A business plan may facilitate your opening up a business banking account, get business credit and help you acquire investor financing. Your business plan provides lenders and other interested parties with a succinct overview of your company's operations. It also provides the owner with benefits. Business owners can look back to their business plan to verify that they’re staying true to the company's principles. A sound business plan can keep your business on track to meet your objectives for many years to come.
Creating a business plan takes some time, but the good thing is that they tend to follow a consistent format, so you can basically work from a rough template to create yours.
Writing a Business Plan
A basic business plan is made up of eight different elements. Each segment delves into a different aspect of your company's operations. Below, you’ll find a list of everything that should be covered in a traditional business plan.
You don’t have to stick exactly to the following outline. Use the sections that apply to your business and don’t worry about the other sections for now. They can always be incorporated later if need be.
1. Executive Summary
The executive summary is usually the first item that investors look at. Only two or three brief paragraphs are required for this part.
The executive summary should include the following information:
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What kind of business you’re in
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How old is your business (when was it founded)
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Overview of past business successes
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Highlights/unique features of your business model
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Snapshot of future business goals now, and in 3, 5, 10 and 20 years
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Outline of how you plan to reach those business goals
2. Company Description
The corporate description provides a high-level overview of your firm. It's a bit more detailed than the executive summary, but it's still done in general terms. This part should provide the reader with further information about your organization.
Begin this section with a summary phrase that describes your overall company concept. For example, you may say, “TrueLeaf is a natural beverage product.” Then the phrases after that should expand on that. "We sell a line of natural beverages made with natural sweeteners, marketed to teens.” Discuss your target demographic briefly, as well as the number of customers you already serve.
3. Market Analysis
In this section, you’ll begin delving into the feasibility of your company in the larger market. Your objective is to persuade the reader that you have a good grip on your market position and that you’re aware of the strengths and weaknesses of your rivals.
Discuss the following topics in this section:
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A peek at the industry – What is the size of the industry? What is its past, and what does the future hold? Is it expanding and changing at an exponential rate? Are you on the verge of launching a brand-new business?
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Information on your target population – Who are the people who make up your target market? What percentage of the market do you control? How much do you think you'll be able to claim in the future?
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What are your strategies for meeting the demands of your target market? – Is your product or service in high demand? What does your company provide that your competitors don't?
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Who are your competitors? – Be as precise as possible. Answer the following questions: Who are they, what are their sales, who are their consumers, and what is their market share? What are their advantages and disadvantages?
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Challenges you'll have to face - What problems does your company have to deal with? Do you require logistical assistance? Do you require inventory finance or lobbying for government regulation?
4. Organization and Management
This section is all about the structure of your company. To make this part more aesthetically appealing, you may want to utilize an organizational flow chart graphic. Include the names of the major participants, as well as their work titles.
You'll also have to describe how your business is structured, whether it's an LLC, S-Corp, C-Corp, or a single proprietorship.
A part dedicated to the relevant histories of important employees, including schooling, degrees, and certifications, should also be included. Mention any essential people who have relevant work experience. This section essentially describes why those individuals are employed in that position.
Finally, if you intend to hire more people, indicate it here. Discuss your reasons for wanting to recruit more individuals and how they will benefit your company.
5. Service or Product Line
Now it's time to go into the specifics of your product or service. Begin by describing what your company sells. Describe the product or service in great detail, including any patents you may have. Include details like suppliers. What materials do you use to produce your product? Do you plan to import the product in its entirety or in parts?
Describe your working relationship with your suppliers. Do you utilize contracts on a regular basis? How long do current contracts with suppliers, manufacturers, or distributors last?
6. Marketing and Sales
In this section, explain how you advertise your business. Your marketing budget, marketing techniques, and how you implement your marketing plan should all be included. You should also indicate how much of your marketing budget each division receives. Cover all your sales channels, general marketing activity, pricing strategy, and target market position.
Answer the following questions:
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Do you have a team of salespeople?
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Do you utilize a sales funnel or a customer relationship management (CRM) service?
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What methods do you employ to market your goods and/or services?
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What changes do you expect to see in your marketing and sales strategy in the future?
7. Financial Projections
This section reflects the financial stability or status of your company. This is where you can show that you have a solid financial basis and that you know how to manage and build a business. Your CPA can help tremendously with this part.
Include:
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Past 12 months of income statements
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Past 12 months of cash flow statements
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Balance sheet
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Accounts receivable report
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Accounts payable report
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Statement of debts
8. Appendix
Information about the owner and key personnel is commonly included as an appendix. There’s no need for any other information except to attach all resumes of the owners, key employees, and executive personnel, as well as the Board of Directors' resumes if you have a Board.
If you break it down into its sections, writing a business plan is very manageable. Understanding the eight components that any successful business plan should include is the first step. Contact your CPA for more information.
by Kate Supino