businessplan

Creating a Business Plan

Creating a business plan is a useful process that many start-ups overlook. However, if you take the time to get it completed, it can save you a world of headaches.

  1. Executive Summary
  2. Company Description
  3. Market Analysis
  4. Organization & Management
  5. Service or Product Line
  6. Marketing & Sales
  7. Funding Request
  8. Financial Projections
  9. Appendix
  10.  How to Make Your Business Plan Stand Out

1. Executive Summary

 This section should include:

  • A brief description of where your company is
  • A brief description of where you want to take it
  • A brief description of why your business idea will be successful.

If you are seeking financing, the executive summary is also your first opportunity to grab a potential investor’s interest.

With the exception of the mission statement, all of the information in the executive summary should be covered in a concise fashion and kept to one page. The executive summary is the first part of your business plan many people will see, so each word should count.

Please note: The executive summary should highlight the strengths of your overall plan and therefore be the last section you write. However, it usually appears first in your business plan document.

2 types of Executive Summaries

 1. Established Business should include

  • The Mission Statement – This explains what your business is all about. It should be between several sentences and a paragraph.
  • Company Information – Include a short statement that covers when your business was formed, the names of the founders and their roles, your number of employees, and your business location(s).
  • Growth Highlights – Include examples of company growth, such as financial or market highlights (for example, “XYZ Firm increased profit margins and market share year-over-year since its foundation). Graphs and charts can be helpful in this section.
  • Your Products/Services – Briefly describe the products or services you provide.
  • Financial Information – If you are seeking financing, include any information about your current bank and investors.
  • Summarize future plans – Explain where you would like to take your business.

 

2. Start ups and New Business should include 

If you are just starting a business, you won’t have as much information as an established company. So you should focus on 4 areas.

  • Focus on your experience and background as well as the decisions that led you to start this particular enterprise.
  • Demonstrate that you have done thorough market analysis.
  • Include information about a need or gap in your target market, and how your particular solutions can fill it.
  • Convince the reader that you can succeed in your target market, then address your future plans.

Please Note: Remember, your Executive Summary will be the last thing you write.

Useful Link: Example of A Bakery Business Plan  via bplans.com

Useful Link: How to Write an Executive Summary  via Inc.com

 

2. Company Description

This section should include:

  • a high-level review of the different elements of your business.

Purpose of this section:

  • similar to an extended elevator pitch
  • helps readers and potential investors understand the goal of your business and its unique proposition.

What to Include in Your Company Description

  • Describe the nature of your business and list the marketplace needs that you are trying to satisfy.
  • Explain how your products and services meet these needs.
  • List the specific consumers, organizations or businesses that your company serves or will serve.
  • Explain the competitive advantages that you believe will make your business a success such as your location, expert personnel, efficient operations, or ability to bring value to your customers.

Useful Link: Tips for Writing the Company Description Section of a Business Plan via

Useful Link:  Cover All the Bases in Your Business Description via Inc.com

 

3. Market Analysis

This section should include:

  • Industry and market knowledge
  • Any of your research findings, results and conclusions

Purpose of this section:

  • Convey the results of Market Analysis
  • Show that you understand your industry

 

The 8 Areas Of Focus In Market Analysis

1. Industry Description and Outlook 

  • Describe your industry, including its current size and historic growth rate as well as other trends and characteristics (e.g., life cycle stage, projected growth rate).
  • Next, list the major customer groups within your industry.

2. Information About Your Target Market –

  • Narrow your target market to a manageable size.
  • Many businesses make the mistake of trying to appeal to too many target markets.
  • Research and include the following information about your market:

3. Distinguishing characteristics –

  • What are the critical needs of your potential customers?
  • Are those needs being met?
  • What are the demographics of the group and where are they located?
  • Are there any seasonal or cyclical purchasing trends that may impact your business?

4. Size of the primary target market –

  • In addition to the size of your market, what data can you include about the annual purchases your market makes in your industry?
  • What is the forecasted market growth for this group?
  • For more information, see our market research guide for tips and free government resources that can help you build a market profile.

