Writing a Business Plan
When starting a business, one of the best investments you can make is that of time. While a business plan may take some time to write, a cogent business plan is the key to any successful new business.
In most scenarios, business plans generally project the route a company intends to take for a 5-10 year period. These plans are never set in stone, but do offer an objective view of your business’s initial intentions that might be lost in the later years. By seeing your company’s plan on paper, it allows you to design and construct a strategy for creating your business venture serving as a guide to set up and run your company correctly from the start. Furthermore, if you are seeking any type of financing, either from a bank, private investor or from a Venture Capitalist, a Business Plan helps to demonstrate the owners' ability to plan, organize and manage a successful business venture.
Your business plan will be composed of several separate parts. The two most important will be your company description and executive summary. When you begin to write your plan, you want to start with a company description that targets a specific consumer. Everything from the nature of your business to why your business will succeed over others should be included here. Make sure that the advantages of targeting the intended consumer is also explained in detail in this section. This is the core of your plan and it needs to be able to capture a future investor’s interest.
If you are worried about your lack of experience as a business owner, use the executive summary to highlight your knowledge of the market. Most new business plans should include your professional experience, as well as the market research that led you to start your business in this particular field. This will show your reader that you are equipped to tackle the task at hand. You will soon see that a well thought-out business plan is an invaluable tool you to which you will return, again and again, whenever there is a fork in the road.
Outline of a Successful Business Plan
Focus on your experience and background as well as the decisions that led you to start this particular enterprise. Demonstrate that you have done thorough market analysis. Include information about a need or gap in your target market, and how your particular solutions can fill it. Convince the reader that you can succeed in your target market, then address your future plans. It’s important to remember that this can be edited at any time and updated as needed.
- Intended industry
- Role of technology/ social media
- Market size
- How your business will effect this industry
- How will you incorporate?
- Historic growth rate as well as other trends and characteristics (e.g., life cycle stage, projected growth rate). Next, list the major customer groups within your industry.
- Describe the nature of your business and list the marketplace needs that you are trying to satisfy.
- Explain how your products and services meet these needs.
- List the specific consumers, organizations or businesses that your will serve.
- Explain the competitive advantages that you believe will make your business a success such as your location, expert personnel, efficient operations, or ability to bring value to your customers.
- Legal structure of your business along with the subsequent ownership information
Market Analysis and Research
- What are the critical needs of your potential customers? Are those needs being met? What are the demographics of the group and where are they located? Are there any seasonal or cyclical purchasing trends that may impact your business?
- Size of the primary target market – In addition to the size of your market, what data can you include about the annual purchases your market makes in your industry? What is the forecasted market growth for this group?
- How much market share can you gain? – What is the market share percentage and number of customers you expect to obtain in a defined geographic area? Explain the logic behind your calculation.
- Pricing and gross margin targets – Define your pricing structure, gross margin levels, and any discount that you plan to use.
- When you include information about any of the market tests or research studies you have completed, be sure to focus only on the results of these tests. Any other details should be included in the appendix.
- How much time do you have to capitalize on your intended market?
- Are there any special licenses, copyrights or patents that will need to be secured?
- Market share
- Strengths and weaknesses
- How important is your target market to your competitors?
- What is your window of opportunity to enter the market?
- What are your specific Marketing Strategies?
- What are the prices to be charged? How did these numbers come about?
- How do they compare to the competitor pricing?
- If the price is below competition, how will you maintain profitability?
- Where will you market?
- What do you intend to spend on marketing?
- How will you get your product to the market? Identify all costs here
- Your company's organizational structure including details about the ownership of your company, profiles of your management team, responsibilities of each individual and the qualifications of your board of directors.
- Who's on the board (if you have an advisory board) and how you intend to keep them there.
- What kind of salary and benefits package do you have for employees? Include incentives and promotional opportunities here.
- Ownership Information
- Percentage ownership
- Extent of involvement with the company
- Forms of ownership (i.e., common stock, preferred stock, general partner, limited partner)
- Outstanding equity equivalents (i.e., options, warrants, convertible debt)
- Common stock (i.e., authorized or issued)
- Management Profiles
- Compensation basis and levels (make sure these are reasonable -- not too high or too low)
- Board of Directors' Qualifications
- What is the main source of funding?
- Balance Sheet for 3 - 5 years.
- Accounts Receivable
- Accounts Payable
- Short Term Debt
- Long Term Debt
- Owners Equity
- Founders Capital
- Additional Paid in Capital
- Retained Earnings
- Payment on Loans
- How long will it be before you start turning a profit?
- Most firms have a negative cash flow during the first year.
- Do you have enough reserves to hold you over?
- Monthly versus cumulative break-even.
Risk Management Plan
- What are your risks? What are common risks in every business? Include how you can tackle these risks
- Are there any barriers that may hinder you as you enter the market?
- Are there any indirect or secondary competitors who may impact your success?
- What barriers to market are there (e.g., changing technology, high investment cost, lack of quality personnel)?
- Regulatory Restrictions – Include any customer or governmental regulatory requirements affecting your business, and how you’ll comply. Also, cite any operational or cost impact the compliance process will have on your business.