You’ve developed a great beauty or personal product and now need a business plan to raise capital. Your business plan should include 7 sections (plus an Executive Summary):
- Market Opportunity – In this section, you discuss how big the market for your product is. Let’s start with the No, no, no. No – every woman with skin is NOT your market. No – every athlete is NOT your market. Investors are more sophisticated than that. Discuss the true characteristics of the person who will use your product and quantify how many there are out in the geographic area your product will be sold. (NOTE: If your product is sold online, you still should focus your marketing efforts on a specific geographic area. For example, you may focus on the United States and not worry about gathering data in Europe, Latin America, and Africa).
Once you have determined how big the market is, then discuss how much of the market you want to capture. Investors don’t like the phrase “If we capture 1% of the market…” Instead I write “The market has 39 million individuals and our goal is to have 50,000 customers purchase from us four times per year.” This helps the investors understand what your goals are and that they’re reasonable.
Marketing Plan – Once you’ve determined what your goal is, the marketing plan discusses how you’ll get those 50,000 customers. Will you use social media? Great! What platforms? How will you use it? What hashtags will you focus on? How many times will you post each day/week? What will you post? A great marketing plan becomes an activity checklist for your business.
Operations – I like to include the supply chain in a business plan like this. Take the reader from raw ingredient to product in the customer’s hand. Where will the raw ingredients come from? Who will manufacture the product? Will the product be shipped from China to the United States? What company will do the shipping? How will the product get from the United States docks to the warehouse where you’ll store them? Where will the product be stored until it’s sold? You get my drift.
Completing this exercise proves that you’ve thought through all aspects of the supply chain.
Team – The #1 reason a business plan is not funded has nothing to do with the quality of the product. It has to do with the team you’ve assembled. Highlight why your team is the one that can help the company reach its marketing, operational, and financial goals.
Competition and Competitive Advantages – Every company has competition. It’s imperative that you discuss the competition and your competitive advantages in your business plan.
Financial Forecast – The most important part of the business plan are the financials. And the most important aspect of the financials are the assumptions. Financial assumptions include the number of customers you have, what the sales ramp up will be, your expected sales conversion, when you’ll add team members, etc. Forecasts are typically 3-7 years; however, the majority are 5 years.
The best advice I give is to be conservative with your expected revenues and aggressive with your expected expenses.
- Exit Plan – If someone gives you $1 million, how will they get their money back? When will they get their money back? This is the exit plan.
This may sound peculiar but it’s easier to raise $10 million than $200,000. The seed round (or family and friend round where you raise $200K, for example) is always the toughest funds to raise because you usually have nothing but a dream on a napkin. Within the business plan for your seed raise, prove to investors that you can take their money and complete a finished product. If you’ve put a certain amount of money into the business, highlight that. Investors always feel more comfortable if you have skin in the game.
By the time you get to your Series A round, you should already have a functional prototype and some sales – even if it’s on a small level. You’re showing investors that your company has traction. People are ordering your product over and over again. You’ve gained a small social following. Now you’ll use their money to add gasoline to the fire. They love this because money follows success.
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