A business plan is required to gain entry for investor capital, as it’s the future story of your business, and many entrepreneurs have a great story that are not sure how to tell it. If you’re unsure get help, but since no one can create your story for you, experienced advisors can show you how to structure your plan to present your story effectively.

The minimum information your business plan must contain includes a statement of the strategic direction the business is to follow and why that strategy makes sense within the company’s market or industry environment, a detailed description of the products or services to be provided with special emphasis on their proprietary nature, profiles or resumes of the key managers, a brief analysis of the markets served and their outlook, and financial projections on where the business can be taken in sales and profits over three to five years.

A business plan is one, at heart, a story that explains how a business works, and when a business plan doesn’t work, it’s because it fails in either the narrative test or the numbers test, with the narrative test asking “does a story make sense”, and the numbers test asking “does the story at up?”

A business plan is therefore usually broken down into these two test sections, a written section typically called the plan narrative, and a numbers section typically referred to as the financial projections. The projections are simply a numerical representation of the business itself and its marketing strategy that is presented in the plan narrative, and the two sections must be completely entwined.

The narrative of a business plan is usually broken down into three major sections including the business description section, the marketing strategy section, and the management and operations section.

The financial projections section of the plan should be thought of as simply quantifying the effects of what was presented in the plan narrative, although the projections are concerned with the future don’t think of the projections as merely a prediction, instead the projections should be thought of as goal setting with respect to revenues and expenses. We cannot predict the future, precisely why our planning is necessary, but we can make plans, set expectations, and set goals.

Projections should include a list of required funds and their uses, a sales forecast with the least monthly for the first year and quarterly for additional years, a variable cost of sales analysis, a fixed expenses operating budget, a projected profit and loss statement, and possibly a projected cash flow statements, a balance sheet, and the breakeven analysis.

If you are trying to secure equity, you cannot spend enough time on the executive summary of your business plan, as this is the first thing, if not the only thing, that gets read by an equity investor. The executive summary is your business plan in miniature, and it should contain the scope of the opportunity and the essence of the plan in less than the page.

After reading the executive summary and making the decision to read on, equity investors look to one section of the plan more than the rest, the management team, and savvy investors know that an experienced and well rounded management team can make all the difference when it comes to success of the business.

Your management team section should be very comprehensive citing the background, education, experience, skill sets, and responsibilities for every member of the team, and also you should include all of the outside professionals that you will utilize such as your attorney, accountant, management consultants, etc.

Even well put together plans can flounder because of the failure to appreciate the crucial difference between entrepreneurs and investors, and entrepreneurs focus on the potential of an idea, while investors focused on its risks, which makes the key to raising capital lowering risk, not hyping the upside, and entrepreneurs who say how they’ll reduce risk are the ones who get the capital.

It should be noted that investors in growing companies understand risk is part of the equation, but they want to see evidence that an entrepreneur recognizes the risk factors facing the business and has taken steps to control them, which means addressing questions about market risk, financial risk, and the technological risk, stressing not the dazzling upside, but the return investors can reasonably expect, weighted against a limited and carefully chosen and defined set of risks.

If an investor likes what they see in the management team section, they will usually proceed to the financial projections, and it goes without saying that one of the most important things an investor wants to see is what potential return there might be, and for this they turn to the projected profits of the business, and while your business plan need not discuss the amount of ownership you were willing to give up, it should give the investor some idea of what returns they might receive from their investment in your business.

Finally, your business plan should indicate some exit strategy for the investor. An exit strategy is how the investor will get their original capital back and convert their ownership back to the business, and an exit strategy might include converting equity to debt by getting a bank loan to pay off the investor, or it can also include selling the business, buying out the investor, bringing in other investors to take their place, or even taking the business public.