How To Evaluate a Business Plan

Evaluating a Business Plan When you evaluate a business plan there are some primary questions you need to ask after you have thoroughly read the plan.

  1. Executive Summary & Company Overview (What problem are you solving? What is your business proposition for solving the problem? Who are your customers? Who are your competitors? How viable is your business? How do you make money? Executive Summary is clear & effective as a stand-alone document.)
  • Products or Services (What is the product or service? What are its attributes? Advantages and potential drawbacks? Why/how is your product/service more compelling than existing ones or the competition? What is the stage of development? Do you have a proprietary position or intellectual property protection planned or in place?)
  • Market Need (What specific conditions in the market have created the problem you are solving? How will your product/service take advantage of the opportunity? Who are your customers and what are their attributes? Clearly define your potential customers and why they will pay for your product or service.)
  • Market Potential for Your Product or Service (What are the characteristics of the market for your product or service? How will you reach the market? How big is the market opportunity: number of potential customers & annual sales? Can you narrow the market to a manageable segment? How will you dominate the market? E.g. through pricing, quality, geography, etc? Is there a market niche where you will have competitive advantage?)
  • Competitive Advantage (Competitive Matrix: Who are your competitors? Their strengths & weaknesses? Your strengths & weaknesses? How will you close the gap? How easily can competition close gap? )
  • Management (Who are key team members and their respective roles? What are their relevant experiences and accomplishments? What other areas of expertise are you lacking? When will you need additional team members?)
  • Financial Forecasts (Present in summary form, consistent with plan and effective in capturing financial performance; quarterly for first two years, annually for years 3-5.)

a. Income Statement

b. Balance Sheet

c. Funds Required & Uses

d. Key Assumptions (trends, comparatives)

Please evaluate the Business Plan Presentation using the criteria below:

1. Is the business plan readable?

2. Is the business plan well thought out?

 3. What is the legal structure of the business?

4. What are the strengths of this business plan?

5. What are the weaknesses?

 6. Has your client accurately estimated the difficulties in growing a business?

 7. Are there any vague or unsubstantiated statements in the business plan? (i.e. sales will double in two years)

8. Is your client being realistic?

 9. Is there data to support your client’s statements?

10. Has your client demonstrated a how they are going to measure their objectives?

11. Does the plan demonstrate how your client intends for this business to become profitable?

12. Does the business plan demonstrate that there is sufficient demand for the products/services?

13. Does the client have a sustainable competitive advantage?

14. Does the plan adequately describe the business?

 15. Does it adequately describe the products/services?

 16. Is there a solid management team?

 17. What is the historical profile of your client’s business?

18. Are the projections backed up with reliable data?

19. What analysis of the market has your client conducted?

20. What is your client’s market share?

21. Is the business feasible?

22. What are the risks associated with the business?

23. What are the opportunities associated with this business?

24. What are the challenges associated with this business?

5. Is your client in a position to overcome these challenges?

26. Has your client included historical financial information on their business?

27. Has your client included all the necessary financial statements?

 28. Are the financial statements realistic?

29. What happens if you run different scenarios using the generic financial statements that have been provided?

30. How much financing is requested? Is it reasonable?

 31. What are the financial ratios telling you about this business? Have you compared the ratios to the industry averages?

32. Does the business plan need more research?