Learn the fundamentals of writing a business plan to get your new endeavor off to a great start.
An opportunity has made it obvious that you need to reach out beyond your support circle. Or perhaps that idea you had a few years ago has taken off, and now you and your partners have simply been ‘making it work.’ Now your business needs some direction. A business plan is a crucial part to map out the future for your business, its employees and its investors.
The Basics of a Business Plan
The basics of a business plan are readily available. SBA.gov recommends that a business plan include:
- An executive summary. This is a brief description of your company, what it does and its history along with where it is going. Some investors only look at this 2-page summary, so include where you’ll be in 3 to 5 years and highlight why or how this a successful venture. Include your mission statement, general information, and highlights of your history and goods or services. Even though this is the first thing your reader will see, make it the last thing that you write, so you can set up everything that they’ll see in the rest of the plan.
- Your company description. This is likely the easiest part of your business plan. Start if off with your tried-and-true elevator pitch. Who are you and what do you do? You’ve been practicing this since the beginning, don’t overthink it. Follow that up with your value proposition: where do you fit in the marketplace and whom do you serve? Finish the description with your business’ legal structure (are you an LLC or an S-Corp?) so that anyone reading can easily understand your company structure.
- Market analysis. You know your industry, your market and your competitors more than anybody. In this section, explain that to your audience, and like a fourth-grade math test: Show Your Work. Describe your industry from its history to its present size and trends because you may be talking to someone without any prior knowledge of these facts. Introduce your target market, its characteristics (including size and growth), and your share. And deftly describe your competitors, barriers you have or foresee in the future, and market pricing. This is the bread and butter of a business plan, and someone with no prior knowledge should be able to read this and get a clear understanding of your present market picture.
- The Business organization and management overview. This is to solidify your business and its management structure so an outsider can recognize how the business is run. Don’t forget to include spouses or friends that may have an interest in the company.
- Your services and/or products. Begin with a general overview of what you do and flesh it out over the section. Include any research and development you may have created, and what it looks like today. People often overlook including other vendors or sources that the business relies on when completing this section. Don’t forget this detail. Company-owned patents and intellectual property would be included here as well.
- The company marketing and sales plans. You’ve already alluded to your position in the marketplace, show what sets your business apart here. How and where will you reach your customers? What is your company sales strategy and who will be doing the selling? Inquiring minds do want to know, especially in your business plan.
- And finally,
- Your financial projections. If you’ve been in business for a while, you have plenty of data to support how the next year, the next three years and five years will likely look. Include balance sheets, income and cash flow statements and debt obligations. A new business will include statements of projected income and budgets, cash flow forecasts and balance statements. Likely, if a business plan includes needs for funding for the near future, it will appear in this section.
- If your business plan has been created in hopes of finding an investor, outline this need completely here. Include present need, projected future need for funding, and the purposes this funding will achieve — whether it be working capital or equipment purchasing, or even franchise fees.
Tips for a Great Business Plan
Above all, remember these few key thoughts when creating a business plan.
- Explain why you are passionate about this business, this industry, and why you are dedicated to this company. If it helps, even explain mistakes of the past and what you’ve learned from your history. If you can show how you care about your business, others will see it.
- Adapt your business plan to your audience. Sure, much of the numbers and facts will remain unchanged, but the tone for an angel investor will surely be different than that of your management team.
- Spend some time creating a company profile. You are already doing a lot of work creating this business plan. Make it official. Add it to your website. Include the history of your organization, what products or services you offer, your resources, your target market, and what makes you unique. If someone needs you to solve a problem, show off a little and assure them that you are up to the task.
Starting any new endeavor is an exciting adventure — whether you are creating a new business or if you’ve been open for 20 years and are expanding. Whatever the reason that you need a business plan, use these tips to make the most of this important document.