Who is the Audience for a Business Plan?

When developing a business plan, it’s crucial to recognize that you’re often creating a document with dual purposes. On one hand, a business plan serves as a tool for your own understanding and strategy; on the other, it acts as a vital communication document for your business plan audience. The art of crafting an effective business plan lies in balancing these two aspects: introspection and communication.

Different external groups – such as banks, investors, USCIS, landlords, state authorities, potential co-founders, or key employees – each have unique expectations and requirements when evaluating a business plan. As an entrepreneur, it’s essential to ask yourself, “Who is the audience for a business plan?” Different audiences seek specific information that helps them make informed decisions, be it for funding, approval, adjudication, or partnership. Thus, your business plan must be tailored to meet these varied needs effectively.

Where to Start

Starting a business plan from scratch can be a daunting task. It’s akin to arriving at an empty plot of land to build a house without a blueprint, tools, subcontractors, or permits. While it’s theoretically possible, it’s certainly not the most efficient or effective approach. That’s why we advocate for a structured, methodical process in business plan creation.

We recommend two primary pathways for developing your business plan:

1. Pre-Planning Process: This comprehensive approach is segmented into six stages – Know Your Customer (the Pre-Vision Interview technique), Core Cost Analysis, Business Model Development, Operations in Detail, Startup & Operational Cost Analysis, and Funding Options. This process guides you from conceptualization to practical assessment, helping you determine if your business idea is worth your time and investment.
2. Model-Based Planning: A more expedited route, this method leverages hundreds of pre-determined business models to gather relevant information quickly and efficiently. It’s an ideal approach for those who need to draft a business plan in a shorter time frame.

Both pathways are designed to provide you with a robust foundation for your business plan, ensuring that when you do approach your intended audience, you do so with a well-thought-out, comprehensive, and audience-tailored document.

Banks and SBA Loans

Understanding the Lender’s Perspective

When seeking funding for a new business, it’s essential to recognize the inherent caution of banks and the Small Business Administration (SBA). Given a choice, lenders typically prefer funding established businesses over new ventures due to their lower risk profile. This is particularly true for brand new brands, as opposed to established franchise brands, due to the extended period most new brands take to gain traction. Statistics reinforce this caution: approximately half of new businesses do not survive beyond their third year.

Crafting a Convincing Business Plan

To persuade a lender to invest in your new venture, your business plan must meticulously counteract every potential reason for rejection. This demands:

1. Detailed and Realistic Planning: Your business plan must go beyond surface-level details. It should reflect deep, thorough research and realistic projections. Avoid overestimating your capacity to run the business single-handedly. Recognize the limits of your manpower and the need for adequate staffing or professional services.
2. Comprehensive Research: Entrepreneurs often make the mistake of relying on outdated or superficial internet research. A robust business plan requires current, detailed, and relevant data specific to your industry and geographic location. This includes understanding industry performance, customer demographics, and market trends.
3. Accurate Assessment of Startup Costs: Many entrepreneurs focus on major expenses while overlooking hidden costs like customs duties, logistics fees, or employee training. Ensure that your business plan accounts for all aspects of startup costs, including hardware/software training, technical support, and the real costs of marketing and advertising efforts (including analytics setup, social media management, and SEO).

Demonstrating Experience and Understanding

Banks look for evidence of experience and a realistic understanding of the business environment. This includes:

1. Management and Industry Experience: Highlight your experience in management, the industry, and any relevant training or steps you’ve taken to prepare for business ownership.
2. Acknowledgement of Professional Help: Demonstrate an understanding that running a business is not a one-person show. Indicate your readiness to outsource certain aspects to professionals and your plan for doing so.
3. A Realistic Approach: Avoid presenting an overly optimistic or “fairytale” vision of your business. Banks can discern between a well-researched plan and one that looks good on the surface but lacks substance upon closer examination.

