When you're about to embark on developing a business plan, remember this: Form f...
Eight Essentials of a Good Business Plan
Every business starts with an idea but a plan is essential to understand the full...
2. Company description:
This high-level view of your company should explain who you are, how you operate and what your goa...
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Business plan essentials


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Business plan essentials

  1. 1. SOME OF THE ESSENTIALS OF A BUSINESS PLAN When you're about to embark on developing a business plan, remember this: Form follows function, so you want a plan that fits your exact business needs. The emphasis should change depending on whether it's a plan for starting a company, raising investment money, supporting a business loan or managing an existing business. In most cases, your plan will be a 20- to 30-page document written in simple business language so it's easy to read with the main points highlighted and lots of bullets, and some tables and charts to highlight the most important financial projections. A standard plan includes seven sections: 1. The Executive Summary. Write this summary last, and make sure it contains the highlights of your plan. Assume your most important readers will read only this section. 2. The Company. A plan for a startup describes your strategy for creating the legal entity and how the initial ownership will be divided among the founders. It should also include a table that lists startup costs and initial funding. A plan for an ongoing or already existing company should describe the legal form of the business, the company history and the business's past performance. 3. What You Sell. Describe the products or services you offer. Emphasize why buyers purchase those things, what benefits they get, and what pain points they have before they buy. Show how much it costs to deliver what you're selling. 4. Your Market. Describe your target market, including market demographics, market growth and trends. Include a table that shows a market forecast. Describe the nature of your industry and the competition you have. 5. Strategy and Implementation. Strategy is all about focus. So focus on certain target market segments, certain products or services, and specific distribution avenues. Forecast your sales and the cost of sales. Define your milestones with dates, budgets and specific responsibilities. 6. Management Team. Name and describe the key members on your team. Include a table that shows personnel costs. List the gaps in the management team--if any--and show how they're being addressed. 7. Financial Projections. Describe your financial strategy and how it supports your projected growth. Include a break-even analysis that shows risk as a matter of fixed vs. variable costs. Include projected profit or loss, cash flow and balance sheets. As you deal with these standard sections, remember that this is your plan and not a classroom assignment, which means you should ignore anything that doesn't fit your needs. For example, if you're developing a business plan for internal use only that won't be read by anybody outside the company, you don't need to describe your company history. You might want to include management team gaps and a personnel plan, but you probably don't need to describe the background of your key management team members. Making your plan fit your needs means you might add some things, too, beyond the standard outline. For example, a plan for investors should include the investment offering--how much equity for how much money--as well as a discussion of exit strategy, use of funds and return on investment. A plan supporting a bank loan application needs to describe the loan requirements, intended use of funds, collateral and repayment plans. So what should every plan include no matter what? There are three essentials: 1. Specific milestones, with deadline dates, spending budgets and a list of the people responsible for them. I've seen this called "weaving a MAT," with MAT standing for "milestones, assumptions and tasks." That normally goes into Section 5, Strategy and Implementation. Make the responsibilities specific for specific people, and make sure every task gets assigned to a single person with a name and a face. This section must describe how these different milestones are going to be tracked and measured. 2. Real cash flow. Your plan should show cash flow--either projected or actual or both--month by month for at least 12 months. Show where you're getting money and how much, and show what you're spending the money on. This is cash flow, not just profit and loss, and you have to understand how different cash flow is from profits. Profitable companies go under all the time, but companies with positive cash flow can pay their bills.3. Focus. A business plan should establish your company's priorities. Don't try to do everything, and don't try to please everybody.
