliminate?
When writing the “trends” section, consider these three questions: What recent emerging trends have you developed your product/service in response to? Are there any new or emerging technologies that make your product/solution possible? Are there any specific brands you can point to that illustrate the demand for products/services like (but not too like) yours?
And to sum it all up, write a conclusion that answer this question: How do the problems customers face and the trends that are happening come together to create the perfect environment for your company to succeed?
5. Company Synopsis
The company synopsis section is where you introduce readers to your company and what you have to offer. This is the easy part: It’s where you get to talk about what you’re doing and why it’s awesome.
Consider these questions if you’re having trouble getting started: What does your company do? How does it solve the problem you’ve previously outlined? What products and services do you offer? How will customers use your product/service? What are the key features? What makes your product/service different from anything currently available?
6. Revenue Model
This is where you answer the age-old question of any business: How does your company make money? Identify all current/initial revenue sources, including pricing, COGS, and margins.
Ask yourself: Why is this revenue model the right fit for your current stage? How does your pricing compare to competitors? Are there additional revenue sources you plan to add down the line? If you haven’t started generating revenue when & how will you “flip the switch”?
7. Traction/Company Milestones
It’s important for investors to see that your business is more than just an idea on a cocktail napkin; it’s an actual, viable business. Traction is a huge part of making that case.
Here are some key categories of traction that signal to readers that your company is making moves.
- Product Development : Where are you in the process? Is your product in the market?
- Manufacturing/Distribution: Do you have an established partner for production/manufacturing? Distribution?
- Early Customers and Revenue : Do you have existing customers? How many? And how fast are you growing? Have you started generating revenue?
- Testimonials and Social Proof : Do you have any positive client reviews of your product/service? Any high profile customers or industry experts?
- Partnerships : Have you secured partnerships with any established brands?
- Intellectual Property : Do you have any patents for the technology behind your company? Is your company name trademarked?
- Press Mentions : Has your company been featured by any media outlets? Which ones?
8. Industry Analysis
The industry analysis section provides a bird’s eye view of the industry your company is positioned in, what’s happening in the industry, and where your company stands in relation to your peers. You want readers to walk away from your business plan seeing not only that you’re an expert in your company but that you’re highly knowledgeable about the industry you’re entering into.
Be intentional about the statistics you include in the plan. Include only numbers that really help to illustrate: the size of the opportunity your company is positioned to address; the demand for your solution; the growth of the audience/demand for your product that is already happening; and competitor analysis.
Now that you’ve introduced readers to your industry, it’s time to give them a glimpse into the other companies that are working in the same space, and how your company stacks up. Identify at least three sources of competition for your company and answer the following questions about each one:
- Basic Info : Where are they based? What stage of growth are they in?
- Traction : How much revenue do they generate? How many customers do they have? Have they received funding?
- Similarities and Differences : What are their strengths? How do you plan to neutralize them? What are their weaknesses? How is that an advantage to you?
- The Takeaway : What can you learn from your competitors to make your company stronger?
Pro tip: When identifying competitors, it’s important to think outside the box, and look beyond companies that are offering the exact same product or service that you are. A skimpy competitor analysis section doesn’t tell investors that your solution is unrivaled — it tells them that you’re not looking hard enough.
9. Differentiating Factors
The differentiating factors section is where you outline how your product/service is different from others on the market and how those differences will help you to maintain your strategic edge. Ask yourself: What are three to five key differentiators between your company and other solutions out there? How will these advantages translate into a long-term advantage for your company?
10. Target Audience
The target audience section is where you show readers that you know who your audience is, where they are, and what is important to them.
Some questions to help you get started include: Who are the people that your product/service is designed to appeal to? What do you know about customers in this demographic? Does your target audience skew more male or more female? What age range do your target customers fall in? Around how many people are there in this target demographic? Where do your target customers live? How much money do they make? Do they have any particular priorities or concerns when it comes to the products/services they buy?
11. User Acquisition and Marketing Strategy
Now that we know who your customers are, the next question is: How do you plan on getting them?
Ask yourself: How will you get your first customers? Who will you target first? Will you introduce your product in certain key geographic locations? Are there any existing brands that you are planning to partner with? How do you plan to raise awareness for your brand? What forms of media will you use? Why? Do you have a presence on social media? Which platforms do you use and why? Essentially, what is your marketing strategy ?
12. Future Growth and Development
Once you’ve accomplished all the short-term goals, built out your initial product offering, and acquired your first customers — what will you do to grow your business from there?
Ask yourself: Do you have any new products in the pipeline? How will these new products enhance your current offerings? Are you planning to expand into new markets (new cities, new demographic categories)? Can you provide a timeline of when you expect each new development to take place? What metrics or conditions will help you to decide when it’s time to move forward? What are some potential exit strategies for your company down the road? Will you seek acquisition by a larger company? Do you plan to take the company public with an Initial Public Offering?
13. Financial Overview
Financial data is always at the end of the business plan, but that doesn’t mean it’s any less important. In fact, poor financials can rip apart anything you initially had going for you. The charts, tables, and formulas in your financial section show an investor how well you’re doing and what your odds are for continued survival.
The three most important things to include are: cash flow statement, income statement, and your balance sheet. While these three things are related, they measure quite different aspects of a company’s financial health.
We’re Here To Help
There you have it: A comprehensive guide to writing your next business plan for investors. Sound like a big undertaking? Our friends at Bizplan.com have your back. Click here for a Startups.co exclusive discount on their services. Good luck!
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Startups is the world's largest startup platform, helping over 1 million startup companies find customers , funding , mentors , and world-class education .
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The 7 Best Business Plan Examples
So you want to start a business . Kudos! You’re doing big things.
One of the first steps to building a strong foundation for your new venture is to write a rock-solid business plan . When done right, your business plan can pave your path to success, all while helping you to smoothly cruise through any obstacles that may come up.
Plus, a good business plan can help you secure critical partnerships and funding that you might need in your early stages.
If you’re unsure how to write one, a great place to start is to learn from the pros. In this article, we’ll look at companies that built incredible business plans.
Take notes on the structure, format, and details. Hopefully you’ll leave with plenty of inspiration to write your own.
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7-part template for business plan examples
We’ll look at seven business plans that are structured using a seven-part template. Here’s a quick review of those parts:
- Executive summary: A quick overview of your business and the contents of your business plan.
- Company description: More info about your company, its goals and mission, and why you started it in the first place.
- Market analysis: Research about the market and industry your business will operate in, including a competitive analysis about the companies you’ll be up against.
- Products and services: A detailed description of what you’ll be selling to your customers.
- Marketing plan: A strategic outline of how you plan to market and promote your business before, during, and after your company launches into the market.
- Logistics and operations plan: An explanation of the systems, processes, and tools that are needed to run your business in the background.
- Financial plan: A map of your short-term (and even long-term) financial goals and the costs to run the business. If you’re looking for funding, here’s the place to discuss your request and needs.
7 business plan examples (section by section)
In this section, you’ll find hypothetical and real-world examples of each aspect of a business plan to show you how the whole thing comes together.
- Executive summary
Your executive summary offers a high-level overview of the rest of your business plan. You’ll want to include a brief description of your company, market research, competitor analysis, and financial information.
In ThoughtCo’s sample business plan for a fictional company called Acme Management Technology, the executive summary is three paragraphs and occupies nearly half the page:
- Company description
You might go more in-depth with your company description and include the following sections:
- Nature of the business. Mention the general category of business you fall under. Are you a manufacturer, wholesaler, or retailer of your products?
- Background information. Talk about your past experiences and skills, and how you’ve combined them to fill in the market.
- Business structure. This section outlines how you registered your company —as a corporation, sole proprietorship, LLC, or other business type.
- Industry. Which business sector do you operate in? The answer might be technology, merchandising, or another industry.
- Team. Whether you’re the sole full-time employee of your business or you have contractors to support your daily workflow, this is your chance to put them under the spotlight.
You can also repurpose your company description elsewhere, like on your About page, Instagram page, or other properties that ask for a boilerplate description of your business. Hair extensions brand Luxy Hair has a blurb on its About page that could easily be repurposed as a company description for its business plan.
- Market analysis
Market analysis comprises research on product supply and demand, your target market, the competitive landscape, and industry trends. You might do a SWOT analysis to learn where you stand and identify market gaps that you could exploit to establish your footing. Here’s an example of a SWOT analysis we did for a hypothetical ecommerce business:
You’ll also want to run a competitive analysis as part of the market analysis component for your business plan. This will show you who you’re up against and give you ideas on how to gain an edge over the competition.
- Products and services
This part of your business plan describes your product or service, how it will be priced, and the ways it will compete against similar offerings in the market. Don’t go into too much detail here —a few lines are enough to introduce your item to the reader.
- Marketing plan
Potential investors will want to know how you’ll get the word out about your business. As such, it’s essential to build a marketing plan that highlights the promotion and customer acquisition strategies you’re planning to adopt.
Most marketing plans focus on the four Ps: product, price, place, and promotion. However, it’s easier when you break it down by the different marketing channels . Mention how you intend to promote your business using blogs, email, social media, and word-of-mouth marketing.
Here’s an example of a hypothetical marketing plan for a real estate website:
Logistics and operations
This section of your business plan provides information about your production, facilities, production, equipment, shipping and fulfillment, and inventory.
Financial plan
The financial plan (a.k.a. financial statement) offers a breakdown of your sales, revenue, expenses, profit, and other financial metrics. You’ll want to include all the numbers and concrete data to project your current and projected financial state. For example, the financial statement for ecommerce brand Nature’s Candy includes forecasted revenue, expenses, and net profit in graphs.
It then goes deeper into the financials, citing:
- Funding needs
- Project cash-flow statement
- Project profit-and-loss statement
- Projected balance sheet
You can use Shopify’s financial plan template to create your own income statement, cash-flow statement, and balance sheet.
Types of business plan (and what to write for each)
A one-page business plan is a pared down version of a standard business plan that’s easy for potential investors and partners to understand. You’ll want to include all of the sections, but make sure they’re abbreviated and summarized.
- Logistics and operations plan
- Financials
A startup business plan is meant to secure outside funding for a new business. Typically, there’s a big focus on the financials, as well as other sections that help determine the viability of your business idea —market analysis, for example.
- Market research: in depth
- Financials: in depth
Internal
Your internal business plan acts as the enforcer of your company’s vision. It reminds your team of the long-term objective and keeps them strategically aligned toward the same goal.
