How to Write a Great Business Plan
The Roadmap and Tools for Success
- What Is a Business Plan?
- Why Should I Write a Business Plan?
- Guidelines for Writing a Business Plan
- Tools to Help You Write a Business Plan
- Basic Features of Your Business Plan
- How to Write Each Section of Your Business Plan
"Wow!! I learned so much... This is awesome stuff!....Thanks for your assistance." M.R. Holt, Providence RI
What Is a Business Plan?
A business plan is a formal statement of your business goals. It explains your strategy for reaching those goals. Whether you have a new business startup or an existing business, a business plan helps you look ahead, to anticipate the difficulties and overcome them. It is a road map into the future that gives you and your team direction and purpose. Just as you wouldn't travel around the world without a map, you should have a map for your business. And preparing a business plan helps you understand your business better. Did you know that, of about a million new businesses started each year in the United States, only 1 in 5 will last for five years? A business owner who fails to plan also plans to fail. Your necessary tools for success include a good idea, lots of energy and persistence, and a professional business plan.
Writing the Business Plan
Why Should I Write a Business Plan?
You will need a written business plan for many purposes. It is necessary when you go to the bank for a loan, when you take on a partner, when you raise capital from new investors and when you approach venture capital firms. The business plan comes in handy when you lease space and equipment for your startup, when you approach new vendors to purchase on credit, when you arrange for business insurance, and when you hire your management team. The exercise of preparing your plan will add to your knowledge. A business plan will also help you grow your business and develop it according to your goals. The business plan will take your dreams and make them a reality.
How Not to Write
a Business Plan
Guidelines for Writing a Business Plan
Write your business plan ahead of time, so it is available when you need it. Make it both complete and concise, without puffery. The plan should show that you have a sound business concept, and that you understand your market. Demonstrate that you have chosen a healthy, growing and stable industry, and that you and your management are capable. In your business plan, include as much financial data and research as possible to support your optimism. Use charts, tables, bullets and other graphics. Proofread carefully for typos and spelling. As business operations progress, you may change and rewrite your business plan several times.
Sections of the Business Plan
Before you start your plan, you should choose the type of business and the scope of operation. You know your area of expertise. You know how much money is available. And you probably have a name for the business.
Tools to Help You Write a Business Plan
There is no set format for a business plan. It can be as long as 50 pages, or as short as 5 pages. A plan is usually presented in a three-ring binder or a spiral-bound folder. You may want to rely on a business plan template made especially for your type of business. Or you can use one of the many computer software packages like Business Plan Pro, Planwrite, BizPlan Builder or Automate Your Business Plan. They have fill-in-the-blanks areas, built-in-spreadsheets, and boilerplate text to make the job easier. Sample business plans are available at Bplans.com and at quicken.com. If you need it, help is available from Service Corps of Retired Executives and from your accountant. Check out the Small Business Administration for sample business plans and information about government loans. But it is up to you to set your business plan in motion.
Basic Features of Your Business Plan
Though business plans have many different presentation formats, they typically cover these topics.
Present your business plan with a cover sheet, a brief personalized letter to the reader that has contact information, the purpose of the business plan and why you are presenting it.
- Table of Contents
- Executive Summary.
- Description of the Company and Background
- A Marketing Plan
- An Operational Plan
- A Financial Plan
How to Write Each Section of Your Business Plan
Writing the Business Plan
- The Executive Summary. Write this section of the business plan last and best. Itís just a page or two of highlights from the other sections. Use it to impress your reader, bank or investor with the glowing presentation of your business. Assume that many people will only look at the executive summary, so make it work for you.
- The Company Description. Name of company, contact information, years in business, legal structure, minority and majority owners, history, owners and start-up plans. Include business relationships and references.
- The Company Product or Service. Describe what youíre selling in detail. Focus on customer benefits. Present the Company Mission Statement. Include photos of your product or service.
