The old adage, "failing to plan is planning to fail" was never truer than when it comes to business plans. Without one, you're apt to make expensive mistakes. With one, you have a clear path, a language with which to discuss your business with others, and an information base to help you make strategic decisions.
Business Plan Basics
Since you may use your business plan to secure capital funding, design it from the first line to be easy to understand and interpret.
Create a Cover Page
The cover page should include:
- The name of the business
- A logo, if you have one
- The name and title of the primary contact person
- The most recent revision date
Create a Footer
For easy reference, the document should contain a footer, which includes:
- A physical business address, including the zip code
- A direct contact telephone number for the primary contact person
- A direct email address for the primary contact person
- Executive Summary
The Executive Summary
Although your executive summary will appear at the beginning of your business plan, it's best to write it last. Its purpose is to give your reader a preview of coming attractions. It needs to encapsulate your vision of why you believe your business is likely to succeed. Writing that will be much easier after you have created the other components of the plan.
Important characteristics should include:
- Persuasive Tone -- The goal of the summary is to persuade readers to read the plan from cover to cover. Think of the executive summary as a sales pitch for the plan itself.
- Accurate Preview - Tell them what you are going to tell them within the business plan. It should briefly summarize the key segments of your business plan and make the reader want to drill down into the plan for additional detail.
- Organized Format - It should follow the format and structure of the actual business plan.
- Quick to Read -- Readers should be able to read and understand the entire executive summary in just a very few minutes. If it takes longer than three to five minutes for a person to read through this part of your business plan, you may lose your reader.
Remember that you are crafting the first impression your company will make, and there are no do-overs. Use a professional tone, make sure it's free from grammatical or typographical errors, and make it clear and concise.
Your company description should include:
- A Mission Statement: This is a brief pointed statement explaining exactly what your company does. It's helpful if the statement also includes why your business is poised to be the best.
- Principle Members: This is a list of the key people leading your company and their titles.
- Legal Structure: Before writing your plan, work out with your accountant whether it's in your best interest to form your company as an S-Corp, Limited Liability Company (LLC), Partnership, Sole Proprietorship, Non-profit, or Corporation.
Make a solid, well documented case for support for your company. Be sure to address:
- What need does your company fill?
- Is the market saturated or growing in your geographic area?
- Who are your top competitors?
- What edge do you have over the competition?
- What regulations will you be required to meet and how will you meet them?
- Who is your ideal customer and what are her demographics?
- Include age, income, interests, and education level.
- What pain points does she have that your company address?
- Given her landscape of options, why would she choose your products and services?
Products and Services
List detailed information about the products and services you plan to provide. Include:
- A menu of products and services
- Your pricing structure
- How far along you are in the development of your products and services
- Whether you hold or have applied for any patents
- Whether you have intellectual property that needs to be protected, and how you plan to protect it
- Any research and development that may be underway
Marketing and Sales
Outline a well-rounded plan for how you intend to reach out to your customers. Customized marketing solutions should be mentioned here, as will any other advertising and marketing ideas your business will utilize.
Also outline areas of business growth you plan to pursue in the next three to five years.
Include Financial Statements
Numbers are a crucial part of any business plan. Clearly understand the amount of cash on hand you will need to launch your business, how much revenue you can realistically expect to generate, and what your operating costs will be.
You will have to create your initial financial reports based on estimates, but be as realistic as possible. If you borrow money or approach investors they will expect to see these numbers as well. Be sure to include a break-even point, after which time your business will have repaid lenders and investors.
Two basic reports that will help you to fulfill these goals and should be included within your business plan are:
- Profit and Loss Statement (P&L): This Profit and Loss Blank Form will guide you through the steps necessary to create your own P&L statement. This form will also help you to project income and expenses for a period of three years.
- Cash Flow Report: Visit this sample cash flow report (Section 6.3) to see what should be included.
If your business is large or financially complex, include a balance sheet, listing assets, liabilities and equity.
Appendices and Exhibits
This section affords you the opportunity to include tangibles that will lend credibility to your business plan. This might include product photos, legal contracts, studies, or other documents.
A sample business plan can help get you started in writing your own plan. If you prefer to use a fill-in template to create your business plan you can use software or download a template. Business Plan Pro is highly customizable, and easy to use. Just cut and paste. Another option is the template provided by the Small Business Association (SBA).
Industry and Scope
Keep in mind that a business plan for an airline will look very different from a plan for a children's shoe store. Both can follow the same basic format, but modify the content of the plan to address your particular industry. Every business plan needs well documented details, but plans that touch more people and industries, or that call for higher dollars, need substantially more credible back-up. Investors, lenders, and the public want to know that you've thought through every angle and created a plan for each one.