- Market research
Feasibility
A feasibility business plan is essentially a feasibility study that helps you evaluate whether your product or idea is worthy of a full business plan.
Mix and match to make a killer business plan
The good news is: there’s no single right way to write a business plan. If you’re feeling unsure about how to craft yours, pull bits and pieces that you like from other examples, and leave out the parts that don’t apply or make sense for you.
The important thing is to clearly communicate your reason for starting the company, what’s needed to operate it, and how you plan to make it work in the long run.
When you can convince others that you have a killer game plan, you’ve nailed it.
Want to learn more?
- Question: Are You a Business Owner or an Entrepreneur?
- Bootstrapping a Business: 10 Tips to Help You Succeed
- Entrepreneurial Mindset: 20 Ways to Think Like an Entrepreneur
- 101+ Best Small Business Software Programs
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Investment Business Plans
Did you know each of these plans was created in LivePlan? Learn More
Financial Services Business Plan
Green Investments is a financial service company that focuses on stocks of environmentally responsible companies.
Investment Company Business Plan
Investment Company is a start-up which buys and sells other businesses.
Investment Consulting Business Plan
Vista Investors is a start-up investment management firm, whose hallmark investment product will be the Vista Total Market Equity strategy, which will initially be offered through a mutual fund.
Investment Website Business Plan
Staryoo.com is a start-up Internet company providing a Web-based trading platform for Chinese equities and securities investors and institutions.
Start-Up Real Estate Business Plan
Golden Valley Real Estate will provide real estate services in the newly established Golden Valley Retirement Community, located to the Northwest of scenic Tucson, Arizona.
Are you in the business of investing in other businesses? While it may not necessarily operate exactly the same as a customer-facing organization, you’ll still need a business plan prepared in order to succeed and attract potential acquisitions. Check out our financial investment, consulting, and various other investment sample plans for guidance as you develop your own business plan.
If you’re looking to develop a more modern business plan, we recommend you try LivePlan . It contains the same templates and information you see here, but with additional guidance to help you develop the perfect plan.
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Volkswagen announces five-year $193 billion investment plan as electrification gathers pace
The German automotive giant earlier this month posted a full-year 2022 operating profit of 22.5 billion euros, up 13% from the previous year, with battery and electric vehicle (BEV) deliveries rising 26%.
- Overall delivery numbers declined by 7% due to "an increase in working capital due to supply chain and logistics issues."
Volkswagen on Tuesday announced plans to invest 180 billion euros ($192.6 billion) between 2023 and 2027, with more than two thirds targeting "electrification and digitalization."
The BEV expansion was driven by a 68% spike in China, while the company also completed the landmark electrification of its plant in Chattanooga, Tennessee.
However, overall delivery numbers declined by 7% to 8.3 million vehicles in 2022 and the automotive division's net cash flows decreased to 4.8 billion euros from 8.6 billion euros in 2021.
In Tuesday's annual report, the company attributed this to "an increase in working capital due to supply chain and logistics issues, especially towards the end of the year," and projected this should "largely reverse" over the course of 2023.
CEO Oliver Blume said Volkswagen "set clear and ambitious targets and took necessary decisions to streamline processes" in 2022, while the coming year will be "decisive" for executing the group's strategic aims.
Volkswagen Group CFO and COO Arno Antlitz said that the company's strong financial position should enable it to "continue investing in electrification and digitalization" even in a "challenging economic environment."
"We have interest rates increasing and the overall demand is slightly coming down from a customer perspective, from a market perspective, but on the other hand we are still operating in an environment, in an economy, that is characterized by [semiconductor] supply that is still not sufficient," Antlitz told CNBC on Tuesday, adding that this global shortage of semiconductors is easing.
"Based on that, we have an order book which is almost 1.8 million cars. Based on our strong products, strong brands and that order book, we are rather confident for 2023."
Net cash flow in the automotive division increased to 43 billion euros by the end of 2022, fueled by the successful IPO of luxury brand Porsche , which reported record earnings on Monday and issued an ambitious long-term outlook.
How to Write a Financial Plan for Your Small Business — 2022 Guide
Building a financial plan can be the most intimidating part of writing your business plan . It’s also one of the most vital. Businesses that have a full financial plan in place more prepared to pitch to investors, receive funding, and achieve long-term success.
Thankfully, you don’t need an accounting degree to successfully put one together. All you need to know is the key elements and what goes into them. Read on for the six components that need to go into your financial plan and successfully launch your business.
What is a financial plan?
A financial plan is simply an overview of your current business financials and projections for growth. Think of any documents that represent your current monetary situation as a snapshot of the health of your business and the projections being your future expectations.
Why is a financial plan important for your business?
As said before, the financial plan is a snapshot of the current state of your business. The projections, inform your short and long-term financial goals and gives you a starting point for developing a strategy.
It helps you, as a business owner, set realistic expectations regarding the success of your business. You’re less likely to be surprised by your current financial state and more prepared to manage a crisis or incredible growth, simply because you know your financials inside and out.
And aside from helping you better manage your business, a thorough financial plan also makes you more attractive to investors. It makes you less of a risk and shows that you have a firm plan and track record in place to grow your business.
Components of a successful financial plan
All business plans, whether you’re just starting a business or building an expansion plan for an existing business, should include the following:
- Profit and loss statement
- Cash flow statement
- Balance sheet
- Sales forecast
- Personnel plan
- Business ratios and break-even analysis
Even if you’re in the very beginning stages, these financial statements can still work for you.
How to write a financial plan for your small business
The good news is that they don’t have to be difficult to create or hard to understand. With just a few educated guesses about how much you might sell and what your expenses will be, you’ll be well on your way to creating a complete financial plan.
1. Profit and loss statement
This is a financial statement that goes by a few different names—profit and loss statement, income statement, pro forma income statement, P&L (short for “profit and loss”)— and is essentially an explanation of how your business made a profit (or incur a loss) over a certain period of time.
It’s a table that lists all of your revenue streams and all of your expenses—typically over a three-month period—and lists at the very bottom the total amount of net profit or loss.
There are different formats for profit and loss statements, depending on the type of business you’re in and the structure of your business (nonprofit, LLC, C-Corp, etc.).
What to include in your profit and loss statement
- Your revenue (also called sales)
- Your “cost of sale” or “cost of goods sold” (COGS)—keep in mind, some types of companies, such as a services firm, may not have COGS
- Your gross margin, which is your revenue less your COGS
These three components (revenue, COGS, and gross margin) are the backbone of your business model — i.e., how you make money.
You’ll also list your operating expenses, which are the expenses associated with running your business that isn’t directly associated with making a sale. They’re the fixed expenses that don’t fluctuate depending on the strength or weakness of your revenue in a given month—think rent, utilities, and insurance.
How to find operating income
To find your operating income with the P&L statement you’ll take the gross margin less your operating expenses:
Gross Margin – Operating Expenses = Operating Income
Depending on how you classify some of your expenses, your operating income will typically be equivalent to your “earnings before interest, taxes, depreciation, and amortization” (EBITDA). This is basically, how much money you made in profit before you take your accounting and tax obligations into consideration. It may also be called your “profit before interest and taxes,” gross profit, and “contribution to overhead”—many names, but they all refer to the same number.
How to find net income
Your so-called “bottom line”—officially, your net income, which is found at the very end (or, bottom line) of your profit and loss statement—is your EBITDA less the “ITDA.” Just subtract your expenses for interest, taxes, depreciation, and amortization from your EBITDA, and you have your net income:
Operating Income – Interest, Taxes, Depreciation, and Amortization Expenses = Net Income
For further reading on profit and loss statements (a.k.a., income statements), including an example of what a profit and loss statement actually looks like, check out “ How to Read and Analyze an Income Statement.” And if you want to start building your own, download our free Profit and Loss Statement Template .
2. Cash flow statement
Your cash flow statement is just as important as your profit and loss statement. Businesses run on cash —there are no two ways around it. A cash flow statement is an explanation of how much cash your business brought in, how much cash it paid out, and what its ending cash balance was, typically per-month.
Without a thorough understanding of how much cash you have, where your cash is coming from, where it’s going, and on what schedule, you’re going to have a hard time running a healthy business . And without the cash flow statement, which lays that information out neatly for lenders and investors, you’re not going to be able to raise funds.
The cash flow statement helps you understand the difference between what your profit and loss statement reports as income—your profit—and what your actual cash position is.
It is possible to be extremely profitable and still not have enough cash to pay your expenses and keep your business afloat. It is also possible to be unprofitable but still have enough cash on hand to keep the doors open for several months and buy yourself time to turn things around —that’s why this financial statement is so important to understand.
Cash versus accrual accounting
There are two methods of accounting—the cash method and the accrual method.
The accrual method means that you account for your sales and expenses at the same time—if you got a big preorder for a new product, for example, you’d wait to account for all of your preorder sales revenue until you’d actually started manufacturing and delivering the product. Matching revenue with the related expenses is what’s referred to as “the matching principle,” and is the basis of accrual accounting.
The cash method means that you just account for your sales and expenses as they happen, without worrying about matching up the expenses that are related to a particular sale or vice versa.
If you use the cash method, your cash flow statement isn’t going to be very different from what you see in your profit and loss statement. That might seem like it makes things simpler, but I actually advise against it.
I think that the accrual method of accounting gives you the best sense of how your business operates and that you should consider switching to it if you aren’t using it already.
Why you should use accrual accounting for cash flow
For the best sense of how your business operates, you should consider switching to accrual accounting if you aren’t using it already.
Here’s why: Let’s say you operate a summer camp business. You might receive payment from a camper in March, several months before camp actually starts in July—using the accrual method, you wouldn’t recognize the revenue until you’ve performed the service, so both the revenue and the expenses for the camp would be accounted for in the month of July.
With the cash method, you would have recognized the revenue back in March, but all of the expenses in July, which would have made it look like you were profitable in all of the months leading up to the camp, but unprofitable during the month that camp actually took place.
Cash accounting can get a little unwieldy when it comes time to evaluate how profitable an event or product was, and can make it harder to really understand the ins and outs of your business operations. For the best look at how your business works, accrual accounting is the way to go.
3. Balance sheet
Your balance sheet is a snapshot of your business’s financial position—at a particular moment in time, how are you doing? How much cash do you have in the bank, how much do your customers owe you, and how much do you owe your vendors?