- Market Analysis. This is the planning backbone of any business. You need to know your market inside and out, what your customers need, where they are, and how to reach them. Present the results of your research: the geographic market, population, total spent on this product or service by these people, residential and business customers, and demographics by age and gender. Good solid research will pay off in the long run.
- Competition analysis. In this section of the business plan, you identify that largest companies that compete with you, names and estimated volume of sales, and how they do business, and their share of the market. Include franchises and national chains. Address the growth of the market and possible market saturation. Compare existing products to your product for features and deficiencies. Emphasize the customer needs not presently being met by your competitors.
- The Marketing and Sales Plan. The marketing plan is mission-critical.
When you write your marketing plan, explain your Unique Selling Proposition. What gives you a competitive edge? Your product may be eco-friendly and all natural. The product may come with a stronger warranty, offer more customer support, have customized features, or be unique in the marketplace. You may have a money-back guarantee, free shipping and provide more convenient business hours. Your Unique Selling Proposition shows why people cannot get along without your product, and why you outshine the competition.
As part of the marketing and sales plan, discuss your pricing strategy, and decide if you will compete on price or value. If you do not have the lowest price, what will be your competitive advantage, and what types of marketing will you use? Include any test marketing results and client testimonials. Identify your potential distributors and their interest level. What are the terms of sale? Present your plans for promotion and brand development. Write about customer feedback, quality benchmarks, Better Business Bureau rating and online customer review services.
- Strategy and Implementation. The Strategy and Implementation section of the business plan has detailed sales forecasts for the products. It should include a timetable with dates and budget for all the important business milestones. It will show the progress made on important projects like the new website, staffing, training, advertising programs, patents filed, new construction, funding received, and other important objectives.
Company strategy and implementation also discusses your facility, warehousing and supply chain, manufacturing schedule, in house operations and contracts.
Be specific about management responsibilities with dates and budgets. Make sure you can track results from day one. Cover the duties of sales and operations staff. Estimate the total employees and total payroll, along with your plans for hiring.
At this point as you write the business plan, you should decide how fast the company will grow, and how much funding is required to support growth. Discuss the company plans for expansion.
- Web Plan Summary. For an e-commerce business, as well as any other business, include in your business plan a discussion of the website, its development costs and operation. Consider online sales and marketing strategies. What technology will you use for shopping carts, merchant accounts, ordering, routing, price quotes or training? Write up a description of the web pages and software tools required.
- The Management Team. Introduce the members of your management team and key employees. Include their backgrounds, resumes, job descriptions and salary. Often potential investors and partners will rely heavily on this information.
- Summary of Start-Up Costs. Itemize your start-up costs for equipment, website, legal, accounting, rent, signage, property, plant and equipment, printing, salaries and operating cash. Identify the sources of funds that will cover your start-up costs.
List the amounts required from each of your funding sources, owners, loans, banks, stockholders, venture capital and vendors.
Financial Analysis. The most important part of the financial analysis is to show that the business will have sufficient cash to repay its bank loans and to meet its other obligations. The business should also have an exit plan to repay investors.
At the very least, your business plan should include a pro forma estimated Profit and Loss Statement and a pro forma estimated Cash Flow Statement for each year of the next five years. For these statements, it is helpful to understand the difference between cash flow and profit. Certain non-cash expenses, like depreciation, amortization of organization expense, deferred taxes, and an allowance for uncollectible accounts are shown on the profit and loss statement, but not on the cash flow statement. Certain cash payments, like repayments of the loan principal, cash purchases of major assets such as buildings and equipment, cash paid to vendors, payments received from accounts receivable, payments made to vendors, owner's withdrawals in cash, and dividends paid in cash are shown on the Cash Flow Statement, but not the Profit and Loss Statement. Be conservative in your estimates when you write this section of the business plan. Include bar charts and pie charts for clarity. Your accountant will be helpful in preparing these statements.
Sales Chart for the Business Plan
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