Table of Contents
What is a business plan? It’s a document that lays out your idea in as much detail as possible, outlines the risks and opportunities inherent to making it happen, and discusses how you’ll go about bringing your project from concept to reality. If you’re thinking of starting or expanding on an existing business–or just have general questions about writing one–here are nine steps for getting started.
A business plan may help you predict your future whether you’re just starting out or already have a successful company. A business plan also provides a chance to demonstrate why and how your company will succeed. To develop an effective business plan, you must prepare ahead of time and undertake financial and market research.
Here are the nine components of your business plan to include:
1. Opening & Legal Pages
The opening pages of a business plan assist arrange the remainder of the document and legally protect your company concept. It contains vital information about the company. A Non-disclosure Accord (NDA) is voluntary, but it may be required if you feel someone would steal your company concept or steal your tactics. The Table of Contents aids in the organization of the whole business plan.
Page 1 of 2
Page 1 of 2 simply provides contact information about the business and its owner. On Page 1 of 2, include the business name and who prepared it, including your name, address, phone number, and email address. Additionally, if the registered company name with the state is different than the business name, you may want to add that as a “company name.”
Non-disclosure Accord
A Non-disclosure Accord (also called a confidentiality agreement) is a legal document that safeguards business information. You’d want someone to sign it before reading your business plan if you believe they could use the information to their advantage and your disadvantage, such as to steal your business idea or, something more focused, like a particular marketing technique.
Table of Contents
The Table of Contents lists the sections and subsections of your business plan. All of the headers below (Executive Summary, Goals for the Company, Company Summary, Products and Services, and so on) are considered sections of a business plan. You can number the sections for additional organization. For example, 1.0 is the executive summary, 1.1 is the Goals for the Company, and 1.2 is the Statement of Purpose.
2. Executive Summary
The executive summary should be one to two pages long and provide an outline of the company strategy. It’s possible that merely the executive summary will be requested by investors. Make it a clear, succinct, and informative representation of your company strategy. After you’ve finished the other parts of the business plan, finish the executive summary last. It’s easy to comprehend which elements of your company plan are the most crucial to emphasize if you tackle this section last.
Consider incorporating the following in the executive summary’s first paragraphs:
- A business description is equivalent to a 30-second elevator speech that describes your company and what makes it special.
- Items and services: Include the kind of products and services you offer, as well as their prices.
- Rivals: Describe your main competitors in a few sentences and explain why your company will prosper despite them.
- Management and organization: Talk about the owners’ history and how they can assist the company to prosper. Also, if necessary, talk about the company’s management structure.
- If the location (or facility) of the firm is critical to its success, consider emphasizing the advantages of the site as well as the surrounding region.
- Ideal consumer and target market: Describe who your ideal consumers are and why they’ll buy your goods or services.
- Provide short financial statistics and estimates pertinent to your firm, such as launch expenses, the month in which the business will be profitable, and expected sales figures.
- Finish the first few lines with a description of the startup funding sources and the amount of money sought.
The bullets above may be used to create many paragraphs. You may also add or delete parts depending on your company’s requirements. If you don’t have a physical location, for example, leave it blank; if having a web presence is critical to your business, provide two to three words on your internet approach. Remember to keep the executive summary under two pages long, including the three headings listed below.
Goals for the Company
Your business objections are specific and attainable goals for your business. For example, “Attract at least 80 customers per day within the first year in business” or “Generate a positive cash flow from operations with at least 15% net profit to sales.” You can include business financial goals as well. Create at least four Goals for the Company organized by bullet point.
Statement of Purpose
The Statement of Purpose discusses the aim, purpose, and values of your business. It’s typically a short statement from one sentence to several sentences in length. You may find that your Statement of Purpose evolves as your business grows.