What to include in your balance sheet
- Assets: Your accounts receivable, money in the bank, inventory, etc.
- Liabilities: Your accounts payable, credit card balances, loan repayments, etc.
- Equity: For most small businesses, this is just the owner’s equity, but it could include investors’ shares, retained earnings, stock proceeds, etc.
It’s called a balance sheet because it’s an equation that needs to balance out:
Assets = Liabilities + Equity
The total of your liabilities plus your total equity always equals the total of your assets.
At the end of the accounting year, your total profit or loss adds to or subtracts from your retained earnings (a component of your equity). That makes your retained earnings your business’s cumulative profit and loss since the business’s inception.
However, if you are a sole proprietor or other pass-through tax entity, “retained earnings” doesn’t really apply to you—your retained earnings will always equal zero, as all profits and losses are passed through to the owners and not rolled over or retained like they are in a corporation.
If you’d like more help creating your balance sheet, check out our free downloadable Balance Sheet Template .
4. Sales forecast
The sales forecast is exactly what it sounds like: your projections, or forecast, of what you think you will sell in a given period. Your sales forecast is an incredibly important part of your business plan, especially when lenders or investors are involved, and should be an ongoing part of your business planning process.
Your sales forecast should be an ongoing part of your business planning process.
You should create a forecast that is consistent with the sales number you use in your profit and loss statement. In fact, in our business planning software, LivePlan , the sales forecast auto-fills the profit and loss statement.
There isn’t a one-size-fits-all kind of sales forecast—every business will have different needs. How you segment and organize your forecast depends on what kind of business you have and how thoroughly you want to track your sales.
Generally, you’ll want to break down your sales forecast into segments that are helpful to you for planning and marketing purposes.
If you own a restaurant, for example, you’ll want to separate your forecasts for dinner and lunch sales. But a gym owner may find it helpful to differentiate between the membership types. If you want to get really specific, you might even break your forecast down by product, with a separate line for every product you sell.
Along with each segment of forecasted sales, you’ll want to include that segment’s “cost of goods sold” (COGS). The difference between your forecasted revenue and your forecasted COGS is your forecasted gross margin.
5. Personnel plan
Think of the personnel plan as a justification of each team member’s necessity to the business.
The overall importance of the personnel plan depends largely on the type of business you have. If you are a sole proprietor with no employees, this might not be that important and could be summarized in a sentence of two. But if you are a larger business with high labor costs, you should spend the time necessary to figure out how your personnel affects your business.
If you opt to create a full personnel plan, it should include a description of each member of your management team, and what they bring to the table in terms of training, expertise, and product or market knowledge. Think of this as a justification of each team member’s necessity to the business, and a justification of their salary (and/or equity share, if applicable). This would fall in the company overview section of your business plan.
You can also choose to use this section to list entire departments if that is a better fit for your business and the intentions you have for your business plan . There’s no rule that says you have to list only individual members of the management team.
This is also where you would list team members or departments that you’ve budgeted for but haven’t hired yet. Describe who your ideal candidate(s) is/re, and justify your budgeted salary range(s).
6. Business ratios and break-even analysis
Business ratios explained.
If you have your profit and loss statement, your cash flow statement, and your balance sheet, you have all the numbers you need to calculate the standard business ratios . These ratios aren’t necessary to include in a business plan—especially for an internal plan—but knowing some key ratios is always a good idea.
Common profitability ratios include:
- Gross margin
- Return on sales
- Return on assets
- Return on investment
Common liquidity ratios include:
- Debt-to-equity
- Current ratio
- Working capital
Of these, the most common ratios used by business owners and requested by bankers are probably gross margin, return on investment (ROI), and debt-to-equity.
Break-even analysis explained
Your break-even analysis is a calculation of how much you will need to sell in order to “break-even” i.e. cover all of your expenses.
In determining your break-even point, you’ll need to figure out the contribution margin of what you’re selling. In the case of a restaurant, the contribution margin will be the price of the meal less any associated costs. For example, the customer pays $50 for the meal. The food costs are $10 and the wages paid to prepare and serve the meal are $15. Your contribution margin is $25 ($50 – $10 – $15 = $25).
Using this model you can determine how high your sales revenue needs to be in order for you to break even. If your monthly fixed costs are $5,000 and you average a 50 percent contribution margin (like in our example with the restaurant), you’ll need to have sales of $10,000 in order to break even.
Make financial planning a recurring part of your business
Your financial plan might feel overwhelming when you get started, but the truth is that this section of your business plan is absolutely essential to understand.
Even if you end up outsourcing your bookkeeping and regular financial analysis to an accounting firm, you—the business owner—should be able to read and understand these documents and make decisions based on what you learn from them. Using a business dashboard tool like LivePlan can help simplify this process, so you’re not wading through spreadsheets to input and alter every single detail.
If you create and present financial statements that all work together to tell the story of your business, and if you can answer questions about where your numbers are coming from, your chances of securing funding from investors or lenders are much higher.
Additional small business financial resources
Ready to develop your own financial plan? Check out the following resources for more insights into creating an effective financial plan for your small business.
- Balance Sheet Template [Free Download]
- Profit and Loss Template [Free Download]
- How to Do a Sales Forecast
- How to Build a Profit and Loss Statement (Income Statement)
- How to Forecast Cash Flow
- Building Your Balance Sheet
- The Difference Between Cash and Profits
Trevor Betenson
Trevor is the CFO of Palo Alto Software, where he is responsible for leading the company’s accounting and finance efforts.
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Volkswagen Will Invest $193 Billion in Electric Cars and Software
The German automaker announced a plan to accelerate its transition to battery-powered vehicles and bolster operations in China and North America.
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By Melissa Eddy
Reporting from Berlin
Volkswagen said on Tuesday that it would spend $193 billion on software, battery factories and other investments as it aimed to make every fifth vehicle it sold electric by 2025.
The automaker, the world’s second biggest after Toyota, will also focus on expanding its presence in North America, where it has struggled for years, and becoming more competitive in China, one of its most important markets, said Oliver Blume, Volkswagen’s chief executive.
Mr. Blume laid out a 10-point plan for helping Volkswagen pivot to electric vehicles, a path it began in earnest when it effectively abandoned diesel technology after an emissions cheating scandal in 2015. The plan’s centerpiece are investments totaling 180 billion euros, or about $193 billion. Two-thirds of that sum will be channeled into producing battery cells, developing software and shoring up supply chains of critical raw materials.
“For me, it is important that we have a clear orientation of where we are going,” Mr. Blume told reporters, adding that 2023 would be “a decisive year” for the company. It is his first as chief executive; he took over in September from Herbert Diess, who aggressively pushed Volkswagen to embrace electric cars but was forced out after just four years because of disagreements with the company’s board.
Mr. Blume hopes to use some of the proceeds of a 2022 initial public offering of Porsche, where he is also chief executive, to strengthen Volkswagen’s electrification strategy. The listing brought in €43 billion.
Volkswagen reported a net profit in 2022 of €15.8 billion, or $16.7 billion, an increase of 2.6 percent from the previous year, as supply chains disrupted by the coronavirus pandemic began to normalize.
The Rise of Electric Vehicles
- Bulking Up: Electric vehicles are usually a more climate-friendly option. But as they get bigger, their emissions savings, and other environmental and safety benefits, begin to diminish .
- Tesla: The company will open some of its fast chargers , which had been exclusive to its customers, to all electric vehicles by the end of next year, the Biden administration said.
- Ford: The automaker plans to build a $3.5 billion electric-vehicle battery factory in Michigan using technology licensed from a Chinese company that has become one of the most important players in the industry.
- Prices Fall: More quickly than seemed possible a few months ago, sticker prices for electric vehicles are falling closer to the point where they could match gasoline models this year .
Russia’s invasion of Ukraine last year caused energy prices to rise and contributed to high inflation, especially in Germany. Addressing those challenges, while balancing the demand for combustion-engine vehicles as the company pivots to electric-vehicle production, will be the main focus in Europe, Volkswagen said.
“We must transform ourselves into a technology and mobility services group,” Arno Antlitz, Volkswagen’s chief financial and operating officer, said at the Tuesday media event. “We need to focus on our platforms, such as our hardware for battery-powered electric vehicles, a unified software stack, batteries, mobility, autonomous driving.”
In the short term, Volkswagen will continue to produce combustion-engine cars, which generate profits that the company needs to pay for the transition to battery-powered vehicles. In 2022, Volkswagen sold 8.2 million cars and trucks.
Despite the German government’s call for companies to diversify their operations in Asia, pivoting away from China, Volkswagen is continuing to invest in the country in partnerships with local companies.
Volkswagen is the leading producer of combustion-engine vehicles in China, but has lost ground to domestic carmakers in the fast-growing market for electric cars. Last year, Volkswagen introduced an “in China for China” strategy that it plans to expand, including developing technology and software specifically for consumers there, including in-car karaoke.
The automaker’s problems in North America are somewhat different. After years of trying to become a bigger player in the United States specifically, it remains far behind U.S. automakers like General Motors and Ford Motor and Asian companies like Toyota and Hyundai.
Volkswagen retooled its plant in Chattanooga, Tenn., last year to begin producing electric vehicles, and it now produces the ID.4 sport utility vehicle there. On Monday, Volkswagen said it had chosen a site in Ontario for a new battery plant. And earlier in March, the company said it would put up a factory in South Carolina to build pickup trucks and S.U.V.s that would be sold under the moribund Scout brand.
In Europe, a key element of the company’s focus includes its first battery cell plant, a €2 billion factory that is rising out of a field in Salzgitter, Germany, near the company’s headquarters in Wolfsburg. The new plant sits behind a site where Volkswagen has been building engines for more than 50 years and is slated to become the main provider of battery cells for the automaker.
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The business investment plan is necessary for strategizing and thinking before you invest in some company or the project. The certain features and elements are important before you think of investing in some trade. The action plan and strategy contains in it the few things that are unavoidable when you’re planning for any sort of business or trade investment. The plan is to know about the logo and the branding of the company or the organization in which you’re investing your funds and assets.
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Keir is an industry expert in the small business and accountant fields. With over two decades of experience as a journalist and small business owner, he cares passionately about the issues facing businesses worldwide.
Have you got a burning desire to start your own business? If so, you’re in good company.
Recent research says 28% of people worldwide have started a business at some point in their lives, while 30% have seriously considered it.
