Walsh Enterprises Business & Financial Advisors
Huntington Beach, California USA
Writing a Business Plan
A Primer for Beginners
Reprinted from a blog posted December 2008 at www/walshal.wordpress.com
I’ve had a large number of inquiries regarding business planning
and capital-hunting for new ventures, so I’ve jotted down some thoughts
from my experience as a guideline for the beginner…
So, you’ve come up with a new business idea. Being a rational person,
you’ve recognized that you can’t just go off half-cocked so you’ve
thoroughly researched the matter and worked out what you think is a
winning strategy based upon all the information that you could gather (If
you haven’t, I can only suggest the old saying that “A fool and their
money are soon parted”. If you want to waste some other “fool’s”
money, good luck.). Now you want to commit it to paper so you can go
after seed capital and have a “bible” to follow in your business startup.
The business plan is partly for your benefit, and partly a marketing tool to
raise money - so it needs to satisfy both criteria.
I have a standard formula that has worked well for me, as follows:
• Start with a one page summary of the proposed business.
• Flesh out the summary with a more detailed narrative of
the business strategy, and how you intend to go about it. The
length of the narrative will depend on the level of business
complexity involved. In most cases, I’ve found that five to ten
pages is adequate; however I’ve written narratives as long as
100 pages for complex deals.
• Follow the narrative with a 3-year Financial Forecast that is
primarily focused on showing how the Investor(s) will be repaid
and compensated. In essence, you need to build a 3-year
Balance Sheet and Income Statement based upon your best
estimates of revenues, costs & capital-spending requirements.
Do it in the form of monthly and annual summaries. Break
down the categories of costs & revenues, and the timing of
these events, to the best of your ability. Include a “pull-down”
line that shows cashflow back to the investor(s). Why 3-pages?
– That’s the longest period of time that most investors will
expect to have their money tied up.
• Add a one-page biographical summary regarding the background &
capabilities that qualify you to successfully start and operate the
• Finally, include a one-page summary that reiterates what you want
from the investor(s), when & how you want it, what you’re willing to
give up in return, and how they’re going to be repaid and
Each section should logically flow from the prior sections, with
appropriate cross-references as necessary.
The Business Plan is strategic in nature, so you don’t need to get into
every gritty detail of business operations. It should, however, address all
costs and revenues to the best of your ability. It should also show that
you’ve addressed all identifiable risks.
Keep in mind the perspective of the investor(s) who will be reading the
plan: “What do I have to put in - what do I get back out (and when) –
what is the entrepreneur putting at risk themselves - has the entrepreneur
addressed all the risks that they will be exposing my money to – does the
plan make sense – and is the entrepreneur qualified to start and run the
The investor(s) is not emotionally involved in your “baby” like you
are. To them, it’s just a business proposition that they will be weighing
on it’s financial merits.
Stay flexible in your Business Plan, and in your thinking, about how the
deal with the investor(s) will be structured. If you want their money, you
will have to find a structure that they will live with. They won’t be shy
about telling you their requirements.
Choose your words carefully. You don’t have to use big fancy words, but
use them sparingly; don’t be over-wordy and don’t repeat yourself over &
over. Write the plan with an air of competent humility. You want to
convey quiet competence to the investor(s), but a little humility doesn’t
hurt – after all, you’re asking them to give up their hard-earned money –
and they probably have more business expertise than you (that’s how
they got the money to invest in the 1st place). You will have to present
your plan, so write it in a style that you’re comfortable with and facilitates
your oral presentation.
You don’t have to spend a lot of money on fancy glossies or a
professionally prepared document. Plain computer paper will do fine. A
little bit of color & graphics can help make it more interesting to read and
help highlight critical points; if used sparingly. Investors will be a lot
more interested in what you say, and how you present it, than in
fanciness. They also know that beginning entrepreneurs don’t have
money to throw around on such things. Of course, if there are pertinent
photos or graphics that help make your point - by all means use
them. For instance, if you’re pitching a real estate development proposal
you’ll want to include photos & a description of the land, and
architectural renderings of the project.
The plan is your best snapshot at a point in time. Business realities will
force changes; virtually from day-one. Investors know that from their
own experience. Just try to be as realistic as you can.
Don’t be greedy in your expectations. If you expect an investor(s) to put
up most of the money, and thus take most of the risk, they will expect to
be compensated accordingly. They will also want to exert some level of
control over management of the business; directly or in an advisory
role. That’s not necessarily a bad thing. They very likely have more
business experience and expertise than you. They also have a vested
interest in your success. Very likely, they can help you succeed.
Keep in mind that your Business Plan is a representation of your skills
and abilities as a business person. Don’t short-change yourself. If you
still think at this point that a Business Plan isn’t necessary, then there’s
nothing further that I can say to help you.
At this point, some of you will be tempted to contact me and ask for
introductions to investors. I’ve spent years identifying qualified
investors, learning their likes & dislikes, and earning their trust. I only
approach them after I’ve vetted a business proposal and carefully
scrutinized the Business Plan (in most cases, preparing it). I’ve rejected
far more business proposals than I’ve chosen to work on. I’m always a
key player in the presentation so that I can assure it’s quality-control (I
won’t get a second chance at these people if I do a shabby presentation,
so I’m very picky about who I represent and I get my ducks in a row
before I walk in the room). I have only done this once on a free-gratis
basis, for a very good friend, and even then I only advised; she prepared
her own plan and obtained her own startup financing. If done properly,
Business Plans and Capital presentations are a very laborious process.
Late Note: The current environment for raising venture capital is horrible. Only
the best will succeed.