How to write a business plan
The following is a good format to use. You can skip the sections that may not be applicable to your particular business such as the Discussion of Location but do not leave anything out that might be questioned by an investor. All points made should be backed up by research with sources noted at the bottom of each page.
Title Page
Company logo
Name of company
Name of contact person
Address
Phone number, fax number
E-mail address
Table of Contents
Make sure you format your document with ‘Heading 1’ , ‘Heading 2’ and so on so you can insert a Table of Contents on the page after the Title Page. Word can create the Table for you.
Introduction (1 or 2 pages)
Many people think the first section of your Business Plan should be the Executive Summary, but I find this is not a good idea because your Executive Summary (I like to call it a Venture Summary) should be written after you finish your Business Plan and should be more of a sales oriented document. It should be written to give a brief overview of your idea and the high points of your company such as proprietary products, extremely experienced management, a great Board of Advisors, or other things that might attract an investor’s attention and elicit a request for the full Business Plan. The Introduction should set the stage for what you are about to say about your company. In it you might want to build a case for why your idea is a good one, including brief data on the industry and a brief introduction to what your company will do that revolutionizes the industry or fills a needed niche. This can be your statement of purpose in which you describe the goal of the business and how you expect to achieve this goal.
Company Description (1 page)
This is your detailed description of what your company does and how that is accomplished. These are a few points you might want to cover in this section, but everything from the point ‘How does the business operate?’ on down might be better covered in one of the other sections of the document.
What is the legal structure? (sole proprietorship, partnership, LLC, S-Corporation, CCorporation)
• Dates of formation and incorporation.
• Description of the general business.
• What does it do?
• What is the product?
• How does the business operate?
• Hours of operation.
• Facilities – storefront, home office, warehouse/office
• Who are the suppliers?
• Give a general description of your customers.
• What is your present situation? Pre-start up, Start up, Young operating company or Mature company
Management (1 page)
List the officers and key managers or employees of your company and their individual responsibilities – how they contribute to the company’s success. Include a brief description of their education and experience. If you have a Board of Directors or outside advisors, list them here with descriptions of their backgrounds/business and how they contribute. If your Management and Boards are nothing special, you might want to move this section further back in the document in order to emphasize your strong points which are, presumably, your product or service offerings.
Discussion of Products & Services (1 page)
Your product or service is too complex to discuss fully in the Company Description section, so you discuss it here.
• Fully describe the product or service.
• Patent, trademark, licensing or copyright information.
• What makes this product/service unique?
• What are the features your customers find most attractive?
Discussion of Revenue Model
You don’t want to be dependent upon only one source of revenue. It is always a good dea to have five different ways revenue will come in. Make sure you plan for the various economic conditions you will meet over a period of years; for example, if you are going to create a ski resort you would also want to include elements that would attract customers during the summer or during years when there is little snowfall.
Discussion of Specialized Technology (1 page)
• Specialized equipment needed.
• Specialized software or other technology needed.
• Obsolescence.
• Estimated replacement dates and costs.
Discussion of Market (1 page)
• Who are your customers?
• Where are they located?
• What is your source of new customers?
• Why would they do business with you.
Price. Customer service. Proprietary advantage.
Discussion of Competition (1 page)
• Who are your main competitors?
• Where are they located?
• What share of the market do they enjoy?
• What do they do that makes them successful?
• How does your company compare with them?
• Why would someone do business with you, instead?
Discussion of Location (1 page)
• Describe your facilities in detail.
• Parking considerations.
• Lease or rent provisions.
• Neighboring businesses.
• Zoning laws that apply.
• Traffic – foot traffic and walk-ins, no need for traffic, etc.
• Why is this location ideal for your business?
• Any plans to relocate?
Discussion of Daily Operations (1 page)
• How many employees? Part time? Full time? Contract?
• What are their functions?
• Plans for future hires or layoffs?
• Briefly describe your daily operations.
Discussion of Marketing Plan (1 or 2 pages)
• Define your target market/customer.
• How will you reach that customer?
• Advertising?
• Telemarketing?
• Internet strategy?
• Pricing strategy.
• How do price, distribution, sales figure into your plans?
Contingency Plan (1 page)
• What are the top five risks that your company will be exposed to?
• Briefly state a plan to deal with each if it arises.
Financial Plan (approx. 6 spreadsheets)
Keep in mind the above discussions.
• Charts and graphs can be used for illustration purposes.
• Create a Profit & Loss spreadsheet listing all your expected monthly revenues and expenses for one year. Make sure to include costs of borrowing.
• Create second and third Profit and Loss spreadsheet for Year 2 and Year 3. You can project on the basis of a percentage increase where you do not have a firm idea of revenues or costs.