For example, Airbnb’s Statement of Purpose is “To live in the world where one day you can feel like you’re home anywhere and not in a home, but truly home, where you belong.” Additionally, Outback Steakhouse’s Statement of Purpose is “We’re the leader of the pack by emphasizing consistently high-quality delicious food delivering a warm, welcoming environment. Our generous portions are moderately priced. Our casual atmosphere couldn’t be more transporting—it’s like you’re right there in the Australian Outback.”
Success Factors
Your Success Factors are the specific advantages your business will have. For example, if your location is a huge advantage for your business, you should be more specific than simply saying “location,” and describe what about your location makes it a key to success, such as visibility, parking spots, drive-thru, or proximity to housing. Your competitors may have similar Success Factors as your business.
Success Factors are different than Advantage in the Markets because typically, the Advantage in the Market is something your competitors cannot replicate. It is a unique advantage or proprietary information, such as a patent. The Advantage in the Market can be added as a key to success. List two to three Success Factors as bullet points.
3. Business Overview
The company overview section, in general, outlines your firm’s triumphs (if you’re currently in business) or why it will be successful (if you’re a startup). Provide information about the company, such as its location, owners, hours of operation, goods, and services, in the first paragraph or paragraphs.
Summary of the Initial Phase (or Company History)
Whether you’re a startup or an established company, the organization of this part will differ. Permits, build-outs, rent, and marketing are just a few of the main expenditures and stages that a company may consider. A well-established corporation will briefly outline its financial success over the last three years.
Table of Startup Funding
Include a chart detailing the products that will be acquired with the funds if you’re drafting a business plan to get financing from an investor or bank. If you’re using the extra funds to buy equipment, for example, make a list of each item of equipment and its cost. Show the sum of all costs at the bottom of the chart, which should equal the desired amount of financing.
Location & Facilities
If you have a physical site or a facility, such as a warehouse, please describe it here. Go through the advantages of your location and the nearby locations in detail. Write about square footage, leases or ownership, the neighborhood, and a quick description of the people, for example.
Ownership of the Business
Briefly mention the Ownership of the Business team and their backgrounds. Show why these owners are likely to be successful in operating this business by providing information such as each owner’s industry experience, previous employers, education, and awards won. This owner’s background will be discussed more in-depth in the management and organization section below.
The advantage in the Market
Ideally, your Advantage in the Market is what your business can do that your competitors cannot. It’s the one big feature that will make your company successful. Many investors are looking for specific Advantages in the Markets, such as patents, proprietary tech, data, and industry relationships. However, if you don’t have these, describe the number one thing your business will do better than competitors, such as quality of products, quality of services, relationships with vendors, or marketing techniques.
4. Products & Services
Because the layout of the goods and services part is determined by what your company offers, it is the most customizable area. Include a Business Plan, which defines how your company produces money, regardless of what you’re offering. Include any future items or services that the company may provide in one, two, or five years.
Business Plan
The Business Plan is essentially how the business makes money. If you have a new type of business or a novel way to produce a product or service, this section is important and needs to be in-depth. For example, if you own a pizza restaurant, you should discuss all the ways your business will earn money. Customers can order at a table inside your restaurant, over the phone, on your website, and using an app like Uber Eats. You may even be able to sell your homemade ranch bottles as well.
Products
If you’re selling tangible items, provide a description in this box. Remember to emphasize both the product’s characteristics and its advantages. If you’re selling umbrellas, for example, you may say they’re composed of nylon, aluminum, and plastic. They have the advantage of keeping you dry in the rain while being tiny.
Services
This is where you’ll talk about the company’s services. Have both categories if your company offers both items and services. Keep in mind that services do not have to be offered for a fee. For example, entertainment such as live music or bar games may be a complimentary service provided by your company.
Fulfillment
It’s critical to clarify how each will be delivered, whether you’re selling items, services, or both. Describe how a service, such as window replacement, will be carried out. What is the source of the glass, how will it be obtained, and how will the window be installed? How will your items be constructed, packaged, and transported if you’re selling them?
