Your business plan is a crucial outline for your company’s success. Everyone’s heard of business plans, but you’d be surprised how many entrepreneurs don’t take the time to prepare one.
Fortunately, putting one together isn’t as hard as it may seem; it’s a matter of making an honest assessment of what you plan to do and how you plan to do it. A good business plan will project ahead some three to five years, with careful consideration as to how the company aims to increase revenues.
Why a business plan is important
The real value of creating a business plan is in the process of researching and thinking about your business in an organized way. Planning helps you to think things through, research the market, and examine your ideas critically.
To start, a business plan template suitable for all types of businesses is available as a Word template at www.SCORE.org. It consists of a narrative and several financial worksheets.
The body of the business plan contains questions divided into several sections. It also has tips for fine-tuning your plan to make an effective presentation to investors or bankers.
If this is why you’re creating your plan, pay particular attention to your writing style. You will be judged by the quality and appearance of your work, as well as by your ideas. When you are finished writing your first draft, you’ll have a collection of small essays on the various topics of your business plan.
It usually takes several weeks to complete a good plan. Most of that time is spent in research and re-thinking your ideas and assumptions. That’s the value of the process, so make time to do the job properly. Those who do never regret the effort. Be sure to keep detailed notes on your sources of information and on the assumptions underlying your financial data.
The components of a business plan
Executive summary: This often comes near the beginning of the plan, but it’s suggested that you write it last. Explain the fundamentals of the proposed business: What will your product be? Who will your customers be? Who are the owners? What do you think the future holds for your business and your industry?
Make it enthusiastic, professional, complete, and concise. If applying for a loan, state clearly how much you want, precisely how you are going to use it, and how the money will make your business more profitable, thereby ensuring repayment.
Company description: What business will you be in? What will you do? If you want to draft a mission statement, this is a good place to put it, followed by your goals, your business philosophy (what’s important to you in business), a description of your important company strengths and competencies, and the structure of the company itself (see “Which legal structure works best for your business?” on page 4).
Products and services: Describe in depth your products or services. What factors will give you competitive advantages or disadvantages? Examples include level of quality or unique or proprietary features. What are the pricing or leasing structures of your products or services?
Marketing plan: It is very dangerous to assume that you already know about your intended market; you need to do market research to make sure you’re on track. Go into depth about your potential customers. What is the total size of your market? What does demand look like? Who are your competitors?
Operational plan and organization: Explain the daily operation of the business, its location, equipment, people, processes, and surrounding environment.
Financial plan: For many, this is the hardest part of business plan preparation; often, though, it’s often the most key. It should include 12-month profit and loss projection, a four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a break-even calculation. Be realistic, and if you need to borrow money, detail why it’s needed and when it will be repaid. Together, these items will constitute a reasonable estimate of your company’s financial future.
More importantly, though, the process of thinking through the financial plan will improve your insight into the inner financial workings of your company. You’ll be glad to have these insights from the start.
This article is featured in the 2017 Small Business Resource Guide, a free publication from Business Examiner Media.