• Create a Cash Flow spreadsheet for each year showing the accumulation of losses and profits on a monthly basis.
Venture Summary (1 to 3 pages)
After finishing the above sections, it is time to write the Venture Summary. It should start out with your most compelling point, which is probably what you talk about in your ‘Elevator Pitch’ and follow that with your best supporting points. You will have a very detailed Business Plan that can be used as an operating guide or used for obtaining financing. However, it is a good idea to take it to your local SBA or SCORE office and sit down with a counselor to pick it apart just to make sure you are not deceiving yourself in any of your assumptions or projections.
Further suggestions:
• Talk about facts, do not talk about your dreams for success.
• Be conservative in your estimates.
• Take into consideration what happens to your industry during a recession, and talk about it in your Business Plan.
• Document your research.
• Consult a professional for assistance.
• Be as concise as possible, but try to avoid ‘legalese’.
• Do not bind your document because people you present it to (banks, venture capitalists) might need to make copies. A staple will do, or a 3-hole presentation folder will also work well.
• Send out your Venture Summary instead of your Business Plan. If then the Business Plan is requested, send it out.
Title Page
Company logo
Name of company
Name of contact person
Address
Phone number, fax number
E-mail address
Table of Contents
Make sure you format your document with ‘Heading 1’ , ‘Heading 2’ and so on so you can insert a Table of Contents on the page after the Title Page. Word can create the Table for you.
Introduction (1 or 2 pages)
Many people think the first section of your Business Plan should be the Executive Summary, but I find this is not a good idea because your Executive Summary (I like to call it a Venture Summary) should be written after you finish your Business Plan and should be more of a sales oriented document. It should be written to give a brief overview of your idea and the high points of your company such as proprietary products, extremely experienced management, a great Board of Advisors, or other things that might attract an investor’s attention and elicit a request for the full Business Plan. The Introduction should set the stage for what you are about to say about your company. In it you might want to build a case for why your idea is a good one, including brief data on the industry and a brief introduction to what your company will do that revolutionizes the industry or fills a needed niche. This can be your statement of purpose in which you describe the goal of the business and how you expect to achieve this goal.
Company Description (1 page)
This is your detailed description of what your company does and how that is accomplished. These are a few points you might want to cover in this section, but everything from the point ‘How does the business operate?’ on down might be better covered in one of the other sections of the document.
What is the legal structure? (sole proprietorship, partnership, LLC, S-Corporation, CCorporation)
• Dates of formation and incorporation.
• Description of the general business.
• What does it do?
• What is the product?
• How does the business operate?
• Hours of operation.
• Facilities – storefront, home office, warehouse/office
• Who are the suppliers?
• Give a general description of your customers.
• What is your present situation? Pre-start up, Start up, Young operating company or Mature company
Management (1 page)
List the officers and key managers or employees of your company and their individual responsibilities – how they contribute to the company’s success. Include a brief description of their education and experience. If you have a Board of Directors or outside advisors, list them here with descriptions of their backgrounds/business and how they contribute. If your Management and Boards are nothing special, you might want to move this section further back in the document in order to emphasize your strong points which are, presumably, your product or service offerings.
Discussion of Products & Services (1 page)
Your product or service is too complex to discuss fully in the Company Description section, so you discuss it here.
• Fully describe the product or service.
• Patent, trademark, licensing or copyright information.
• What makes this product/service unique?
• What are the features your customers find most attractive?
Discussion of Revenue Model
You don’t want to be dependent upon only one source of revenue. It is always a good dea to have five different ways revenue will come in. Make sure you plan for the various economic conditions you will meet over a period of years; for example, if you are going to create a ski resort you would also want to include elements that would attract customers during the summer or during years when there is little snowfall.
Discussion of Specialized Technology (1 page)
• Specialized equipment needed.
• Specialized software or other technology needed.
• Obsolescence.
• Estimated replacement dates and costs.
Discussion of Market (1 page)
• Who are your customers?
• Where are they located?
• What is your source of new customers?
• Why would they do business with you.
Price. Customer service. Proprietary advantage.
Discussion of Competition (1 page)
• Who are your main competitors?
• Where are they located?
• What share of the market do they enjoy?
• What do they do that makes them successful?
• How does your company compare with them?
• Why would someone do business with you, instead?
Discussion of Location (1 page)
• Describe your facilities in detail.
• Parking considerations.
• Lease or rent provisions.
• Neighboring businesses.
• Zoning laws that apply.
• Traffic – foot traffic and walk-ins, no need for traffic, etc.
• Why is this location ideal for your business?
• Any plans to relocate?
Discussion of Daily Operations (1 page)
• How many employees? Part time? Full time? Contract?
• What are their functions?
• Plans for future hires or layoffs?
• Briefly describe your daily operations.