Future Products & Services
Outline any new items and services you want to provide following the first launch. Don’t restrict yourself to just offering more of the same thing. If you own a commercial photography business, for example, you may consider hiring a graphic designer to offer a distinct service. You may also express how you want to develop your firm, such as by renting out the apartment next door, providing more services, or selling more items.
5. Market & Analysis of the Industry
This is where you make the case for why your company should flourish, preferably with statistics to back it up. You should research your competition and talk about their issues and triumphs. Remember that this part should persuade the reader as to why your company will succeed.
Segmentation of the Market
Segmentation of the Market is also called your business’ target market. It consists of the customers who are most likely to purchase your products or services. Describe these groups of customers based on demographics, such as age, income, location, and buying habits. Additionally, if you’ll be operating business-to-business (B2B), use characteristics to describe the ideal businesses to which you’ll be selling.
Use market research data to illustrate that those clients are geographically situated near your firm (or are likely to conduct business with you if you’re online) after your target market has been sorted into distinct categories. You may get this information for free from a variety of sources, including the United States Census and ReferenceUSA, which is available in thousands of libraries around the country. If you’re starting a daycare, for example, you’ll want to present statistics on how many families live within a mile radius of your company.
Market Segmentation Strategy
After you’ve defined at least three parts, sketch down the method you’ll employ to attain them. It will most likely be a marketing plan, but it might also be pricing, networking, or strategy for selling. Also, outline the segments’ general thinking (or the inner workings of the firms) that would lead them to do business with you. Describe how families will want to come to your family-friendly restaurant after a long day at the theme park, for example, if you run a restaurant close to a theme park.
Analysis of the Industry
Analyze the business’ industry and explain why it’s a good idea to establish a company in that area, in addition to the target segments. A bank is more likely to offer your company cash if you’re in a booming sector since it’s expected to be in high demand and attract new clients. Use a free service like the Bureau of Labor Statistics or a paid one like Hoovers Industry Research, which offers professionally curated information for over 1,000 sectors.
Competitor Analysis
Wrap up the market and Analysis of the Industry section by analyzing at least five competitors within a five-mile radius (expand the radius, if needed). Create a table with the five competitors and mention their distance from your business (if applicable), challenges, and successes. During your analysis, you’ll want to frame their challenges as something you can improve upon. Persuade your reader that your business will provide superior products and services than the competitors do.
6. Marketing Techniques & Implementation Summary
In the marketing techniques and execution part, you’ll describe your marketing plan and how it’ll be implemented. Give a summary of the subsections below in the first few paragraphs. This part may be lengthier for certain firms than others. A company that relies on eCommerce for sales, for example, would describe its website, social media strategy, online advertising, and email marketing plan. This portion will be shorter for a firm that relies on government contracts and doesn’t conduct any marketing.
Marketing Techniques
Discuss the overall Marketing Techniques for the business. Include any trends within the industry you may take advantage of, such as video or Facebook ads. If applicable, include the advertising strategy and budget, stating specific channels. Mention who in the business will be responsible for overseeing the marketing.
Plan for Traditional Marketing
Within the Marketing Techniques, you may want to include a subsection that includes the business’ plan for traditional marketing. Traditional marketing includes anything not online-related, such as business cards, flyers, local media, direct mail, magazine advertising, and signage. For example, if you own a retail business, like a dog groomer, traditional marketing will most likely be a strong component of your business.
Online Marketing Strategy
An online marketing strategy (also called a web plan) includes using tools like the business’ website, social media, email marketing, and video, and may require several pages. If you’re hiring a company to do any online work, like creating a website or managing social media, briefly describe them and the overall cost (you can elaborate more on costs in the financial data section).
Strategy for Selling
Include a section regarding your sales plan if sales are a significant part of your firm. Include the salesperson’s (or individuals’) position, the methods they’ll use to complete deals with customers, the processes they’ll use to lead follow-up, and the networking events they’ll attend. Also, talk about any training your salespeople will get.