In other words, nearly a third of all people worldwide have considered going it alone.
If you’re serious about starting a business , you’ll need many things – but perhaps the first two you’ll need from day one are accounting software and a business plan .
The former lets you start on the very best footing without having to worry about an admin overload.
The latter is a way of transcribing your ideas and aspirations into cold, hard facts that investors can use.
For most people, creating a business plan is one of the hardest tasks they will undertake in the early days of their business.
But help is available.
Meet our business owner, Olivia
There are lots of business plan examples and templates, including here at Sage Advice . Using templates helps you answer questions that are typically asked if you hope to attract interest in your business – and therefore get investment.
Here, we look at creating a business plan via the hypothetical example of Olivia, who would like to create a plant-based chocolate retailer called Chocoholics Anonymous.
We’ll aim to create an ideal business plan by examining what she writes and how she approaches the task.
Olivia has already tested the water by running a part-time business from her kitchen for some months, with help from a few friends. Sales have boomed.
Now, she’d like to expand into a storefront and full online operation.
If she’s applying for a bank loan, she might be asking for most if not all of the funding. But if she’s hoping for angel investment, she may need to match the anticipated input with her own.
This might be her own cash, but it can also be her collateral in the business, and it’s for this reason that people often approach investors once their operation is an ongoing concern, rather than beforehand.
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Thinking about starting a business or already putting your ideas into action? We’ve got the resources, expertise and software to help you achieve your goals.
How to create a business plan
Olivia downloads our business plan template and sets aside an afternoon to make a start, realising it could take several days or perhaps even weeks to complete and perfect.
She realises this is one of the most important things she will do – more important, even, than the secret recipe for her fudge brigadeiros!
When answering the questions, she tries to remember who the business plan is for: investors, such as banks that she might be approaching for loans, or entrepreneurs.
For this reason, her plan contains as many data points as possible because it has to make a genuine case for her company’s existence.
But it also has to be positive and inspiring, to show the promise her business offers.
Additionally, this is one situation where she knows not to stop herself from including personality in the application. She knows investors are putting their money into her, as much as they are in the potential of the business.
In her business plan, she includes diagrams, charts, visuals and anything else that helps her share her vision.
And that makes the plan easier to consume – after all, investors are busy people, so she’s wise to make the job as easy as possible for them.
Step 1: Description of the business and its objectives
Coyness isn’t required here, and Olivia doesn’t hold back:
“Chocoholics Anonymous will be the most profitable plant-based chocolatier in the country and within three years will become the dominant plant-based chocolate brand.”
She explains how her business will be different from the rest. It will target three price points: budget, medium and high end.
Highlight how you developed your business idea and what you want to achieve
Most chocolatiers, she explains with examples from actual businesses, target only the medium and high-end. She wants to create a low-price revolution.
Similarly, describing her objective is unrestrained in its ambition.
She writes that she wants virtually all vegan chocolate consumers in the country to have heard about her business, and to have a one in 10 conversion rate among this audience – which is to say, 10% will have actively placed an order with her in the space of any year.
She bases these figures on the reach of major plant-based food manufacturers, thanks to taking a look at their annual reports, and creates a graph showing the sales increases she anticipates over the first, second and third years.
Use your business plan to highlight your goals and objectives
She lets her imagination run wild, and talks about wanting to scale the business to multiple retail outlets, and using a dedicated manufacturing base.
Investors need to see ambition because they’re investing in that future as well as the here and now.
Step 2: Products and pricing
Olivia starts by breaking down her ingredient costs vs her profit margin, providing the figures in tables for ease of reading.
Then she explains her strategy for both creating and selling chocolate, and another unique selling point: she intends to offer discounts for bulk buying, so people will be encouraged to purchase more than one item each and every time.
She includes her product listing and provides examples of what she anticipates typical consumer purchases will look like, and how they will scale in this way.
Use this section of your business plan to go through what you’ll be selling
She also explains how she intends to operate both on and offline (or bricks and mortar, as it’s often called), and intends to run a loyalty-card scheme for her retail outlet.
Step 3: Customers
Olivia has done her research, which is the fundamentals upon which any business plan should be based.
People love statistics.
Olivia found statistics describing the growth in plant-based eating in the past decade, as well as the growth of flexitarian dietary choices.
Additionally, from those yearly reports from other plant-based food manufacturers and retailers, she’s able to take profiles of typical customers (personas), as well as discussions of their wants and needs.
And, of course, she finds their sales figures in their annual reports, so she can quote these as examples for her own potential reach, with a geographical breakdown for online sales.
Step 4: Competitors
Although her initial instinct was to pretend that she had no competitors, Olivia doesn’t flinch in examining the competitive landscape.
She realises her investors will not be stupid and, thanks to Google, can do their own research in seconds.
Before handing over cash, any investor will do their own due diligence in any event to confirm what Olivia claims.
So, she provides details of online retailers worldwide, as well as bricks-and-mortar retailers local to her.
She includes any business that might compete in future, such as non-vegan retailers, or even restaurants and cafes who might sniff her success and provide products (although she also mentions how she hopes to supply these retailers).
Use this section of your business plan to highlight your competitor research
She highlights her own unique selling points by expressing them as weaknesses in her competitors.
This level of insight Olivia provides is good for several reasons.
Gaps in the market
It genuinely shows where there might be gaps in the market. For example, Olivia realises during her research that nobody is making products for baby showers with vegan chocolate. She spots a gap in the market for diabetic-friendly plant-based confectionery.
Competitor analysis
Competitor analysis is also good practice when she begins to run her business, because this kind of research will need to be ongoing.
She’ll always need to spot gaps in the market and aim to keep a step ahead of competitors.
Some competitors may simply clone what she’s doing, but because she started her work before them, she can exploit this competitive edge to keep innovating and remain one step ahead.
Being realistic
But mostly, by being so pragmatic Olivia is showing by her competitor analysis that she’s realistic about her prospects. This is something investors will respect.
Step 5: Your people
Olivia starts by detailing her own qualifications and experience in retail, and her success up until that point operating the business from her kitchen.
She writes about her brother-in-law, who she intends to hire to man the store while she creates her masterpieces in the back. She details his qualifications and experience too.
Detail who will be working for you and the skills they’ll be developing
She highlights her expansion plans to take on new staff as the business goes on, and their roles – how she intends to use an online marketing manager when the business grows, for example, to expand her online reach.
Step 6: How to make the business a success
This is one question in the business plan where Olivia has a chance to be truly expansive while answering – although she knows to keep what she writes detailed and pragmatic.
She again discusses her plan to sell her products both online and offline.
Olivia mentions how she intends to exploit social networking to encourage online sales, and how she intends to run competitions with her products as prizes in order to build a mailing list.
She talks about her own experience of being vegan and how she’s firmly entrenched within the vegan community – both online and offline– and how she intends to use this to further the business aims, as well as how it gives her insight into sensitivities, and therefore marketing potential, among her community.
Olivia again does vital research and is able to show how her local area has a high proportion of people interested in plant-based eating, and who could become her bricks-and-mortar customers.
In short, anything and everything that could make her business a success is mentioned – and, in nearly every case, is backed up by data points.
Step 7: Profit and loss for the first three years
This is the toughest part of all.
Olivia has to work out all her costs moving forward – from day one of her business, all the way through to 36 months into the future when the business will hopefully look very different.
Having done her research, she knows her fixed costs – those that don’t change no matter how much she sells.
From speaking to estate agents, for example, she knows what a storefront rent is going to be.
From speaking to other business owners with stores via her local commerce association, she finds out what her bills are likely to be (water, electricity, internet etc).
She decides on salaries for herself and her brother-in-law.
Variable costs are harder for her to predict, because raw ingredient prices can be volatile. All she can do is list them at their current price, and adding a note about volatility.
Speaking to her potential suppliers, she asks the salesperson to give her a spread of recent prices so she can also show what the variation is likely to be. She factors in taking on casual staff as the business grows.
She projects how many units she will sell, and how this will grow.
Download our small business toolkit
One thing Olivia should do is download our small business survival toolkit. This includes an ebook, designed to help you achieve success by addressing typical challenges encountered by small businesses in the first few years.
It’s full of information, including potential funding sources that all businesses need to know about.
The business plan template we offer lets you update or complete your strategy for success, as outlined above. All you have to do is follow the instructions in each section, entering your own information.
Finally, our cash flow forecast template can be used to predict funds flowing in and out of your business over the next 12 months.
This is vital, and you can use it along with the advice in our ebook to address any cash shortfalls.
Small business toolkit
Get your free guide, business plan template and cash flow forecast template to help you manage your business and achieve your goals.
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Real Estate | Ultimate Guide
How to Write a Real Estate Investment Business Plan (+ Free Template)
REVIEWED BY: Gina Baker
Gina is a licensed real estate salesperson, experienced trainer, and former high school educator of 1,000+ learners. She writes for Fit Small Business with a focus on real estate content.
WRITTEN BY: Aloun Khountham
Published September 22, 2022
Aloun Khountham is a contributor to Fit Small Business. Her real estate experience stems from over five years as a New York City real estate operations executive focused on implementing processes, procedures, and new technology solutions designed to help agents succeed.
Free Real Estate Investment Business Plan Template
- 1 Write Your Mission & Vision Statement
- 2 Conduct a SWOT Analysis
- 3 Choose a Real Estate Business Investing Model
- 4 Set Specific & Measurable Goals
- 5 Write a Company Summary
- 6 Determine Your Financial Plan
- 7 Perform a Rental Market Analysis & Create a Marketing Plan
- 8 Build a Team & Implement Systems
- 9 Have an Exit Strategy
- 10 Bottom Line
A real estate investment business plan is a guide with actionable steps for determining how you’ll operate your real estate investing business. It outlines your mission and vision statement and lets you conduct a SWOT (strengths, weaknesses, opportunities, and threats) analysis. The business plan should indicate how you’ll measure your business’ success. It’s similar to a business plan for any business, but the objectives are geared toward how you will grow your investment, manage the business, and secure funding.
We’ve created a real estate business plan template for you to download and use as a guide as you read through the article and learn how to make a business plan for real estate investing:
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💡 Quick tip:
In addition to the template, investing in property management software like TenantCloud will set you up for success. The free plan from TenantCloud will help you list apartments, collect rent payments, and screen applicants to maximize profits and minimize vacancies.