5. How much market share can you gain? –

  • What is the market share percentage and number of customers you expect to obtain in a defined geographic area?
  • Explain the logic behind your calculation.
6. Pricing and gross margin targets –
  • Define your pricing structure, gross margin levels, and any discount that you plan to use.

7. Competitive Analysis –

  • Your competitive analysis should identify your competition by product line or service and market segment.
  • Assess the following characteristics of the competitive landscape

8. Regulatory Restrictions 

  • Include any customer or governmental regulatory requirements affecting your business, and how you’ll comply.
  • Also, cite any operational or cost impact the compliance process will have on your business.

Please Note: When you include information about any of the market tests or research studies you have completed, be sure to focus only on the results of these tests. Any other details should be included in the appendix.

Useful links: Conducting a Market Analysis for Your Business Plan via entrepreneur.com

 

4. Organization & Management

This section should include:

  • your company’s organizational structure
  • details about the ownership of your company
  • profiles of your management team
  • and the qualifications of your board of directors.

Purpose of this section is to convey:

  • Give a detailed description of each division or department and its function.
  • Who is involved in your business and who is responsible for what?
  • What are the backgrounds of those involved?
  • Do you have board members and who are they?

Why do I need a breakdown of my businesses Organizational Structure?

  • Creating an organizational chart with a narrative description proves that you are leaving nothing to chance.
  • It gives potential investors and employees confidence that there is someone in charge of all functions.
  • Ensures nothing slips through the cracks.

 

Ownership Information

This section should also include

  • the legal structure of your business along with the subsequent ownership information
  • Have you incorporated your business? If so, is it a C or S corporation?
  • Have you formed a partnership with someone? If so, is it a general, limited partnership?
  • Are you the sole proprietor of your business?

Please note: These may seem like unnecessary questions to answer in a one- or two-person organization, but the people reading your business plan want to know who’s in charge, so tell them.

Please note: Reassure your reader that the people you have on staff are more than just names on a letterhead.

Useful links:  Example of a Management and Organization Summary via bplans.com

Useful links: What to include in a Managment and Organization section via sba.gov

 

5. Service or Product Line

This section should include:

  • An in-depth description your service or product
  • Emphasize the benefits to potential and current customers.
  • You should focus on why your particular product will fill a need for your target customers.
  • Outline any R&D activities that you are involved in or are planning.

What to Include in Your Service or Product Line Section

  • A description of your product or service’s ability to meet consumer needs
  • Does your Product or service have any advantages over that of the competition?
  • What is the current development stage of your product? (e.g., idea, prototype).
  • What is your Product’s Life Cycle?
  • Do you own and Intellectual Property in relation to your product
  • Do  you have any existing, pending, or any anticipated copyright or patent filings?
  • Can any key aspects of a product be classified as a trade secret.
  • Include any information pertaining to existing legal agreements, such as nondisclosure or non-compete agreements.
  • What results of future R&D activities do you expect?
  • Be sure to analyze the R&D efforts of not only your own business, but also of others in your industry.

Useful links: Common Business Plan Mistakes via greatfxprinting.com

 

6. Marketing & Sales

This section should include:

  • Define marketing and sales management strategy for your business
  • Define your marketing strategy
  • Customers are the lifeblood of your business, how will you find them?

 

An overall marketing strategy should include 4 different strategies:

  1. A market penetration strategy.
  2. A growth strategy. This strategy for building your business might include: an internal strategy such as how to increase your human resources, an acquisition strategy such as buying another business, a franchise strategy for branching out, a horizontal strategy where you would provide the same type of products to different users, or a vertical strategy where you would continue providing the same products but would offer them at different levels of the distribution chain.
  3. Channels of distribution strategy. Choices for distribution channels could include original equipment manufacturers (OEMs), an internal sales force, distributors, or retailers.
  4. Communication strategy. How are you going to reach your customers? Usually a combination of the following tactics works the best: promotions, advertising, public relations, personal selling, and printed materials such as brochures, catalogs, flyers, etc.