Discussion of Marketing Plan (1 or 2 pages)
• Define your target market/customer.
• How will you reach that customer?
• Advertising?
• Telemarketing?
• Internet strategy?
• Pricing strategy.
• How do price, distribution, sales figure into your plans?
Contingency Plan (1 page)
• What are the top five risks that your company will be exposed to?
• Briefly state a plan to deal with each if it arises.
Financial Plan (approx. 6 spreadsheets)
Keep in mind the above discussions.
• Charts and graphs can be used for illustration purposes.
• Create a Profit & Loss spreadsheet listing all your expected monthly revenues and expenses for one year. Make sure to include costs of borrowing.
• Create second and third Profit and Loss spreadsheet for Year 2 and Year 3. You can project on the basis of a percentage increase where you do not have a firm idea of revenues or costs.
• Create a Cash Flow spreadsheet for each year showing the accumulation of losses and profits on a monthly basis.
Venture Summary (1 to 3 pages)
After finishing the above sections, it is time to write the Venture Summary. It should start out with your most compelling point, which is probably what you talk about in your ‘Elevator Pitch’ and follow that with your best supporting points. You will have a very detailed Business Plan that can be used as an operating guide or used for obtaining financing. However, it is a good idea to take it to your local SBA or SCORE office and sit down with a counselor to pick it apart just to make sure you are not deceiving yourself in any of your assumptions or projections.
Further suggestions:
• Talk about facts, do not talk about your dreams for success.
• Be conservative in your estimates.
• Take into consideration what happens to your industry during a recession, and talk about it in your Business Plan.
• Document your research.
• Consult a professional for assistance.
• Be as concise as possible, but try to avoid ‘legalese’.
• Do not bind your document because people you present it to (banks, venture capitalists) might need to make copies. A staple will do, or a 3-hole presentation folder will also work well.
• Send out your Venture Summary instead of your Business Plan. If then the Business Plan is requested, send it out.
How to create a financial plan
A business plan is all-conceptual until you start filling in the numbers and terms. The sections about your marketing plan and strategy are interesting to read, but they don't mean a thing if you can't justify your business with good figures on the bottom line. You do this in a distinct section of your business plan for financial forecasts and statements. The financial section of a business plan is one of the most essential components of the plan, as you will need it if you have any hope of winning over investors or obtaining a bank loan. Even if you don't need financing, you should compile a financial forecast in order to simply be successful in steering your business.
• One-time start-up costs: Every small business faces a long list of items that you have to spend money on only once just to get up and running — everything from a business license, start-up furnishings and equipment, and introductory marketing materials to that Grand Opening promotion you’ve planned.
• Regular monthly expenses: After you’re open for business, you have all sorts of ongoing expenses to deal with, from paying salaries to buying supplies. Over time, of course, you expect your sales revenue to cover these expenses.That situation doesn’t happen overnight, so you have to set aside funds with which to pay the bills in the early tough-sledding period. Having a three- to six-month cushion is a good place to start, but how long you’ll need a cushion depends on what business you’re in.
For a good idea of what size bankroll you’ll need to finance your small business start-up, first detail your estimated start-up costs. Next, estimate the ongoing monthly expenses you expect to incur and multiply by the number of months you think will pass before your business is bringing in sales revenue sufficient to cover its overhead.add the two totals together, and the resulting number is the financial cushion you need to start out with in order to have cash available when you need it.Use the figures you come up with as a starting point for developing the financial statements that you include in your written business plan. Be sure that you accompany your financial forecasts with descriptions of the assumptions you made as you put the numbers down on paper.
• One-time start-up costs: Every small business faces a long list of items that you have to spend money on only once just to get up and running — everything from a business license, start-up furnishings and equipment, and introductory marketing materials to that Grand Opening promotion you’ve planned.
• Regular monthly expenses: After you’re open for business, you have all sorts of ongoing expenses to deal with, from paying salaries to buying supplies. Over time, of course, you expect your sales revenue to cover these expenses.That situation doesn’t happen overnight, so you have to set aside funds with which to pay the bills in the early tough-sledding period. Having a three- to six-month cushion is a good place to start, but how long you’ll need a cushion depends on what business you’re in.
For a good idea of what size bankroll you’ll need to finance your small business start-up, first detail your estimated start-up costs. Next, estimate the ongoing monthly expenses you expect to incur and multiply by the number of months you think will pass before your business is bringing in sales revenue sufficient to cover its overhead.add the two totals together, and the resulting number is the financial cushion you need to start out with in order to have cash available when you need it.Use the figures you come up with as a starting point for developing the financial statements that you include in your written business plan. Be sure that you accompany your financial forecasts with descriptions of the assumptions you made as you put the numbers down on paper.