Let’s dive into the nine essential steps to creating your real estate investment business plan:
1. Write Your Mission & Vision Statement
Every real estate investment business plan should begin with a concrete mission statement and vision. A mission statement is a declaration of actions and strategies the organization will use to serve as its North Star to achieve its business or investment objectives. A strong mission statement provides a real estate business with direction, keeps teams accountable, inspires customers, and helps you measure success.
Mission statement from Oak Tree Capital
The example above provides the mission statement of Oak Tree Capital. As a real estate investment business, it’s clear what its ultimate business objective is and how it will approach investing with integrity to maximize profit. Essentially, the investment company will drive monetary results—while maintaining its moral principles.
Vision statement from Sila Realty Trust
Vision statements differ slightly from mission statements. They’re a bit more inspirational and provide some direction for future planning and execution of business investment strategies. Vision statements also touch on a company’s desires and purpose beyond day-to-day operational activity.
A vision statement outlines what the business desires to be once its mission statement is achieved. In the example above from Sila Realty Trust, it hopes to be the best investment option for its vendors and partners, specifically in healthcare property investments.
2. Conduct a SWOT Analysis
The section following the mission and vision statements in our real estate investment business plan template is the SWOT analysis. A SWOT analysis helps identify a business’ strengths, weaknesses, opportunities, and threats. This tool helps real estate investors identify internal areas of improvement within their business through their strengths and weaknesses.
The opportunities and threats can assist with motivating a team to take actions that keep them ahead of an ever-changing real estate landscape. For a real estate business investor, the SWOT analysis is aimed at helping grow and protect investments over time.
Example real estate investing SWOT (Source: Denver Investment Real Estate )
Strengths & Weaknesses
Specifically for real estate investing, strengths and weaknesses correlate with the investment properties’ success and touch on items that will help drive investment growth. In the SWOT example above, the strengths and weaknesses are a property’s location, condition, available amenities, and decreased vacancy. All of these items contribute to the success of a property.
The weaknesses can be small unit size, low rents, low cap rates, etc. These weaknesses indicate less money is being collected and a lower overall return on investment. The weaknesses are all factors that limit cash flow into the business and are internal factors that an investor has the ability to change. They can raise the rent or renovate the units to accommodate more tenants.
Opportunities & Threats
Opportunities and threats are external factors that can affect an investment business. You don’t have control over these items, but you can maneuver your business to take advantage of the opportunities or mitigate any long-term effects of external threats. Opportunities relating to investment properties can be receiving certification with a city as a preferred development or having excess equity (like in the SWOT example above).
However, threats to an investment property do not need to be particularly connected to the property itself. They can be factors that affect your overall business. For example, interest rates may be high, which cuts your profits if you’re obtaining a mortgage during that time frame.
After creating your analysis, an investor can use these factors to develop business goals to support your strengths and opportunities while implementing change to combat the weaknesses and threats you anticipate. It also helps investors prioritize what items need to be addressed to succeed. These factors in a SWOT can change as the business grows, so don’t forget to revisit this portion and continuously reevaluate your SWOT.
3. Choose a Real Estate Business Investing Model
The core of real estate investing is to purchase and sell properties for a profit. How to make that profit is a factor in identifying your investment model. Different investing models are beneficial to an investor at different times.
For example, when interest rates are low, you may consider selling your property altogether. However, when interest rates are high, and it’s harder for people to obtain a mortgage, you will want to rent out your properties. Sometimes you have to try a few models to see what works best for your business given your area of expertise.
We’ve identified some investment business models to consider:
- Holding on to an investment: This strategy mostly involves renting out the property and earning regular rental income. This is also considered the BRRRR method : buy, rehab, rent, refinance, and repeat until you have increased your portfolio.
- Flipping properties : Flipping a property entails purchasing a property, adding value, and selling it higher than the investment costs. Many investors have a set profitability number they would like to hit, but should consider market fluctuations on what they’re realistically able to receive during the sale.
- Owner-occupied: Investors can live in the property while renting out extra units to not only reduce their housing costs but have rental income coming in at the same time. This model is best if you own multifamily units, especially duplexes, triplexes, or fourplexes . It’s also a great way to understand the complexities of being a landlord. When you want to move, you can transition your unit to another renter.
- Wholesaling: This method involves finding good deals on properties and quickly selling them for a small markup to another buyer. The process isn’t as laborious as renovating the property, and you can find and close multiple deals in a short period of time.
Investors don’t have to stick to one model, and they can have a few of these investment models within their portfolio, depending on the amount of effort they would like to put into each property. Before choosing an investment model, consider which will help you meet your investing goals most efficiently.
Roofstock property marketplace (Source: Roofstock )
To support your chosen investment model, Roofstock offers a platform that makes investing accessible for new and experienced investors. Its marketplace lists individual properties, short-term rentals, or you can pick from curated portfolios that all list cap rates, gross yield percentages, and a neighborhood rating for each property. The site also assists with offloading your properties or finding new buyers if you’re not looking to hold on to the investment.
Visit Roofstock
4. Set Specific & Measurable Goals
The next step to completing a real estate investment business plan for real estate investing is to set SMART goals. SMART is an acronym that stands for specific, measurable, achievable, relevant, and time-bound. Creating goals that contain all of the criteria of SMART goals results in extremely specific goals, provides focus, and sets an investor up for achieving the goals. The process of creating these goals takes some experience and continued practice.
An investor’s goals can consist of small short-term goals and more monumental long-term goals. Whether goals are big or small, ideal goals will propel your business forward. For example, your end goal could be having a specific number of properties in your portfolio or setting a specific return on investment (ROI) you want to achieve annually.
Keep in mind that the SMART goals you set forth don’t always have to be property-related just because you’re an investor. They can be goals that help you improve your networking or public speaking skills that can also add to a growing business.
Example of improving goals with SMART in mind:
Begin creating SMART goals with an initial goal. Then, you take that initial goal and break it down into the different SMART components. SMART goals leave no room for error or confusion. The specific, measurable, and time-bound criteria identify the exact components for success. However, the relevant and achievable parts of the goal require a little extra work to identify. The relevancy should align with your company’s mission, and extra research must be performed to ensure the goal is attainable.
Initial goal: Receive a 5% return on investment from the property
Smart goal:
- Specific: I want to achieve a 5% return on the 99 Park Place property.
- Measurable: The goal is to sell it for greater than or equal to $499,000.
- Achievable: The current market value for a two-bedroom in Chicago is currently selling for $500,000 and growing 1% each year.
- Relevant: I’m aiming to meet my overall portfolio returns by 20%, annually.
- Time-bound: I want to offload this property in the next three years.
5. Write a Company Summary
The company summary section of a business plan for investors is a high-level overview, giving insight into your business, its services, goals and mission, and how you differentiate yourself from your competition. Other items that can be included in this overview are business legal structure, business location, and business goals. The company summary is particularly helpful if you’re looking to involve outside investors or partners in your business.
Example company profile from Choueri Real Estate
A company summary is customizable to your target audience. If you’re using this section to recruit high-level executives to your team, center it around business operations and corporate culture. However, if you’re looking to target funding and develop investor relationships for a new project, then you may want to include investor-specific topics relating to profitability, investment strategy, and company business structure.
Partners and outside investors will want to take into account the specific legal business structure of your company to know what types of liabilities are at hand. Legal business structure determines how taxes are charged and paid along with what legal entity owns the assets. This information helps determine how the liabilities are separated from personal assets. For example, if a tenant wants to seek legal damages against the landlord and the property is owned by an LLC, personal assets like your personal home will not be at risk.
6. Determine Your Financial Plan
The most important part of creating a real estate investing business is the financial aspect, since much of the business involves purchasing, managing, and eventually, the sale of real estate. To initially purchase real estate, you’ll have to determine where funding will be coming from. Funding can come from your own personal assets, obtaining a line of credit, or involving external investors that can provide funding.
When obtaining a loan to purchase properties, a few options are available to real estate investors. Some of these lending options are a better fit than others based on your investing model. For example, if you’re wholesaling, it might not be worth obtaining a mortgage to just quickly sell to another investor or end-buyer.
The lending options available to most real estate investors include the following:
- Mortgage: This is one of the most common means of obtaining financing. A financial institution will provide money based on a borrower’s credit score and ability to pay the loan back.
- Federal Housing Authority (FHA) loans : This loan is secured by the FHA to assist with getting you a low down payment or lower closing costs, and sometimes easily obtain credit. There are some restrictions to qualifying for this loan—but it could be good for newer investors who want to begin investing starting with their primary home.
- Home equity line of credit (HELOC) : If you currently have property, obtain a HELOC by using your current property to secure the line of credit and borrow against the equity in your property. As you pay back the loan, your available balance on the line of credit gets replenished.
- Private lenders : These are lenders who are not financial institutions. These individual lenders typically have fewer restrictions than a traditional lender and will lend money to individuals who are able to grow their investment.
- Hard-money loans : This loan requires a hard asset to be leveraged for money. For example, you can put up the home you are looking to purchase as the asset for money upfront, and the hard-money loan will be paid back once the home is sold or other funding is secured. This is great for short-term deals due to its quick approval with little money upfront.
After funding is obtained to purchase property, financial projections help investors understand their financial standing. These projections can tell you potential income, profits, and when you may need additional funding in the future. Similar to lending options, these calculations are specific to your investing model. If you’re not planning to rent out the property, then calculations like gross rent multiplier are not applicable.
For more information on what is needed to obtain financing, read our article Investment Property Financing & Requirements .
Additional Investment Calculations
In a rental property business plan, it’s important to use a rental property calculator to find out a property’s potential return on investment. The calculator takes into account various factors, such as purchase price, operating expenses, monthly income, or vacancy rates, to determine whether a property is a good investment.
Additional calculations all investors should be aware of when purchasing and managing rental properties :
- Gross operating income (GOI): The GOI calculates the amount of rent and income received from a property minus any vacancy. It doesn’t take into account other expenses. It tells an investor how much income they’ll make after some assumed losses with vacancy.
GOI = Total rent + Other income – Vacancy losses
- Capitalization (cap) rate : Calculates the return on investment (ROI) of a property. This equation is used to compare the return of one building to another. The higher the cap rate, the better, since the purchase price is low.
Cap Rate = Net operating income / Purchase price
- Gross rent multiplier (GRM) : This is a factor that helps determine a property’s potential profitability. Can be used to compare perspective buildings to determine which one is the better deal.