 

Your overall sales strategy should include 4 primary elements:

  • A sales force strategy. If you are going to have a sales force, do you plan to use internal or independent representatives?
  • How many salespeople will you recruit for your sales force?
  • What type of recruitment strategies will you use?
  • How will you train your sales force? What about compensation for your sales force?

Please note: When you are defining your sales strategy, it is important that you break it down into activities.

Activity #1:  Identify your prospects.

  1. Make a list of your prospects
  2. Prioritize your contacts
  3. Select the leads with the highest potential to buy first.
  4. Identify the number of sales calls you will make over a certain period of time.
  5. Determine the average number of sales calls you will need to make per sale
  6. Determine the average dollar size per sale, and the average dollar size per vendor.

Useful Link: Attract Customers Online With Adwords  via google adwords

 

7. Funding Request

This section should include:

  • Your current funding requirement
  • Any future funding requirements over the next five years
  • How you intend to use the funds you receive: Is the funding request for capital expenditures? Working capital? Debt retirement? Acquisitions? Whatever it is, be sure to list it in this section.
  • Any strategic financial situational plans for the future, such as: a buyout, being acquired, debt repayment plan, or selling your business.  These areas are extremely important to a future creditor, since they will directly impact your ability to repay your loan(s).

Please note: When you are outlining your funding requirements, you should  include the amount you want now and the amount you want in the future.

Please note: In addition to the funding request you’ll also need to provide historical and prospective financial information.

Useful link: Sample Business Plan Proposals via Pinterest

Useful link: Funding Requests and Financial Information via greatfxprinting.com

 

8. Financial Projections

This section should include:

  • Financial Projections section
  • Results of  market analysis and clear financial objectives
  • Planned allocation resources

Historical Financial Data

  • If you own an established business, you will be requested to supply historical data related to your company’s performance.
  • Most creditors request data for the last three to five years, depending on the length of time you have been in business.
  • The historical financial data to include are your company’s income statements, balance sheets, and cash flow statements for each year you have been in business (usually for up to three to five years).
  • Often, creditors are also interested in any collateral that you may have that could be used to ensure your loan, regardless of the stage of your business.

Prospective Financial Data

  • All businesses, whether start up or growing, will be required to supply prospective financial data. Creditors will want to see what you expect your company to be able to do within the next 5 years.
  • Each year’s documents should include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets.
  • For the first year, you should supply monthly or quarterly projections.
  • After that, you can stretch it to quarterly and/or yearly projections for years two through five.
  • Make sure that your projections match your funding requests; creditors will be on the lookout for inconsistencies.
  • It’s much better if you catch mistakes before they do.
  • If you have made assumptions in your projections, be sure to summarize what you have assumed.
  • This way, the reader will not be left guessing.
  • Finally, include a short analysis of your financial information.
  • Include a ratio and trend analysis for all of your financial statements (both historical and prospective). Since pictures speak louder than words, you may want to add graphs of your trend analysis (especially if they are positive).

 

9. Appendix

  • The Appendix should be provided to readers on an as-needed basis. In other words, it should not be included with the main body of your business plan.
  • Your plan is your communication tool; as such, it will be seen by a lot of people.
  • Some of the information in the business section you will not want everyone to see, but specific individuals (such as creditors) may want access to this information to make lending decisions.
  • Therefore, it is important to have the appendix within easy reach.

The appendix would include:

  • Credit history (personal & business)
  • Resumes of key managers
  • Product pictures
  • Letters of reference
  • Details of market studies
  • Relevant magazine articles or book references
  • Licenses, permits or patents
  • Legal documents
  • Copies of leases
  • Building permits
  • Contracts
  • List of business consultants, including attorney and accountant

Any copies of your business plan should be controlled; keep a distribution record. This will allow you to update and maintain your business plan on an as-needed basis. Remember, too, that you should include a private placement disclaimer with your business plan if you plan to use it to raise capital.

 Useful Link:  How to Make Your Business Plan Stand Out via sba.gov

2 Comments on “Creating a Business Plan

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