How To Analyze A Business Plan

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For example, a small company seeking an investment of $50,000 should see a potential market of $5 million.

The larger the potential market and the faster it is growing, the better.

Look for experience, integrity and passion in the executive team.

Bios and brief highlights of each executive's strengths and expertise should accompany standard business information such as headquarters and corporate structure.

Entrepreneurs that project capturing 20 percent market share in the first two years probably have unrealistic expectations.

Investigate the returns provided by the investment.Look for detailed breakdowns and analyses of each of it competitors, and of how the company is different and better than the competition in a particular niche.This section should include the regulatory environment and mention any costs or necessary delays associated with regulations.If the founders haven't invested their own capital into the business, or plan on keeping their “day jobs” while running the business, they might lack faith in the project.Ensure that the financial projections are both promising and realistic.The plan must clearly describe the problem the company is solving or need it is meeting for customers, and then propose a solution.Closely examine the alignment between problem and solution. This evaluation must take into account the product or service being offered, the operational capacity and efficiency with which the business actually can produce its product, and the quality of the proposed marketing efforts. The business plan should describe the competitive landscape in which the company operates, preferably by referencing Porter's 5 Forces or another well-established tool.Good business plans include exit strategies for pulling the initial investment back out of the company, and have a realistic valuation of their shares.Evaluate the business plan as a whole document, and as a reflection of a real-world company.Most entrepreneurs vastly overstate their company's potential, starting with the market size and market share.Financial figures should be based on historical data if available, or very conservative projections if the company is not yet profitable.

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