GRM = Property price / Gross annual income
- Vacancy rate : Calculate the vacancy percentage of all your investment properties during a specific time period. Percentage helps an investor determine how their property performs given current market conditions. If you have a high vacancy rate, you must determine the cause. Perhaps your asking rents are too high for the current housing market.
Vacancy Rate Formula = # of Vacant Units x 100 / Total # of Units
- Cash flow: Cash flow is the movement of money in and out of your business, also known as net operating income. In an ideal scenario, investors will bring in more income than expenses, thus showing profit and a positive cash flow. Positive cash flow allows investors to make decisions on how they would like to use that profit. They can invest it in growing their portfolio or increasing their cash reserves for unexpected expenses.
Cash Flow = Gross rental income – Total expenses
Investors can use their current cash flow to forecast future cash flows, which will give you an idea of how much profit you will see over a specific period of time. A scenario where you’ll want to estimate future cash flows is if you want to have enough cash reserves for a down payment on a new property.
First, use past cash flow information to determine if there are any trends. For example, perhaps during the summer months, your water expenses increase, or possibly every few months, you see an increase in property repairs. Consider these trends when estimating future cash flows. Forecasting cash flow is just an estimate. If you do project your future cash flow, compare that to actual numbers to determine if your forecasting is accurate.
Use the template below to forecast future cash flow for six months and determine how much cash flow reserves you will have:
Cash Flow Template
7. Perform a Rental Market Analysis & Create a Marketing Plan
While determining what properties to purchase, investors should perform a rental market analysis (RMA) to gauge the investment potential of a rental property. The rental market analysis consists of running comparables against current units on the market and collecting data that may affect your rental rate to understand if the rental property in question is a solid long-term investment. The analysis helps determine the average rental rate and future rent if you want to make any property upgrades.
Fit Small Business’ rental market analysis
Using our RMA template and example above, we identify the subject property and compare it to five to seven nearby rental properties on the market. Investors can use resources like Zillow to pull comparable property information to gather information on unit layout, building amenities, rental concessions offered, or listing price.
Once the information is gathered, the spreadsheet itemizes the average, median, highest, and lowest rent. When such information is available, it also provides an average price per square foot compared to the subject property. With this information, investors can decide whether the subject property is worth the investment.
Once you determine which property to invest in, investors should identify a marketing plan to list the vacant units. Some investors offload the marketing and advertising to real estate agents and brokerages, which will also collect a fee for renting out the property. It’s not entirely impossible to market the units yourself. However, it will take additional time and effort. You can refer to some of the best real estate marketing materials to help you get started.
Although you can market the properties yourself through your own website and direct mailers, listing available units on third-party lead generation sites like Zillow can assist with reducing your vacancy rate. Zillow is one of the largest real estate search engines, with millions of visitors each month to help provide exposure to your available listings. Once leads are received, investors should have a thorough tenant screening process to place quality tenants in their units to protect their investments.
Visit Zillow
8. Build a Team & Implement Systems
If you’re starting out as a new investor, you may need to wear multiple hats to manage the day-to-day of your business. In the beginning, you may not be able to hire a full team of employees to help perform research, assist with running analysis, property management , accounting duties, etc. Hence, you can implement systems that relieve you of manually performing daily duties to keep your investments profitable.
Regardless if you’re new or experienced in investing, it is best practice to have a list of vendors you will need to rely on to assist with purchasing, rehabilitating, and buying or selling your investment properties. You’ll need real estate attorneys and agents to assist with the buying and selling process, while also having contractors , plumbers, property managers, and accountants to help with the renovations and daily management of tenants.
Find vendors you trust, so you can free yourself from having to micromanage them, and know they have your best interest and the interest of your investments in mind. In addition, many platforms on the market can help with different aspects of your business and can even help manage your maintenance vendors:
9. Have an Exit Strategy
Since an investor’s money is tied up in the properties they own until they choose to sell, deciding when to sell or liquidate to get access to your money is part of the overall exit strategy of an investor. The exit strategy for a real estate investment business simply is a plan for when an investor would like to remove themself from a deal or the business altogether. It helps weigh the different scenarios to minimize business risks and continue to maximize the total return on investments.
The factors that an investor should consider when devising an exit strategy are minimizing financial loss, recouping as much of their original investment, and avoiding any unseen fees that will cut into profits like tax consequences. An investor’s plan should always be to grow their original investment, but unforeseen circumstances may occur that will require you to plan on when to cut your losses as well.
Here are examples of the most common exit plans for investors:
- Sell the property: Involves putting the property up for sale for a higher price than you purchased it for. The property is often sold or assigned to another owner before you even finalize your purchase. This provides for quick profits in an extremely short period of time.
- Passing along the investment to heirs: This involves creating trusts and wills to ensure the property gets into the right hands after your death. Since one of the benefits of investing in real estate is its appreciation over time, many investors choose to purchase real estate with the hopes that it will increase in value by the time their family inherits the asset.
- Bringing in another investor: To minimize their risk, investors can cash out on a portion of their investment by selling a portion of their share to another investor.
Choosing the right exit plan will reduce your risk and increase your profits, but not all exit strategies are alike. Each property should have its own individual exit strategy. The strategy also comes with experience as an investor. Newer investors should take their time doing research and selecting the right plan for them. The exit strategy should be set before your initial investment, so you set yourself up for success and not go into the investment blindly.
Bottom Line
Before launching a successful real estate investment business, you must have an efficient business plan to align your strategies with your business objectives. Our real estate investment business plan template can help get you started. These plans act as a roadmap to help you focus on the steps required to grow your business. Business plans also evolve over time, so continuously revisit and improve your strategies. There is no right or wrong way to write a real estate investment business plan as long as it is used to achieve your goals.
About the Author
Find Aloun On LinkedIn
Aloun Khountham
Aloun Khountham is a freelance real estate contributor to Fit Small Business. Her real estate experience stems from over five years as a New York City real estate operations executive for a growing brokerage. Much of her time in real estate was focused on implementing processes and procedures as well as introducing new technology solutions to help agents succeed. She is currently an operations director in the wholesale sector.
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Blog Business
15+ Business Plan Examples to Win Your Next Round of Funding
By Jennifer Gaskin , Jun 09, 2021
“If you fail to plan, you are planning to fail,” according to words of wisdom dubiously attributed to Benjamin Franklin. While there’s no solid evidence that Franklin actually coined this phrase, the sentiment rings true for any business.
Not having a solid plan makes it unlikely you’ll achieve the goals you seek, whether the goals are getting your to-do list done or launching a successful organization.
In the early stages of a company, that means developing things like pitch decks, business plans, one-sheeters and more. With Venngage’s Business Plan Builder , you can easily organize your business plan into a visually appealing format that can help you win over investors, lenders or partners.
Learn more about how to create a business plan so you can hit the ground running after reading through this list for inspirational examples of business plans.
START CREATING FOR FREE
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Simple business plan example, startup business plan example, small business plan example, nonprofit business plan example, strategic business plan example, market analysis business plan example, sales business plan example, organization and management business plan example, marketing and sales strategy business plan example, apple business plan example, airbnb business plan example, sequoia capital business plan example.
While your business plan should be supported by thorough and exhaustive research into your market and competitors, the resulting document does not have to be overwhelming for the reader. In fact, if you can boil your business plan down to a few key pages, all the better.
CREATE THIS PLAN TEMPLATE
The simple, bold visual aesthetic of this business plan template pairs well with the straightforward approach to the content and various elements of the business plan itself.
Use Venngage’s My Brand Kit to automatically add your brand colors and fonts to your business plan with just a few clicks.
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For a typical startup, the need to appear disruptive in the industry is important. After all, if you’re not offering anything truly new, why would an investor turn their attention toward your organization. That means establishing a problem and the ways in which you solve it right away.
CREATE THIS PRESENTATION TEMPLATE
Whether it’s a full-scale business plan or, in this case, a pitch deck, the ideal way for a startup to make a splash with its plans is to be bold. This successful business plan example is memorable and aspirational.
In the Venngage editor, you can upload images of your business. Add these images to your plans and reports to make them uniquely your own.
All businesses start out small at first, but that doesn’t mean their communications have to be small. One of the best ways to get investors, lenders and talent on board is to show that you’ve done your due diligence.
In this small business plan example, the content is spread over many pages, which is useful in making lengthy, in-depth research feel less like a chore than packing everyone on as few pages as possible.
Organizations that set out to solve problems rather than earning profits also benefit from creating compelling business plans that stir an emotional response in potential donors, benefactors, potential staff members or even media.
CREATE THIS REPORT TEMPLATE
Simplicity is the goal for nonprofits when it comes to business plans, particularly in their early days. Explain the crisis at hand and exactly how your organization will make a difference, which will help donors visualize how their money will be used to help.
Business plans are also helpful for companies that have been around for a while. Whether they’re considering new products to launch or looking for new opportunities, companies can approach business plans from the strategy side of the equation as well.
Strategic business plans or strategy infographics should be highly focused on a single area or problem to be solved rather than taking a holistic approach to the entire business. Expanding scope too much can make a strategy seem too difficult to implement.
Easily share your business plan with Venngage’s multiple download options, including PNG, PNG HD, and as an interactive PDF.
One-page business plan example
For organizations with a simple business model, often a one-page business plan is all that’s needed. This is possible in any industry, but the most common are traditional ones like retail, where few complex concepts need to be explained.
This one-page strategic business plan example could be easily replicated for an organization that offers goods or services across multiple channels or one with three core business areas. It’s a good business plan example for companies whose plans can be easily boiled down to a few bullet points per area.
Especially when entering a saturated market, understanding the landscape and players is crucial to understanding how your organization can fit it—and stand out. That’s why centering your business plan around a market analysis is often a good idea.
In this example, the majority of the content and about half the pages are focused on the market analysis, including competitors, trends, pricing, demographics and more. This successful business plan example ensures the artwork and style used perfectly matches the company’s aesthetic, which further reinforces its position in the market.
You can find more memorable business plan templates to customize in the Venngage editor. Browse Venngage’s business plan templates to find plans that work for you and start editing.
Company description business plan example
Depending on the market, focusing on your company story and what makes you different can drive your narrative home with potential investors. By focusing your business plan on a company description, you center yourself and your organization in the minds of your audience.
This abbreviated plan is a good business plan example. It uses most of the content to tell the organization’s story. In addition to background about the company, potential investors or clients can see how this design firm’s process is different from their rivals.