  2. 2. Eight Essentials of a Good Business Plan Every business starts with an idea but a plan is essential to understand the full scope and complexity of running a business. In addition, most businesses need funding from investors; and to get them behind your company, you’ll need a thorough business plan. Read these eight essential requirements recommended by the U.S. Small Business Administration to guarantee your plan is complete. 1. Executive Summary. The executive summary should consist of a the business’ goal (mission statement), launch date, number of employees, locations, products, banking and investor information, summary of financial information and goals, and summary of future plans. 2. Market Analysis. The market analysis should include an overview of the industry, target market and competitors. This section should also cover any regulations, purchasing and product cycles, lead times, and trends. 3. Company Description. This should describe why your business will be successful, and what will make it successful. Also address how and why your business will appeal to your target market. 4. Organization and Management. Create an organizational chart of those involved in the business: owners, investors, employees, etc. Also create profiles of those in management. 5. Marketing and Sales. Create a marketing strategy explaining how you will receive coverage and grow your business. The sales focus needs to clarify if sales will be handled in-house or by outside sales reps, and how your sales philosophy will be executed. 6. Service or Product. Provide an overview of your product or services and why your customers will want/need it. Include the product lifecycle, copyright or patents, and any research or development required to develop the product. 7. Funding. The funding section needs to clearly state how much funding is needed to operate the business including future plans. In addition, explain how funding will be used. 8. Financials. Include past and prospective financial information. This should include the past five years, what is planned for the next five years, and projections. 7 Essential Sections of a Business Plan Though the task may seem overwhelming, writing a business plan is an important step in helping your company thrive. Business plans provide vision and a clarify strategy. They are also critical for businesses seeking funding. But where do you begin, and what should you include? Like most daunting projects, drafting a business plan is more manageable if you take it step by step. While plans vary by business, here's a synopsis of the seven basic sections and what they should entail. 1. Executive summary: The first section should be a concise overview of your business plan. While the summary should be short, it must be well written: Your goal is to draw readers in so they want to read more about your company. Though this section appears first, consider writing it last, after you've worked out the details of your plan and can summarize your thoughts succinctly and accurately. The executive summary for a standard business plan should include: Your business name and location The products and/or services offered Your company's mission statement The purpose of your plan (to secure investors, set strategies, etc.)
  3. 3. 2. Company description: This high-level view of your company should explain who you are, how you operate and what your goals are. The company description should feature: The legal form of your business (corporation, sole proprietorship, etc.) The nature of your business, and the needs you plan to satisfy A brief history An overview of your products/services, customers and suppliers A summary of company growth, including financial or market highlights A summary of your short-term and long-term business goals 3. Products/services: Clearly describe what you are selling, focusing on the customer benefits. Incorporate details about suppliers, product or service costs and the net revenue expected from the sale of those products or services. Consider adding pictures or diagrams. In general, this section should include: An in-depth description of your products/services, emphasizing the specific benefits An explanation of the market role of your product/service and advantages it has over the competition Information about the product or service's life cycle Relevant copyright, patent or trade secret data Research and development activities that may lead to new products and services 4. Market analysis: Show your industry knowledge, and present conclusions based on market research. (Place detailed findings of any studies in an appendix.) Your market analysis should include: A sketch of targeted customer segments, including size and demographics of the groups An industry description and outlook, including statistics Historical, current and projected marketing data for your product/services A detailed evaluation of your competitors, highlighting their strengths and weaknesses 5. Strategy and implementation: Summarize your sales and marketing strategy and your operating plan. This section should include: An explanation of how you will reach target customers and penetrate the market Details about pricing, promotions and distribution An explanation of how the company will function, following the operations' cycle from acquisition of supplies through production to delivery Information on sources of labor and number of employees Data on operating hours and facilities 6. Organization and management team: Outline your company's organizational structure, and identify the company owners, management team and board of directors. Include the following: An organizational chart with descriptions of departments and key employees Information about owners, including their names, percentage of ownership, extent of involvement within the company and a biography listing their background and skills Profiles of your management team, including their names, positions, main responsibilities and past experience List of any advisors, such as board members, accountants and attorneys 7. Financial plan and projections: This last section of your business plan should be developed with a professional accountant after you've completed a market analysis and set goals for your company. Some of the important financial statements that should be part of your plan are: Historical financial data, if you own an established business, including income statements, balance sheets and cash flow statements for the past three to five years Prospective financial information, including forecasted income statements, balance sheets, cash flow statements and capital expenditure budgets for the next five years A brief analysis of your financial data, featuring a ratio and trend analysis for all financial statements