For a new entrepreneur, presenting a business plan to a bank or the SBA is a test of realism, detail-oriented planning, and pragmatism. Your business plan should not only showcase your vision and potential but also reflect a deep understanding of the risks, challenges, and requirements of starting a new business.

Investors

The Investor’s Perspective

Investors, including angel investors and venture capitalists, operate with a distinct mindset compared to traditional lenders like banks. Their focus is less on the immediate ability of a business to repay a debt and more on its potential to become a leader in emerging markets, such as electric cars, AI, blockchain, telemedicine, space exploration, and sustainability. The driving force behind their investment strategy is the pursuit of outsized returns on investment (ROI), leading them to prioritize novel solutions and market potential.

The Role of a Business Plan for Investors

While many investors may not extensively scrutinize your business plan, its development is crucial for your preparation and understanding. The process of creating a business plan allows you to think through your business idea pragmatically and realistically, equipping you to handle investor questions and discussions confidently.

Catering to Different Investor Needs

Investors’ requirements vary depending on the stage of investment:

• Early-Stage Angel Investors (Pre-seed/Seed Rounds): These investors may focus primarily on your pitch, burn rate and runway projections, and future funding needs (like Series A). They are often interested in the development of a prototype or a Minimum Viable Product (MVP).
• Venture Capitalists (Series A and Beyond): VCs are likely to delve deeper, seeking to understand your traction, interact with your prototype or MVP, and examine historical financials and projections. They assess your business’s growth trajectory and how you envision its development.

Key Elements Investors Look For

Regardless of the investment stage, certain fundamental elements are universally important to investors:

1. Clear Problem and Solution: Articulate the problem your business aims to solve and how your product or service provides a solution.
2. Market Opportunity: Demonstrate the market potential in solving this problem and the scalability of your solution.
3. Business Model: Detail your business model, including how it supports your solution and generates revenue.
4. Competitive Landscape: Analyze competitors, highlighting what they are doing and how your business is different and better positioned.
5. Team Strength: Showcase the capabilities and qualifications of your team, emphasizing why they are the right people to execute the business plan.
6. Financial Projections: For later-stage investors, provide historical financials and realistic projections to convey your understanding of the business’s potential and growth trajectory.

The Investment ‘Ask’

Be prepared with a clear ‘ask’ for investors, specifying not just the financial investment you seek but also the strategic value they can bring. Modern investors often seek to provide more than capital; they offer mentorship, feedback, and networking opportunities. Highlighting how you are receptive to these additional forms of support can be crucial in securing investment.

For entrepreneurs seeking investment, it’s essential to understand that investors are looking for more than just a promising idea. They seek a comprehensive understanding of your business, a clear vision for its future, and a team capable of turning that vision into reality. Your business plan, pitch, and presentations should all reflect these considerations, demonstrating not only your business’s potential but also your readiness to engage with and learn from your investors.

United States Citizenship and Immigration Services (USCIS)

When applying for a visa through USCIS, a meticulously tailored business plan is crucial. Each visa category under USCIS has distinct requirements, and your business plan should reflect these specifics to enhance your application’s success.

L-1 Visas: Intracompany Transferees

For L-1 visa applications, intended for executives or managers transferring within the company:

• Role of the Applicant: Define the applicant’s executive or managerial role, detailing their skills and necessity for the company.
• Organizational Chart: Include a detailed chart showing the applicant’s position within the company hierarchy.

More details can be found on the USCIS L-1 Visa page.

E-2 Treaty Investors

For E-2 visa applicants, who are investing a significant amount of capital in a U.S. business:

• Investment Details: Describe the capital investment, its nature, and how it’s at risk.
• Business Viability: Show how the investment leads to a successful and sustainable business.

For more information, visit the USCIS E-2 Treaty Investors page.

EB-5 Immigrant Investor Program

EB-5 visas are for investors creating jobs in the U.S.:

• Investment and Job Creation: Demonstrate compliance with investment amounts and job creation requirements.
• Collaboration with Economists: Include an analysis from an economist to support the project’s viability under the EB-5 standards.

