A business plan is a written description of your business’s future. It is a document that describes what you plan to do and how you plan to do it. It is used by firms that are trying to attract key investors, prospects for new businesses, deals with suppliers, asking for loans or simply trying to understand how to manage their business better.
A good business plan consists of ten key components: Executive Summary, Company Description, Industry analysis, Market and Competition, Products or Services, Marketing and Sales, Management and Organization, Operations, Funding requests & Financials.
1. Executive Summary: By definition, this entails summarizing the elements of your business. 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?
Your summary should highlight the important financial points of the business including sales, profits, cash flows and return on investments. Clearly state the capital needed to start the business and to expand it. It should state clearly how much you want, how you intend to get it, precisely how you are going to use it, and how the money will make your business more profitable and thereby ensure repayment.
2. Company Description: What business will you be in? What will you do? Many companies have a brief statement of 30 words or sometimes fewer, explaining their reason for existence and their guiding principles. Company goals and objectives can also be included here.
3. Industry Analysis: It should include a description of the industry, the current size of the industry, growth rate, trends and the major customer groups within the industry. It should provide a picture of your industry and of the position of your business within the larger framework.
4. Market and Competition: What products and companies will compete with you? List your major competitors (names and addresses). Will they compete with you across the board, or just for certain products, certain customers, or in certain locations?
Will you be having indirect competitors? How will your products or services compare with the competition?
5. Products or Services: What are you selling? In this section, describe your service or product, emphasizing the benefits to potential and current customers. What factors will give you competitive advantages or disadvantages? What are the pricing, fee, or leasing structures of your products and services?
6. Marketing and Sales: This section deals with how to market your products or services with the best positioning and to forecast your sales. In this section, you should first define your marketing strategy-how you will penetrate the market, strategies for growing your business, channels of distribution strategy (distributors, retailers), and your communication strategies-how you are going to reach the customer.
7. Management and Organization: This section should include your company’s organizational structure, details about ownership of your company, profile of your management team, and the qualifications of your board of directors.
If you’ll have more than 10 employees, create an organizational chart showing the management hierarchy and who is responsible for key functions. Include position descriptions for key employees. If you are seeking loans or investors, include resumes of owners and key employees.
8. Operations: Explain the daily operation of the business, its location, equipment, people, processes, and surrounding environment. How and where are your products or services produced? What qualities do you need in a location? Describe the type of location you’ll have (amount of space, type of building).
9. Funding Requests: In this section, you need to talk about the amount of funding you need to start or expand your business. Include your current and future funding requirements. How would you get these funds- will you take a loan? If yes, for what period? How will you use the funds? Will you use it for capital expenditure or acquisitions?
Make sure you include any strategic information related to your business that may have an impact on your financial position in the future, say going public with your company or being acquired by another company. This is extremely important to future creditors, since it would directly impact your ability to repay the loan.
10. Financials: In this section, you need to write about prospective financial data. Creditors will want to see what you expect your company to be able to do within the next few years. Each year, the document should include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. Make sure that your projections match your funding requests: creditors will be on the lookout for inconsistencies. Include a short analysis of your financial information.
Despite all the work that has gone into creating an impressive presentation, typos, missing words, poor sentence construction, and figures that don’t add up become a significant part of the first impression made on a reviewer.
Important Points to Remember:
- An accurate and systematically organized text conveys professionalism and is much more likely to be regarded as credible
- Don’t necessarily try to balance the material from section to section. Place your emphasis in the proper perspective and accent the features that are most important for your business
- Always include a cover letter with your business plan, because it may get passed on to other staff members who won’t know about your venture
- As pictures speak louder than words, include graphs and charts where appropriate
Written by Kirti Desai for Chillibreeze