Table of Sales Predictions
A Table of Sales Predictions gives a high-level summary of where you expect your sales and expenses to occur for each of the next three years in business. In the paragraph before the table, state where you expect growth to come from and include a growth percentage rate. The annual sales forecast chart will be broken down further in the financial projections section below.
Strategy for Pricing
In the Strategy for Pricing section, discuss the product (or service) pricing, competitor pricing, sales promotions, and discounts—basically anything related to the pricing of what you sell. You should discuss pricing in relation to product and service quality as well. Consider including an overview of pricing for specific products, e.g., pizza price discounts when ordering a specific number of pizzas for catering.
Milestones
In a business strategy, milestones are usually included in a table. They provide a checklist of key things to do before the firm begins (or expands, if already in business). Include the name, expected start and end dates, cost, the person responsible, and the department responsible for each milestone (or outside company responsible). Make a list of at least seven significant events.
7. Management & Organization Summary
The management and organization overview goes through the history of the company and the personnel strategy in detail. This is an essential area since many investors claim to invest in people rather than corporations. Make the case that you and your team have the expertise and knowledge to make this company a success in this area.
History of Ownership
Discuss the owners’ backgrounds, emphasizing how that history will help the company prosper. If you want to create a sports and outdoors shop, for example, talk about your retail management expertise. If you don’t have any experience running a retail store, try partnering with someone who does. Normally, banks would not lend to someone who has no prior expertise with the sort of company they want to start.
Gaps in the Management Team
If there are any gaps in the management team’s expertise or understanding, make them known. Make a list of the consultants or staff you’ll recruit to fill in the blanks. Investors that are familiar with your sector may see flaws in your business plan, so it’s crucial to point them out without waiting for the investor to bring it up. Recognizing any gaps in your experience gives the impression that you are well-versed in the sector.
Personnel Strategy
The Personnel Strategy outlines every position within your business for at least the next three years. In the opening paragraph, discuss the roles within the company and who will report to whom. Include a table with at least three years of salary projections for each employee in your business. Include a total salary figure at the bottom.
8. Financial Data & Analysis
The most challenging portion of a company plan is the financial data and analysis section. You must anticipate income and spending for the following three years in this area. It also requires a basic understanding of financial statements such as the profit and loss statement, balance sheet, and cash flow statement.
Use the free financial forecasts template from the Service Corp of Retired Executives (SCORE) to fill in your company’s information as you go through the financial data sections below.
Give a summary of the areas below in the first paragraphs of the financial data and analysis section. Discuss the break-even point and expected profit in the first, second, and third years of operation. Include the future balance sheet’s assets and liabilities as well.
If you’re taking a loan from a bank, specify how long the loan will be repaid and from what source. One of the most important things lenders want to know from financial forecasting is whether or not they will be paid back, and how probable that is.
Analysis of the Break-Even Point
The Analysis of the Break-Even Point is the point at which revenue exceeds expenses and a profit occurs. In this section’s opening paragraph, state what the monthly fixed costs will be and what the average percent variable cost is, which is the cost that changes with output. For example, variable costs for the example below increase 8% for every additional dollar made.
Projected Profit & Loss
The profit and loss chart shows the revenue and costs for each month (including startup expenses). The profit and loss table displays the month in which the company will make money. In most cases, your firm should turn a profit during the first year of operation and continue to grow in years two and three. Make sure to keep track of your revenue and spending month by month during the first two years of business. Make a separate chart that displays revenue and spending for the first three years, year by year.
Cash Flow Forecast
The cash flow section shows the business’ incoming and outgoing cash. This is broken down in a month-by-month table and should cover the first two years in business. Cash Flow Forecast is different than the profit and loss projection because it focuses specifically on cash within the business. Cash flow is important because you want cash on hand to meet repayment obligations and unexpected cash needs.