With Venngage Business , you can collaborate with team members in real-time to create a business plan that will be effective when presenting to investors.
Five-year business plan example
For most startups or young companies, showing potential investors or partners exactly how and when the company will become profitable is a key aspect of presenting a business plan. Whether it’s woven into a larger presentation or stands alone, you should be sure to include your five-year business plan so investors know you’re looking far beyond the present.
CREATE THIS PROPOSAL TEMPLATE
With Venngage’s Business Plan Builder , you can customize a schedule like this to quickly illustrate for investors or partners what your revenue targets are for the first three to five years your company is in operation.
The lifeblood of any company is the sales team. These are the energetic folks who bring in new business, develop leads and turn prospects into customers. Focusing your energy on creating a sales business plan would prove to investors that you understand what will make your company money.
In this example sales business plan, several facets of ideal buyers are detailed. These include a perfect customer profile that helps to convey to your audience that customer relationships will be at the heart of your operation.
You can include business infographics in your plan to visualize your goals. And with Venngage’s gallery of images and icons, you can customize the template to better reflect your business ethos.
Company mergers and shakeups are also major reasons for organizations to require strong business planning. Creating new departments, deciding which staff to retain and charting a course forward can be even more complex than starting a business from scratch.
This organization and management business plan focuses on how the company can optimize operations through a few key organizational projects.
Executive summary for business plan example
Executive summaries give your business plan a strong human touch, and they set the tone for what’s to follow. That could mean having your executive leadership team write a personal note or singling out some huge achievements of which you’re particularly proud in a business plan infographic .
In this executive summary for a business plan, a brief note is accompanied by a few notable achievements that signal the organization and leadership team’s authority in the industry.
Marketing and sales are two sides of the same coin, and clever companies know how they play off each other. That’s why centering your business plan around your marketing and sales strategy can pay dividends when it comes time to find investors and potential partners.
This marketing and sales business plan example is the picture of a sleek, modern aesthetic, which is appropriate across many industries and will speak volumes to numbers-obsesses sales and marketing leaders.
Do business plans really help? Well, here’s some math for you; in 1981, Apple had just gone public and was in the midst of marketing an absolute flop , the Apple III computer. The company’s market cap, or total estimated market value, could hit $3 trillion this year.
Did this Apple business plan make the difference? No, it’s not possible to attribute the success of Apple entirely to this business plan from July 1981, but this ancient artifact goes to show that even the most groundbreaking companies need to take an honest stock of their situation.
Apple’s 1981 business plan example pdf covers everything from the market landscape for computing to the products that founder Steve Jobs expects to roll out over the next few years, and the advanced analysis contained in the document shows how strategic Jobs and other Apple executives were in those early days.
Inviting strangers to stay in your house for the weekend seemed like a crazy concept before Airbnb became one of the world’s biggest companies. Like all disruptive startups, Airbnb had to create a robust, active system from nothing.
As this Airbnb business plan pitch deck example shows, for companies that are introducing entirely new concepts, it’s helpful not to get too into the weeds. Explain the problem simply and boil down the essence of your solution into a few words; in this case, “A web platform where users can rent out their space” perfectly sums up this popular company.
Sequoia Capital is one of the most successful venture capital firms in the world, backing startups that now have a combined stock market value of more than $1 trillion, according to a Forbes analysis .
For young companies and startups that want to play in the big leagues, tailoring your pitch to something that would appeal to a company like Sequoia Capital is a good idea. That’s why the company has a standard business plan format it recommends .
Using Sequoia Capital’s business plan example means being simple and clear with your content, like the above deck. Note how no slide contains much copy, and even when all slides appear on the screen at once, the text is legible.
In summary: Use Venngage to design business plans that will impress investors
Not every business plan, pitch deck or one-sheeter will net you billions in investment dollars, but every entrepreneur should be adept at crafting impressive, authoritative and informative business plans.
Whether you use one of the inspirational templates shared here or you want to go old school and mimic Apple’s 1981 business plan, using Venngage’s Business Plan Builder helps you bring your company’s vision to life.
Ontario Teachers’ Pension Plan posts 4-per-cent annual return as rate-sensitive investments gain
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The Ontario Teachers' Pension Plan office in Toronto is seen in this file photo.. The plan reported a 4-per-cent return for 2022 when it released its results on Tuesday. COLE BURSTON/The Canadian Press
Ontario Teachers’ Pension Plan reported a 4-per-cent return in 2022, helped by a conscious shift toward investments in assets that are sensitive to higher interest rates in a year market volatility spurred widespread losses in public markets.
Teachers’ annual return beat its internal benchmark of 2.3 per cent, and its net assets increased to $247.2-billion. Over 10 years, Teachers has returned 8.5 per cent, and the plan was considered fully funded at year-end.
Pension plans faced a tough year in 2022 as high inflation and rapidly rising interest rates created volatility in markets. But pension fund managers found refuge in the large portfolios of investments they have built in privately held assets such as infrastructure and private equity, which were more stable, as well as commodities and natural resources that are highly sensitive to interest rates and had a boom year.
Teachers, which manages the pensions of Ontario’s 336,000 active and retired teachers, has ramped up its investments in several of those asset classes, and started to move back into fixed-income securities as interest rates rose. Chief executive officer Jo Taylor has been vocal about the need to be brave in the plan’s investment choices in order to find stable returns in a tumultuous market.
“On a relative basis they’re good results. A lot of our peers find it more challenging to get it to positive territory,” Mr. Taylor said in an interview. “I think we’ve been very much living to that agility principle in the last two years by making bold choices around which areas we think we can make returns.”
On Monday, OPSEU Pension Trust announced a net investment loss of 2.2 per cent for 2022, bringing its 10-year average return to 7.8 per cent. And in recent weeks, Ontario Municipal Employees Retirement System said it returned 4.2 per cent in 2022, while Caisse de dépôt et placement du Québec lost 5.6 per cent. But wide variations in the plans’ portfolios and membership make them difficult to compare directly.
As the recent collapse of Silicon Valley Bank creates new paroxysms in markets, Mr. Taylor said he expects the immediate impact on Teachers from the banking crisis will be “really, nil.” But as the fallout unfolds, he said the widespread uncertainty it creates could start to make deals more difficult if banks pull back on lending and financing for mergers.
“What’s really the issue? I think it’s wider confidence in markets,” Mr. Taylor said. “And then secondly, will it actually mean that some of our banking partners are a little more cautious about being active at the moment on helping us with transactions?”
Last year, Teachers put more money into fixed-income assets, starting to rebuild a portfolio that it had reduced when interest rates fell to ultralow levels after the onset of the COVID-19 pandemic. The plan pushed further into credit, setting up a private credit team in London, and chief investment officer Ziad Hindo said “there is clearly more room for us to grow that asset class” even after it reached its largest share of Teachers’ portfolio at year-end, at 14 per cent of assets or $35-billion.
Teachers has also significantly increased its infrastructure portfolio in recent years. Those investments are in assets such as toll roads, airports, digital infrastructure and power generation that tend to have predictable cash flows tied to inflation. Last year, infrastructure assets delivered some of the strongest returns for Teachers, gaining 18.7 per cent, which beat a 15.1-per-cent benchmark.
Investments in commodities and natural resources returned 19.5 per cent and 29.6 per cent, respectively, though those assets make up smaller slices of the overall portfolio.
Private equity gained 6.1 per cent, surpassing a benchmark loss of 3.9 per cent, helped by foreign currency gains from a strengthening U.S. dollar.
Teachers underperformed in public stocks and bonds as well as real estate. Public equities lost 12.5 per cent, which was worse than a benchmark loss of 10.2 per cent. Bonds lost 5.9 per cent.
And the $28.1-billion real estate portfolio lost 3.5 per cent, missing its benchmark of a 6.7-per-cent gain as valuations on its Canadian retail and office portfolios fell, affecting capitalization rates. Teachers owns Cadillac Fairview, which has a high concentration of retail and office properties in Canada, which underperformed last year.
Mr. Hindo said retail sales productivity levels at many properties are back to pre-COVID levels, “so they’ve recovered quite well.” But the recent decision by Nordstrom Inc. to wind down its Canadian operations creates renewed pressure on malls, including three major properties owned by Cadillac Fairview where the luxury retailer was an anchor tenant.
“Mall anchors has never been an easy story, particularly for the larger malls, but it’s something that Cadillac Fairview has had to deal with multiple times in the past, whether it was Sears or Target, so they’re pretty good at turning that space around and reconfiguring it in a profitable way,” Mr. Hindo said.
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How to Write a Business Plan That Investors Will Like
Writing a business plan is an important first step for any startup. Although you’re not legally required to have one, a good business plan is the blueprint that maps out your goals and can help keep you on track.
If your business will require significant capital to start properly, you may be searching for investors. This is when a good business plan is essential. Investors know that a company with a solid business plan is less likely to make mistakes and better able to handle things like unexpected costs. In fact, 29% of failed startups attributed closing their doors to lack of funding — with exactly 8% attributing their failure to a lack of investor interest.
When it comes to securing funding for your small business from people like angel investors or venture capitalists, a business plan is vital. Before investors sink money into your company, they want to make sure it can make money. In this guide, we’ll go over how to create a business plan investors will love.
What’s Included in a Business Plan?
Although business plans can vary greatly, there are a few essential elements. Here are eight sections that a business plan should include:
- Executive Summary: This is an overview of the rest of your business plan. It will summarize things like your mission statement, plans, goals, structure, and financial needs. Keep this section short.
- Company Description: This section will identify the key parts of your business model, like its owners, location, and clientele. It also introduces products, states company goals, and mentions timelines for growth.
- Market Research: This section identifies the problem that your service will solve for your customers. It shows how your product will meet market needs and the overall market size. It should be backed up by solid research and statistics.
- Product or Service Description: This section describes your new product. It includes pricing, marketing strategy material, and future plans. It also defines the process of delivering products.
- Marketing and Customer Acquisition Strategy: This section shows where you’ll find new customers and how you’ll market to them (e.g., social media).
- Business and Team Structure: This section charts out the roles the members of your business will play. It also includes your team’s qualifications.
- Company Financials: This section estimates your company’s worth and financial forecast. It notes an income statement for your own business, projects financial milestones, and describes how cash flow will work.
- Request for Funding: This section shows the amount of money your company needs and outlines the way the money will be used.
