Business Plans
n_header_1800x270
Business Plans

If you are starting a business and needing funding, you will need to create a business plan to show banks, investors and “angels”. Even if you are starting a business with your own capital, it is very helpful to have a business plan to guide you. One thing to remember, a business plan needs to be updated frequently – it’s a guide that gives direction but also requires input. One of the best reasons to write a business plan is that it forces you to really think through your business in a logical fashion and to do the research needed to make sure this is the right business for you.

By Robert Nunnally


A business plan has many parts, so you will first need to make a cover sheet for presentation with the business name, the owners’ names, and contact information. Then comes the following sections:

  • Table of Contents – this allows you and your investors to know what is coming up in the document, where to find the information needed, and for you, where to go to update information
  • Executive Summary – this part is usually written last and needs to be short (no more than two pages)
    • It needs to cover the essential elements of the business: product or service, customers, owners, future predictions
    • It needs to be professional, concise and complete
    • If the business are applying for financing, then it needs to tell how the money will be used and how the business will pay it back
  • General Company Description – what is this business going to be, what will you do? This section contains the following parts:
    • Mission statement – explaining the business’s reason for being and guiding principles
    • Company goals and objectives – where do you want the business to be in 5, 10 years and what are the benchmarks you will use to measure progress towards those goals
    • Business philosophy – what’s important to the owners in the business?
    • Customers – briefly describe your customers
    • Industry – briefly describe the industry this business is part of and how that industry is doing
    • Strengths/competencies – describe the company’s core strengths and competencies
    • Legal form of ownership – is the company a sole proprietorship, partnership, corporation, limited liability corporation, an international business and why
  • Products and Services – describe in-depth the business’s products and services including technical specifications, drawings, and other such items in an appendix, include:
    • What factors will give your business a competitive advantage? Disadvantage?
    • What is your pricing or fee structure
  • Marketing Plan – what has your market research shown and how will you address those issues, including:
    • Statistics, numbers, sources, graphs
    • Economics – give facts about your industry and your specific type of business, including market share potential
      • Current Demand – what is the current demand in your target market?
      • Trends – what are current trends in your target market?
      • Growth Potential – what opportunities are there for your business to grow?
      • Barriers – what barriers does your new business face and how will you over come them
      • How will potential changes affect your company?
    • Product – describe your products and services from your target market’s point of view
    • Features and Benefits – here you list all of your major products and services and for each one
      • Describe it’s most important feature and what makes it special
      • Describe the benefits this product/service will bring the customer
      • What after sales services will you provide
    • Customers – identify your target market, their characteristics/demographics
    • Competition – what companies will compete with you – list them
      • Use a competitive analysis (need link) to compare your company with your competitors
    • Niche – in one paragraph describe your corner of the market
    • Strategy – outline your marketing strategy keeping the above in mind
    • Promotion – how will you get the work out to your target market?
      • What’s your image?
      • What methods are you going to use?
      • How will you identify repeat customers?
    • Promotional Budget – how much will you spend on marketing for launch, before startup and ongoing
    • Pricing – explain how you set your pricing and does this pricing strategy fit with your competitive analysis
      • How important is competitive pricing to your target market?
    • Proposed Location – is your location important to your customers?
      • Is it convenient?
      • Is it consistent with your image?
    • Distribution Channels – how are you going to sell your products/services?
    • Sales Forecast – use a sales forecast spreadsheet (need link) to prepare a month-by-month projection based on your research
      • You may decide to do two: best and worst case scenarios
  • Operational Plan – explain the daily operations of your business
    • Production – how and where are your products and services produced
    • Location – describe the location you envision for your business
      • Physical description
      • Access
      • Costs
    • Legal Environment – describe the licensing, permitting, regulations, insurance coverage, trademark and other legal issues involved in your business
    • Personnel – describe the number of employees, the types of labor needed, the pay structure, training, and include draft job descriptions for your employees
      • Will you use contract workers for specific purposes?
    • Inventory – what kind, how much, rate of turnover, lead-time for ordering, etc.
    • Suppliers – identify key suppliers
      • Discuss what you will do when there are shortages or delivery problems
    • Credit Policies – will you sell your products and services on credit?
      • What are your policies
      • Accounts receivable – if you extend credit, you will need a way to track payments and aging them over time
      • What is your policy for dealing with slow-paying customers
      • You will also need a way to track what you owe to suppliers and aging those payments over time
  • Management and Organization – who will manage the business on a day-to-day basis and what is that person’s experience, competencies
    • Is there a continuation plan?
    • If you have more than a dozen employees, you should draw up an organizational chart
    • Include key position descriptions
    • Who are your professional and advisory support contacts
  • Personal Financial Statement – needs to be included for each owner, including
    • Assets and liabilities
    • Personal net worth
  • Startup Expenses and Capitalization – how are you going to finance your startup
    • Have you planned for contingencies
    • Explain your research and forecasts
    • Give sources, amounts, and terms of proposed loans
  • Financial Plan – this should include:
    • A 12-month profit and loss projection
    • A four-year profit and loss projection (optional)
    • A cash-flow projection
    • A projected balance sheet
    • A break-even calculation
  • Appendices – can include:
    • Brochures and advertising materials
    • Industry studies
    • Location information
    • Blueprints if building at a location
    • Articles
    • Lists of equipment needed (owned and to be purchased)
    • Leases and contracts
    • Letters of support from future customers
    • Market research studies
    • List of assets that can be collateralized for a loan

REFINING THE PLAN

For Bankers: they want assurance of repayment, so include:
  • Amount of loan
  • How the funds will be used
  • How will this help your business succeed
  • Preferred repayment terms
  • Collateral

For Investors: they are looking for growth and rewards, so include:
  • Funds needed short-term
  • Funds needed in the next two to five years
  • How will the business use the funds and how will this lead to growth
  • Estimated return on investment
  • Exit strategies for investors
  • What percentage of ownership will you give up to investors
  • Benchmarks or conditions you will accept
  • Financial reporting required by investors
  • Involvement of the investors on the board or in management