No business should be born before you write a business plan.
Writing one helps you to validate your business idea, better understand your target market and audience, determine profitability, and much more.
Business plans are also essential if you want to attract investors, get a bank loan, or bring top talent to your team.
There are usually ten sections in a traditional business plan; however, it’s not mandatory to add them all. The sections you include, and the amount of detail you need to provide for each will depend on your business and if you need outside funding or not.
Let’s explore each section in more detail:
The Executive Summary
The executive summary appears first on a business plan. However, it’s usually written after all the other parts of the plan are complete.
The goal of the summary is to provide potential investors, financial institutions, or partners with a high-level overview of your business plan.
There is no need to go into great detail in your executive plan – keep it to no more than two pages. Keep each point brief, be clear and concise – use graphs when highlighting your financials.
An executive summary typically includes:
A Mission statement – Your mission statement is like an elevator pitch it explains in a few sentences the reason why your business exists.
Basic company information – State the location of your business, the names of the owners and their roles, and the number of employees.
Products or Services – Outline the products or services you offer, and describe the problem they solve or the need the address in the market.
Key Financials – Highlight your key financials, such as projected startup and operating costs, projected sales, and expected profits.
Funding Needs – If you require an investment or loan, state how much you need.
Future Plans – Outline where you see your business in the future – what are your growth plans.
General Company Overview
This section of your business plan is where you provide detailed information about your company. Some aspects of the company overview are similar to what you wrote in the executive summary, but you give a lot more detail.
The company overview should:
- Describe what your business does
- Outline your business goals and vision
- Describe the problems your business solves, or the need it addresses in the market.
- Explain what gives your business the edge in the market – your competitive advantages.
- State the legal structure of your business – L.L.C., S-Corp, C-Corp, or other.
Market analysis is a crucial part of your business plan. It provides you with a deep understanding of your target market, your ideal customers, and the competitive landscape.
To complete this section, you will first need to conduct market and competitor research.
The market analysis section typically contains:
Target Market – Provide background information about the target market your business will enter. Include details about the size of the market, growth trends, future prospects, and any other pertinent information.
Target Audience – Describe your ideal customers. Include information about the demographic makeup, income level, interests, characteristics, behaviors, needs, and wants.
The competition – Identify your main competitors and describe how they are currently serving the market. Also, highlight their strengths and weaknesses.
Market Share – Understanding how much market share you can take is key to understanding the potential profitability of your business. You need to be realistic in your expectations and be able to explain your estimations.
Barriers to Entry: Identify barriers that prevent you from entering the market place and offer solutions on how you will overcome them.
In the business organization section of your business plan, provide detailed information about your company, management team, and key employees.
You should provide the following information:
Business Structure – In the company overview section, you already mentioned the legal structure of your business – L.L.C., S-Corp, or C-Corp, etc. In this section, go into more detail, explain why you choose that structure.
Ownership – If you have partners, detail what percentage of the business they own, and how much ownership control they have.
Organizational Structure – Outline the organizational structure of your management team (and org chart can be useful here). Include a bio for each that details their experiences, expertise, and qualities.
Key Employees – Name any key employees that give your business an edge, and provide a bio of each that details their experiences, expertise, and qualities.
Business Location – Include details of your business location and why you choose that location.
Products & Services
This is the section of the business plan that you’ve probably been waiting for – you finally get to talk about your products or services.
In this section include:
Products or Service Line – Describe in detail the product or service you offer and how it solves the issues or addresses the needs of your target audience. Also, explain why it’s better than competing products and services on the market.
Development & Research – If your product or service is still in the research and development phase, explain the current status and when you expect it to reach the market.
Product or Service Life Cycle – If your product or service has a fixed life cycle then breakdown the timeline of the various stages.
Intellectual Property – If your product or service require copyright, patents, intellectual property, or trademark filings provide details on where they stand in this process.
Marketing & Sales Plan
You might have the best products or services in the world. However, if you don’t have a marketing and sales plan, then you won’t go very far.
Most of the information contained in this section of your business, you will have gleaned from the market research phase.
In the market and sales plan include:
Positioning: Explain how you will position your brand in the market place: How your business differentiates itself – in the eyes of your target market – from the competition.
Pricing Model: Provide detail on your pricing model. How you price your products and services has a significant impact on not just sales but also how you position your brand.
Marketing Channels: Give an overview of your marketing strategy. Outline the marketing channels and methods you will use to attract customers, and explain why you choose these channels and methods.
Sales Channels: Describe how you will sell your products or services to customers – through an online store, in-store, with cold-calling, through trade shows, etc.
If your business requires outside funding, this is the section where you breakdown your requirements. You can skip this section of the business plan if you don’t need financing.
In this section include:
The Amount: State the amount of funding you required
Use of Funds: Give a detailed description of how you will spend the money – equipment, development, salaries, etc. – and how much you need for each.
Type of Funding: If seeking investment from investors state the kind of funding you require – equity stake, loan, or convertible debt. However, investors will probably have their own terms so be open to negotiating.
Repayments Plan: Include details on how you plan to repay the debt (if a loan) this should be a realistic plan; don’t underestimate how long it will take.
You can’t build and grow a successful business without a solid financial plan. Your financial will help you budget and focus your finances where they are needed most.
It will also show investors and lending institution that your business is stable and financially viable.
This section usually includes:
Sales projections: Breakdown your monthly sales and revenue projections for twelve months (your first year in business) and create yearly forecasts for the following three to five years.
Cost of Goods Sold: Also breakdown your Cost of Goods Sold (COGS). Your COGS are the costs of the materials that you need to produce each of your product and services.
Personnel Costs: State how much you are paying on employee salaries. Include both the direct salary costs and the related costs such as taxes, insurance, or social security contributions.
Income Statement: An income statement calculates your outgoings vs. incomings – it shows if your business will operate at a profit or loss.
Cash Flow Statement: A cash flow statement helps you manage your finances so that you can cover the monthly costs associated with running your business
Balance Sheet: A balance sheet shows the current financial status of business – it details all the assets owned by the business, as well as the liabilities and equity shares.
Milestones & Goals
A business plan is not complete without a roadmap that details the key milestones and goals that mark the progress and growth of your business. Using a S.M.A.R.T. goal formula is an excellent way to approach this.
In this section:
- Outline all the significant milestones you need to hit and the goals you have to achieve to take your business through each stage of growth and development
- Outline the metrics you will use to measure the progress of each the milestones and goals
To wrap up your business plan, provide an appendix of supporting documents or other materials such as credit histories, references, permits, legal documents, etc.
Now it’s your turn…
You don’t have to spend years writing a business plan. But, having one is essential if you hope to build a successful business. A well thought out business plan will give you clarity on your business and insights on how to take it forward.