Visit the USCIS EB-5 Immigrant Investor Program page for detailed guidance.

EB-2 National Interest Waiver (NIW)

The EB-2 NIW is for individuals whose work benefits the U.S. national interest:

• Alignment with National Interest: Explain how the venture addresses U.S. critical needs or contributes significantly to the market.
• Applicant’s Qualifications: Highlight the applicant’s unique role and qualifications essential for the venture’s success.
• Impact and Endorsements: Project the business’s impact and include endorsements from relevant experts.

For further information, refer to the USCIS EB-2 NIW page.

For each USCIS visa category, aligning your business plan with specific visa requirements is essential. It should not only demonstrate business viability but also how it meets the unique criteria of the visa being applied for. Meticulous attention to detail and a clear understanding of the visa’s objectives can significantly enhance the strength of your application.

Landlords

The Role of a Business Plan in Securing a Lease

For many entrepreneurs, securing a lease for a commercial space is a critical step. While a full-fledged business plan may not always be necessary, a concise, well-thought-out plan can greatly enhance your chances of securing a lease. Landlords generally look for a plan that’s practical and financially sound, often around 10 to 15 pages, that reassures them of your business’s viability.

Key Elements Landlords Look For

• Financial Viability and Startup Costs: Your plan should detail your startup costs, including potential hidden expenses. This shows landlords that you have a realistic grasp of the financial requirements to get your business up and running.
• Benefit to the Property: Explain how your business will attract customers and add value to the property. Landlords are interested in tenants who can increase foot traffic and enhance the overall appeal of their location.
• Understanding of the Geographic Area and Customers: Demonstrate your knowledge of the local market and customer base. This assures the landlord that your business is a good fit for the area and has a high potential for success.

Addressing Landlord Concerns

It’s important to acknowledge the risks landlords face when a business fails, which include:

• Loss of Revenue: A vacant property represents a direct loss of income for landlords.
• Legal and Administrative Costs: The process of dealing with a failed tenancy can involve legal fees and significant administrative efforts.
• Impact on Property Appeal: A failing or closed business can negatively affect the attractiveness and perceived value of the property.

Navigating the Financing and Leasing Process

When seeking a lease, you often need to balance between securing financing and getting the landlord’s approval. Steps to consider:

1. Show Financial Backing: Indicate your investment or existing financial support (like an SBA loan) in the business plan.
2. Obtain a Letter of Intent (LOI): An LOI from a landlord can be crucial when securing financing, as banks often require knowledge of your intended location and lease terms.
3. Timing and Flexibility: Be prepared to adjust your plan as negotiations with landlords evolve. Remember that LOIs typically have a 30-day validity, and leases are often contingent upon securing funding.

Your business plan for a landlord should project confidence, showing that your business is well-conceived, financially sound, and a beneficial addition to their property. It’s a delicate balance of demonstrating your readiness to launch while simultaneously securing the necessary financing and lease agreements. Clear, concise, and comprehensive planning is key to navigating this process successfully.

State or Municipal Licensing, Certification, or Accreditation 

Understanding the Varied Requirements

When dealing with state or municipal authorities for licensing, certification, or accreditation, it’s crucial to recognize that requirements can vary significantly. Each authority, depending on the industry and jurisdiction, may have specific demands that need to be reflected in your business plan.

Key Aspects to Consider

• Research and Due Diligence: Begin by thoroughly researching the specific requirements of the relevant department or authority in your state. This may involve reviewing guidelines, speaking with officials, or consulting with experts in your field.
• Tailoring to Specific Requirements: Your business plan should be customized to address the unique demands of the licensing or accreditation process. This might include:
  • Detailed Floorplans: Some authorities require floorplans showing secure entrances, product storage, or other facility-related specifications.
  • Social Equity Plans: Demonstrating how your business will engage with and benefit disenfranchised communities, including plans for hiring, training, and retaining staff.
  • Continuation Plans for Educational Institutions: For accreditation, particularly in the education sector, plans may need to show how the institution will manage tuition and course continuation in case of closure or disruption.

