A Business Plan is a thorough description of your business, your business goals, and your plans to achieve those goals. A Business Plan is the most important, yet most overlooked, document you can prepare for your business. Potential lenders or investors almost always request a Business Plan. But if you are self-funded, you might be tempted to skip it. Don’t!
Writing a good business plan will force you to think hard about all aspects of your business and identify the various factors that can make your business a success or a failure.
The elements of a good business plan should include the following:
This is a one-page summary of the business plan. It should briefly describe the purpose of your business and the contents of the plan. The best way to write the Executive Summary is to do it last, after you have thought out and written the rest of the plan.
Begin with the purpose of your business and your short-term and long-term goals. This should include a short description of your industry including the present outlook and future possibilities. Also provide information on the various markets in the industry as well as any new products or developments that will benefit or adversely affect your business.
This is where you define your Target Market – who do you think will need/buy your products/services? Describe the current market trends for both your industry and your potential customers – where is the market expected to go and how will your company fit? Also include details about your potential customers – their ages, education, income levels, etc.
Compare your company to the direct and indirect competitors in your market along with their strengths and weaknesses. Detail your strategies to differentiate your company from the them. List any barriers to entry that could deter potential future competitors.
Design and Development
Describe the products or services your business will provide. Detail the product’s design, show its development and where you are within the development stage, and your plans to bring the product to production. Indicate if you have or plan to acquire any copyrights, trademarks or patents.
Products and Services
Detail exactly what you are planning to create and sell, how long your products will last, and how they meet an existing need. If you are a manufacturer, describe your products and your manufacturing process. Include information about suppliers and availability of materials. If you are a wholesale distributor, describe your products and the supply chain. If you are a retailer, describe your sources of inventory and your inventory management plan. If you are a service provider, describe your services and what makes you qualified to provide them.
How do you plan to sell your products or services? Will you sell online, in stores, or via catalogs? Describe your pricing strategy and how it compares to your competition. Indicate how buyers will learn about your company and your products. Explain any advertising and networking plans as well as sales incentives or promotions you will offer.
Management and Administration
Describe the legal structure of your business – sole proprietor, limited liability company, or corporation – and why that structure is best for your company. List all the owners and/or officers and describe their strengths. Also list the managers and describe their responsibilities and abilities.
Provide a summary of your financial needs. How much funding do you need? Give a detailed list of how the funds will be used and your plans to repay those funds.
Insert financial projections here:
- Pro Forma Cash Flow Statement – this should show your expected cash inflows and outflows for at least the first year – three years would be better.
- Income Projection – a Pro Forma Income Statement should show your projected revenues and expenses for the next three years. Base future years on expected economic and industry trends.
- Projected Balance Sheet – what will your assets, liabilities, and net worth look like at the end of the next fiscal year.
- Break-Even Analysis – this will show how much revenue you need to generate to cover both your cost of goods sold and administrative expenses.
A good business plan is essential if you need outside funding, but it is invaluable in helping you crystalize your plans for making your company a success.