How to Create a Persuasive Business Plan

A business plan is based not on an idea, but on hard data. This may come as a slap in the face to some entrepreneurs, who are known for their ideas and creativity. Yet as jacks-of-all-trades, entrepreneurs are also adept at finding the necessary research to support their ideas and prove to investors that their ideas are worth banking on.

Three major elements make up the foundation on which your entire business plan is built.

1. Market Research

The first thing an investor always wants to know about a company is its growth potential in the marketplace. Therefore your market research must show that there is a large and growing market for your product or service. The research needs to prove that customers not only want but need what your company has to offer.

Use reports from independent industry research institutions; reports from governmental, educational, and trade organizations; books, articles, and blog posts from reputable thought leaders in your sector; and other secondary research. Additionally, tap into primary research such as interviews and customer surveys.

2. Qualified Management Team

Investors tend to bet on the jockey, not the horse. In other words, the qualifications of the management team often matter more than the company itself.

Delve deep into the past accomplishments of your management team. Be able to explain in full detail all the directly relevant experience your team has in building successful companies. Additionally, use indirect evidence of their ability to help run your company – such as similar positions even if in disparate industries; related education, awards, recognitions; and so on.

3. Credible Exit Strategy

An exit strategy is an expected liquidation event such as IPO (initial public stock offering) or buyout/merger with another company.

Explaining your exit strategy can be a dicey proposition, as investors are wary of entrepreneurs that claim a guaranteed liquidity event. Avoid making yourself look naïve by detailing how similar companies have achieved liquidation events using strategies similar to yours. Look into the history of such case studies and include that data in your business plan.

Also, research and profile companies that have a history of buying companies like yours. Prove that there is a solid reason for those companies to buy you or merge with you rather than produce a facsimile of your company in-house.