Check out our guide to writing a business plan for even more resources on what each of these steps looks like in action.
What Do Investors Want to See in a Business Plan?
Starting your own store can be a daunting task, especially with such big players already in the game. But starting an Amazon seller store is easier than yo
At the end of the day, investors are looking for a business with profitability potential. They’re different from bank lenders, who are primarily worried about credit history. They want you to convince them that your company will make them money. That’s why your business plan should be easy to understand, well-thought out, and plausible.
A good business plan will walk an investor through your company’s road to success. Investors are risk-takers, but they want to take calculated risks. You need to show them that your business is their best bet through four key areas:
- Clear direction
- Competence within the team
- Competitive advantage
- Financials that add up
Clear Direction
One of the first things an investor will want to know is where your business is headed and how it will get there. A clear direction guides all your business decisions to make sure they bring you closer to your goals. That’s why it’s important that your executive summary is straightforward and concise.
This section is where you’ll want to grab the investor’s attention. Be direct, and be succinct. You may be tempted to describe your business opportunity in depth, but you want to keep the investor’s attention. Instead, try to describe your business opportunity in two sentences.
If an investor can’t understand your executive summary, they may not even read the rest of your business plan. That’s why it can be a good idea to write your summary last; you’ll have a better idea of what a clear summary entails after you’ve finished the rest of your business plan.
Competence Within the Team
If an investor is putting money in your business, they’ll want to know that it’s run by capable and devoted people. Your management team is just as important as the service you’re selling. In your business and team structure section, go over your team members’ qualifications and the reason they’re involved. Show why they’re the best at what they do.
You can mention each member’s position (e.g., CEO, CFO, manager), past experience, accomplishments, or advanced degrees and certifications. Add a quote or blurb on why each person is passionate about the industry. Even if you have a sole proprietorship , you’ll still want to highlight your qualifications and strengths.
Be sure to clarify anything an investor might not be familiar with. For example, they might not know that, as a master electrician, you’ve received the highest certification in your industry (and have at least 4,000 hours of experience).
Be professional. Backers aren’t keen on fun facts or personal details. All they want to know is that everyone has the skills to get the job done. Save details like “favorite ice cream flavor” for your PR material, when you’re trying to relate to your target market.
ZenBusiness has helpful templates for things that can help you plan the foundation of your company, like business plan templates .
Competitive Advantage
Investors need to know that your new company can compete in your field. When you’re presenting your market analysis, be sure to show what problem your service is designed to solve. You’ll also need to describe the obstacles that might keep other companies from taking some of your market share.
Let’s say you’re starting a business as a freelance digital marketing consultant. Here’s how you might lay out your company’s competitive analysis:
- Problem your business solves: Companies without a strong online presence aren’t able to reach broad demographics and market segments like those that can market online efficiently.
- Barriers to entry for competitors: You have an advanced OMCP (Online Marketing Certified Professional) certification that requires 5,000 hours of experience and additional training. Your competitors don’t have the experience or qualifications that you have.
Back up any claims you make with actual research. For the above example, you could explain that landing pages are underutilized in most digital marketing plans. While they have the highest conversion rate, companies use them less than other types of registration forms, like pop-ups. With your skill set, you can help companies use landing pages to increase conversions.
There might be many other obstacles that could lock out competitors. You might reference things like high material costs, intellectual property your company owns, or a unique geographical area you service.
Financials That Add Up
The ultimate goal of an investor is to make money. They want to know how much profit they can expect for the amount of ownership they buy. The more specific you can be, the better. Project how much revenue you’ll expect to generate in the next five years , and break it down further than that if you can (e.g., monthly income).
There are a lot of factors that influence the revenue your company will make. When you’re projecting your company’s future earnings , take into account things like your expenses, your price points, and how often you think your target customers will buy from you. Compensate for the future costs of growing your new business. If you’re an artist, for example, you might plan to move into a larger studio after two years. You can’t predict the future, so you’ll adjust your financial projections as your business runs.
Before you can sell part of your company to an investor, you’ll need to estimate what your company is worth. There are several methods for evaluating your business’ worth. One way is to research the amount that similar businesses have sold for recently. Still, accurately valuing your company can be complicated. It might be best to seek the help of a qualified business appraiser . Potential investors will need to agree on your valuation.
Investors want to see finances that make sense. If you tell an investor that they can expect to make $500,000 in five years by purchasing 15% of your company, you’d better have the numbers on your financial statement to back it up.
Attracting Investor Attention
To make the most of their money, investors look for businesses with smart leadership, clear goals, solid financial plans and records, and a competitive edge. If you want backing, you need to communicate that your business idea has all four components. Drafting a great business plan is the first step toward getting an investor’s attention.
That doesn’t mean it’s the only way to get on an investor’s radar. Methods like networking are still important and can help you build the right connections to get your business funded. In fact, venture capital firms rarely let business owners they don’t have mutual connections with to the pitch deck. Use every strategy you can.
You love running your small business, but it seems like the work is never-ending. ZenBusiness has great resources that will make taking on your administration much easier. This is your dream; don’t let extra paperwork take the fun out of it.
Investor-Ready Business Plan FAQs
Clearly lay out the amount an investor can expect to make, the direction your company is headed, how your services will be successful, and the qualifications of your team. These elements will help inspire the confidence of an investor.
A good business plan shows investors that you’re for real. You’ve taken the time to meticulously plan out your future successful business and you’ll be more likely to make them a profit.
A business plan is a roadmap for every aspect of your business. It introduces your company, staff, and product. It also analyzes your market research and explains the company’s financial situation.
Free Business Plan Resources
Find more answers to your questions about creating a business plan in our free library of articles and resources
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Business plans can help you get funding or bring on new business partners. Investors want to feel confident they'll see a return on their investment. Your business plan is the tool you'll use to convince people that working with you — or investing in your company — is a smart choice. Pick a business plan format that works for you
Describe Your Services or Products. The business plan should have a section that explains the services or products that you're offering. This is the part where you can also describe how they fit ...
Learn about the best business plan software. 1. Write an executive summary. This is the first page of your business plan. Think of it as your elevator pitch. It should include a mission statement ...
A business plan is a document that contains the operational and financial plan of a business, and details how its objectives will be achieved. It serves as a road map for the business and can be used when pitching investors or financial institutions for debt or equity financing.
A business plan provides a snapshot of your investment company as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans. Why You Need a Business Plan
In a business plan, this section is often called "sources and uses of investment." A strong management team A good idea is really only a small part of the equation for a successful business. In fact, lots of people have good business ideas — it's the people that can execute well that generally succeed.
A business plan is a comprehensive document that outlines a company's mission, goals, finances and revenue, and market data. The primary purpose of a business plan is to convince banks and/or investors to loan you money, but there are several other benefits.
The Investment Company's business plan includes strategies for marketing and advertising, financial projections, and a detailed description of the company's services and fees. This is the business Plan for Investors who want to invest in a company with a significant probability of success. 2. Sources Of Financing For Investment Firms
Start your own investment company business plan Investment Company Executive Summary This sample plan was created for a hypothetical investment company that buys other companies as investments. In this sample, the hypothetical Venture Capital firm starts with $20 million as an initial investment fund.
Making an investment plan involves more than just choosing a few stocks to put money in. You have to consider your current financial situation and your goals for the future. It's also important to define your timeline and how much risk you're willing to take on in order to determine your optimal asset allocation.
Investment planning is an integral component of strategic business planning. The business plan should consider investments as part of finance planning. Investments are not only associated with a high capital expenditure and a long-term capital commitment, but investment decisions also have a decisive impact on a company's cost structure.
A business plan is an important document aimed at a company's external and internal audiences. For instance, a business plan is used to attract investment before a company has established a...
The business plan admits the entrepreneur to the investment process. Without a plan furnished in advance, many investor groups won't even grant an interview. And the plan must be...
The Investment Opportunity section is where you tell investors what your goals are, why they are integral in helping you achieve those goals, and what they have to gain from getting involved with your company. This includes: Your Funding Goal: How much money do you need to move forward
7 business plan examples (section by section) In this section, you'll find hypothetical and real-world examples of each aspect of a business plan to show you how the whole thing comes together. Executive summary. Your executive summary offers a high-level overview of the rest of your business plan. You'll want to include a brief description ...
Investment Company is a start-up which buys and sells other businesses. Investment Consulting Business Plan Vista Investors is a start-up investment management firm, whose hallmark investment product will be the Vista Total Market Equity strategy, which will initially be offered through a mutual fund. Investment Website Business Plan
Mike Blake | Reuters Volkswagen on Tuesday announced plans to invest 180 billion euros ($192.6 billion) between 2023 and 2027, with more than two thirds targeting "electrification and...
A financial plan is simply an overview of your current business financials and projections for growth. Think of any documents that represent your current monetary situation as a snapshot of the health of your business and the projections being your future expectations. Why is a financial plan important for your business?
Volkswagen Will Invest $193 Billion in Electric Cars and Software The German automaker announced a plan to accelerate its transition to battery-powered vehicles and bolster operations in China...
The business investment plan is the proper formation of the structured and well-formed idea and showcases it to the investors who are going to invest by going through the strategy. The good presentation of the plan is important as it is the reflection of the complete project for which you want funding and investment. While making the plan, you ...
Step 3: Customers. Olivia has done her research, which is the fundamentals upon which any business plan should be based. People love statistics. Olivia found statistics describing the growth in plant-based eating in the past decade, as well as the growth of flexitarian dietary choices.
Download as PDF. Download as Google Doc. Download as Word Doc. Let's dive into the nine essential steps to creating your real estate investment business plan: 1. Write Your Mission & Vision Statement. Every real estate investment business plan should begin with a concrete mission statement and vision.
Airbnb business plan example. Inviting strangers to stay in your house for the weekend seemed like a crazy concept before Airbnb became one of the world's biggest companies. Like all disruptive startups, Airbnb had to create a robust, active system from nothing. CREATE THIS PRESENTATION TEMPLATE.
Ontario Teachers' Pension Plan reported a 4-per-cent return in 2022, helped by gains from investments in infrastructure and other assets that are sensitive to higher interest rates. Teachers ...
Here are eight sections that a business plan should include: Executive Summary: This is an overview of the rest of your business plan. It will summarize things like your mission statement, plans, goals, structure, and financial needs. Keep this section short. Company Description: This section will identify the key parts of your business model ...