Business Plans 101: How To Write Your Business Plan
A business plan is your blueprint for success. For most small business owners, one of the toughest parts of writing a business plan is getting started. Writing a business plan is challenging and sometimes difficult, but it can be an enjoyable and enlightening exercise that hones your problem-solving skills and provides a foundation on which to build your business. It is a detailed document describing how a proposed or existing business conducts its operation. It's a strategy, and designed to define and delineate the ways you will finance, operate, and profit from your business. It's a working, changing, growing document, and the basis for all your forecasting and goals.
The business plan must be able to convince the audience of your expertise and authority. You must be willing to conduct research and gather information on your products or services, your target customers, and the reasons why your business will succeed. Your plan should enable you to assess the feasibility of your ideas, identify your potential customers, evaluate your business and financial resources, implement a profitable cost and pricing system for selling your products or services, obtain financial backing, and facilitate the setting of realistic goals and growth of your business.
The most important part of a business plan is the executive summary, and is recommended that it be written after all the other sections are finished to ensure its' accuracy and correctness. The executive summary should entice the audience to continue reading the rest of your business plan. It is a compact outline of your business, the reasons why the products or services are better than are currently available, the mission, the target market, the history, your future goals, and the reasons why your business is successful.
The market analysis describes your knowledge of the industry and precisely how your products or services fit into it. It provides an overview of the industry's description, history, the current demand,your markets,the critical needs of your potential customers and how these needs are currently being met, and the forecasted outlook. An overview of your marketing research,and an evaluation of your competitors is stated in this section. Any detailed industry and marketing data should be inserted in the appendix.
The description of the company provides a cursory overview of how the individual pieces of your business fit together, the nature of your business, and your rationale as to why your company is outstanding and a success. The description should list what marketplace needs your company is fulfilling and the procedures you use to meet this need.
The organization and management section describes the legal structure, the ownership of the company, along with the profiles of the management team, and the qualifications of your board of directors, if applicable. Each operational function needed to successfully deliver your products or services is discussed.
The marketing and sales section explains how you distribute, sell, and promote your products or services. It should include your plans and methods you will use to grow and expand your business. Many small businesses have failed simply because they forgot to plan for growth.
The service or product section describes your products or services,the benefits, and advantages that are provided your potential and current customers. It identifies problems that your products or services solve. You need to explain what vendors you need, and the availability of your supplies. Any products or services marketing and promotional materials you have should be included in the appendix.
In the funding request you need to discuss your current funding requirement, and any future requirements for the next five years, the reasons for the requested additional funds, and any long term financial strategies you are planning that might impact your financial request.
In order to provide correct and accurate financial records, they should not be prepared until after the market research and clear objectives have been established. The financial documents you will provide depend upon your current business stage. If your business is established you will include historical data up to your third or fifth year. The historical data consist of income statements, balance sheets, and cash flow statements. Regardless of what business stage you are in, forecasted financial data will need to be provided. Creditors want to see the projected income statements, balance sheets, cash flow statements, and capital expenditure budgets for the next five years for your business, and a list of any applicable current collateral. After you have supplied monthly projections for the first year, you can supply quarterly or yearly projections for the second to the fifth year. A short analysis, with your rationale for the projections, needs to be explained.
The appendix will include personal and business credit history, resumes of key managers, product pictures, letters of reference, details of market studies, relevant magazine articles or book references, applicable licenses, permits, and patents, legal documents, copies of leases, building permits, contracts, and a list of business consultants. Needless to state, these documents should not be attached to the business plan's main body. However, your creditors may request to review these documents in order to determine to loan your business the financial funds. It is recommended you keep a distribution record to ensure your business plan is provided only on an as-needed basis. A private placement disclaimer should be with your business plan, and especially on the appendix.
There are business-plan forms available from several sources, including business books and Small Business Administration publications, as well as Small Business Development Center handouts. There are even computer-software programs available. However, remember these are only guidelines, designed to help you write your own business plan. Just as no two businesses are entirely alike, no two business plans are identical.
