A business plan serves many functions. It organizes the thoughts of the founder or management team; serves as a set of guidelines for running the company; and perhaps most important, introduces investors and lenders to the company. When potential investors or lenders read a business plan, they already know what they are looking for. If the business plan does not answer a certain set of pre-defined questions, funders will not give the company a second thought. To critique a business plan, one must get inside the mind of the investor.

Step 1.

Verify that all 10 sections of the business plan have been written and collated in this order: Executive Summary, Company Analysis, Industry Analysis, Customer Analysis, Competitive Analysis, Marketing Plan, Operations Plan, Management Team, Financial Plan and Appendix. Each section should begin on a new page.

Step 2.

See that the Executive Summary is clear, concise and compelling. It must answer the main questions:

What does the company do? Who are its customers and what do they need? How big is the target market and how fast is it growing? Why is the company uniquely qualified to fill the market need?

The purpose of the Executive Summary is to compel the reader to read the rest of the business plan.

Step 3.

Ensure that the Company Analysis contains the basics: date of company formation, legal structure, location and growth stage. This section should also list the company's past accomplishments and why it is in a special position to succeed.

Step 4.

Ascertain that the Industry Analysis identifies the industry or industries in which the company competes. This section must paint a picture of the market size, market growth rate and trends affecting the market. These points should be backed by data from at least one independent market research firm.

Step 5.

Make sure that the Customer Analysis identifies who exactly the target customer segments are. Each segment must include demographics, psychographics, customer need and customer decision-making processes.

Step 6.

Confirm that the Competitive Analysis defines both the direct and indirect competition. Include the strengths and weaknesses of the competition--and how the company will overcome them. See that this section details the biggest competitors in full.

Step 7.

Assure that the Marketing Plan shows how the company will serve the customer and/or get its product into the hands of the consumer. Check for the Four P's:

What is the Product/Service? What Promotions will be used? What Price(s) will be charged? What location or Place will be targeted?

Also see that the Marketing Plan addresses how the customers will be kept, and what partnerships with other organizations will be fostered to increase revenues.

Step 8.

Identify the short-term and long-term processes described in the business plan. Short-term processes are everyday activities required for the company to operate (research and development, manufacturing, distribution activities, etc.). Long-term processes are projected milestones, such as product release dates, revenue benchmarks and exit strategies (IPO, buyout, merger).

Step 9.

Read the Management Team section. Make sure it contains bios describing the past accomplishments of all key management team members and board members. Find out whether there are any management team positions that need to be filled. If so, this section must describe those gaps.

Step 10.

Scrutinize the Financial Plan, as this is the section of the business plan that investors spend the most time reading. It must contain both prose and charts to paint a full picture of the following elements:

Revenue sources Pro forma (projected future) revenue streams Market share Operating margins Employee population Additional funding sources Exit strategy (if positioned to grow the company quickly toward an IPO or buyout)

All information in the Financial Plan must flow naturally from the assumptions in the rest of the business plan. All assumptions must be realistic and verifiable.

Step 11.

Note the materials in the Appendix. This section should contain any necessary documents to back up the rest of the business plan: schemata, patents, diagrams, additional financials, customer or partner testimonials, etc.

Step 12.

Count the number of pages in the business plan. It should not be more than 30 pages long. The purpose of a business plan is not to say everything there is to say about the company. It is to get investors and lenders to devote time and energy researching the company, so that they can then decide whether to fund it.

Step 13.

Do a "beauty check." Is there a cover sheet with a company logo? Is the formatting attractive, clear, and minimalistic? A rule of thumb here is that a business plan should be easy and credible to read, rather than flashy.