Incorporating Mandates into Your Business Plan

These specific mandates can have significant implications for your business model, including financial projections and operational strategies. Ensure that:

• Financial Models Reflect Regulatory Requirements: Adjust your financial projections to account for any additional costs or operational changes required by the licensing or certification process.
• Operational Plans Align with Regulations: Your business plan should detail how operational practices will comply with the relevant regulations and standards.

Navigating the complexities of state or municipal licensing, certification, or accreditation requires a business plan that is both flexible and meticulously researched. The plan should not only demonstrate compliance with specific regulations but also integrate these requirements into the broader operational and financial strategy of your business. There’s no shortcut in this process; it demands diligence, adaptability, and a thorough understanding of the specific requirements set by the respective authority.

Attracting Key Employees or Co-founders

Understanding the Leap of Faith

Attracting a co-founder or key employee to join your startup is an exercise in empathy and understanding. It involves appreciating the significant leap of faith they are potentially taking by leaving their current roles to embark on a new, uncertain venture. Your business plan plays a crucial role in this process. It’s not just a document outlining your business strategy; it’s a demonstration of your respect for the risks they are considering and a testament to your commitment to the venture.

• Showcasing Seriousness and Thoughtfulness: A draft business plan illustrates that you are not pursuing a mere whim. It’s a signal that you have invested significant time and effort into understanding the market, the business’s potential challenges, and how you think about its path to success.
• Facilitating Collaborative Engagement: By sharing your business plan, you invite potential co-founders or key employees to contribute their insights and expertise. This gesture goes beyond seeking validation; it’s about valuing their input and showing that their contributions can shape the future of the business.

Creating a Foundation for Mutual Commitment

Your business plan should not only inform but also inspire potential collaborators, creating a foundation for a mutually beneficial relationship:

• Fostering Ownership and Involvement: When key individuals interact with your business plan, they begin to see how their unique skills and experience can make a tangible impact. This involvement can transform their perception, encouraging them to invest themselves in the business’s success.
• Building a Relationship Based on Trust and Openness: Presenting your business plan is an act of trust. It demonstrates your willingness to be open and transparent about your vision and challenges, setting the tone for a relationship built on mutual respect and honesty.

For startups raising investor capital, the strength and expertise of your team are paramount. By sharing a comprehensive, well-crafted business plan with potential co-founders or key employees, you not only demonstrate your seriousness and vision but also establish a platform for collaboration, respect, and shared ownership. It’s a fundamental step in building a team that is committed, engaged, and ready to contribute to the success of your venture.

Additional Audiences

Flexibility for Diverse Interests

A comprehensive business plan can be required by a variety of audiences outside the standard financial and regulatory entities. This includes franchise authorities, equipment leasers, strategic partners, or potential major clients, each with unique perspectives and requirements.

Benefits of a Ready-to-Adapt Plan

Having an adaptable business plan allows you to:

• Efficiently Tailor to Specific Needs: Quickly adjust the plan to suit different audiences.
• Respond Promptly: Avoid the rush of creating a new plan for unexpected requests.

A versatile business plan is a strategic asset, enabling you to effectively engage with various stakeholders at a moment’s notice.

Navigating Your Audience’s Expectations

Remember, the key to success lies in recognizing and addressing the unique needs of each audience. Whether it’s banks, investors, USCIS, landlords, state authorities, or key employees and co-founders, each group has its own set of expectations and requirements. Tailoring your business plan to meet these specific demands demonstrates not only your understanding of the landscape but also your commitment to your venture’s success.

Be prepared for other potential audiences who might request access to your business plan. Having a versatile and adaptable document ensures you’re always ready to engage effectively with any stakeholder, avoiding last-minute rushes to meet unexpected demands.

Explore Model-Based Planning as your next step in this journey, and start building a business plan that turns your vision into an actionable and compelling story.