In this section’s introductory paragraph, mention what you plan to do with the excess cash. For example, will you pay down long-term debt, build cash contingency reserves, or reinvest in certificates of deposit or U.S. Treasuries?
Balance Sheet Forecast
The balance sheet depicts the company’s net worth and financial condition at a certain point in time. The balance sheet differs from the profit and loss statement in that it focuses on the company’s assets and liabilities. The income and expenditure statements are the centers of the profit and loss statements. The balance sheet should ideally reflect that your company’s net value is increasing. Prepare a year-by-year balance sheet forecast for the first three years.
Ratios in Business
Ratios in Business (also called financial ratios) are a way to evaluate the performance of your business. It’s helpful to compare your projected Ratios in Business to the industry standard.
For example, you should be aware of your company’s current ratio, which is the ratio of total current assets (cash and other liquid assets) to total current liabilities (short-term debts due in less than a year). Your current ratio is 1:1 if you have $2,000 in current assets and $2,000 in current liabilities.
A 1:1 current ratio indicates that for every $1 in current assets, your company has $1 in current liabilities. Anything less than a 1:1 might signal to lenders and investors that your company would be unable to pay its obligations, which would be a red flag to them.
9. Appendix
The appendix is where you place information about a company that doesn’t fall into any of the sections above. What you write here is mostly determined by the sort of company you’re starting. Any graphic components should be included in the appendix, according to a solid guideline. Consider including a menu and an artist representation of the inside and outside if you’re launching a restaurant.
Consider putting the following elements in your appendix to your business plan:
- Permits for construction
- Plan of the interior
- Agreements and leases
- Documentation for the equipment
- Agreements with suppliers
- Documents of incorporation
- Permits and licenses
- Trademarks
- Coverage in the media
- Promotional materials
- Recommendation letters
An appendix is not required in a business plan, but it is highly recommended for additional persuasion. Often, documents like Coverage in the media, agreements, and Documentation for the equipment show the investor and banker you’re serious about the business. If your appendix becomes too long, more than 10 pages, consider creating a second Contents Table of Contents placed before the appendix.
Financial Forecasts in Great Detail
The financial projections are typically a year-by-year breakdown for three years in the future. However, bankers and investors want to see the first two years broken down month-by-month for at least the profit and loss statement, balance sheet, cash flow, and personnel strategy. Put the more detailed projections in the appendix. Typically, you can simply print out the Excel sheet in smaller font and include it in the appendix. You don’t need to create additional charts for the appendix.
Frequently Asked Questions (FAQs)
The most commonly asked questions regarding how to construct a business plan are answered in this section.
What should be included in a business plan?
The contents of a business plan are determined by the aim of the document. You’ll need most of the parts above if you’re looking for money from a bank or an investor. If you only have time to complete one component, make it the financial estimates. Investors and lenders want to see your financials first, so your research and business details are excellent. The study required to obtain the predicted statistics is time-consuming, but it will assist you in preparing for the business’s debut.
How do you develop a Startup business plan?
The business plan for a startup is similar to a business plan for an established business. The startup business plan will include startup costs, which will be listed by item and factored into the financial projections. Additionally, since your business hasn’t proven it can be successful yet, you may need additional information about the ownership, Business Plan, market, and industry to convince the reader your business will succeed.
How long does a business plan take to write?
A modest business plan could just take a few hours to complete. However, researching the revenue and expenditures connected with operating your firm for the business plan given with this form, which includes financial estimates, might take more than 60 hours. You must also structure those prices into a chart; it is recommended practice to provide facts in the form of easy-to-understand charts.
Is it difficult to write a business plan?
Yes, creating a business plan for funding from a bank or investor is hard. Unless you have a background in financial statements, the financial projections are difficult for the average business owner.
Conclusion
Every type of business, whether it’s a side hustle or a multimillion-dollar business, needs to have a business plan. Remember to get feedback on your business plan from business employees and associates. If necessary, have them sign an NDA before they review the plan.
