How to Write a Business Plan

How to Write a Business Plan

In the old days when you wrote a Business Plan the shear volume of it was important to plunk down on a Banker’s desk.  It showed that you have thought through many of the details and showed your due diligence.

Today however, brevity is appreciated.  The reader wants to get right to the heart of the matter; what are you looking to do, how much can it make, how are you going to capture the market, and who are the key people involved.  Regardless of the order you provide this information this is probably the order they will read it.

Officially, the components of a full-blown Business Plan are as follows:

•  Executive Summary
  The first and most important section, summarizing everything you hope to accomplish with your business.
• Company Legal Description
  Defines your company’s legal status.
• Products and Services
  Lays out the products and/or services you plan to offer to customers and clients.
• Marketing Plan
  Explains your plan for reaching, acquiring, and retaining customers for your business.
• Operations Plan
  Shows that you’ve thought through the logistics of actually operating your company, including hiring staff, shipping, storage, and more.
• Organization and Management
  The organizational structure of your company — what does staffing look like? Who manages which teams?
• Bios of Key Management
  Highlights the experience and competence of the key leaders in your company.
• Personnel Plan
  A deeper dive into your plan for hiring and retaining the best staff to manage and run your company.
• Intellectual Property and other Key Assets
  What are the key assets your company has ownership of? Even if it’s just an idea that you have legal claim to, list it here.
• Financial Plan
  Lays out the cost of everything mentioned in the previous sections, plus your plan for funding to cover those costs.
• Appendix
  Nitty gritty details that you can reference in other sections of your plan. This will include tables, charts, budgets, and other “hard” figures.

However today we will focus on the four important parts previously mentioned, and keep in mind, what they call the One-Page Business Plan, while it is an exaggeration of how short it should be, is becoming more and more popular.  Therefore, if you focus on these four parts and add others as desired, then you should be fine for any lender or investor.

Executive Summary

The Executive Summary is right at the front of the document and the first thing the reader sees.  In this section we want to educate the reader.

• What will the business will be selling.
• Why you are different from your competitors.
• How you will capture your share of the marketplace.
• The size and scope of the business.
• How much capital you are looking for.
• What is in this for the lender or investor.

Try to avoid the personal stories and history of how and why you found yourself wanting to open this business.  Instead try to engage the reader, educate them about this business, and then tell them what is in it for them.

Financial Plan

Although the Financial Plan is usually found towards the end of the document it will most likely be the next section the reader flips to, so spend some time to make them easy to read, comprehensive, and compelling.

If you have not read the blog of Feasibility Analysis, called “Ideas are Easy”, now would be a good time to go to Resources-Development.com to see why I recommend doing a complete Feasibility Analysis BEFORE writing a business plan, using variables that allow you to dial in the optimal business model, size, offering, pricing, etc.

From that Feasibility Study you will pull from it; a Proforma first year month-by-month P&L, a 3/5-year Proforma P&L, a Break-Even Analysis, Itemized list for Cost of Startup, Cash Flow analysis, and Contribution Margin Analysis (or something that shows just how profitable you will be) for inclusion into the business plan.

Keep in mind you want to be conservative in your projections, but NOT TOO conservative, as your reader will probably discount your numbers.

Marketing Plan

If we have done our work properly the reader will be saying to themselves “wow, that looks profitable.  But I wonder how they are going to get all those sales!”, so this is usually the next section they will read.

Providing marketing demographics can be useful in showing just how little of the population you need to sell to in order to reach your numbers BUT MORE IMPORTANTLY you want to show them:

• Why your offering will be more enticing to the buyer.
• What makes you special in the marketplace.
• How do you plan to reach those buyers.
• What your message to those buyers will be.

Do not be afraid to be specific and detailed as to your plans to reach and sell your market.  Many prospective Business Owners have a “if I build it, they will come” mentality, and this thinking is deadly, even with a great location or product.

If there is anyplace in the Business Plan that you need to show you know what you are talking about, this is the place.  This is the place that proves you have something MORE than just a good idea.  Provide sample marketing materials if possible.

Bios of Key Management

Also located toward the back of the document, and while it would be tempting to simply paste everyone’s resume into this section, I would advise that you do some serious editing and boil each persons experience down to the things that make them well suited for THIS business.

I have done several Business Plans with only these four components, I’ve also seen them about as small as this article, however sprinkling in other sections as needed and a few pages longer is more common.

Also, do not underestimate the power of artwork that shows your products, location, etc., as well as charts and graphs that depict your financials.

Please remember that a good Business Plan is a sales/marketing document.  Its purpose is to sell the lender or investor that you are a great investment, that you should have plenty of cashflow to pay back the loan or pay dividends, and that you will make them look good.

It is not about YOUR story, it is not about YOUR needs, it is about how you can make money for THEM and solve a problem that THEY have.

I invite you to reach out to us if you have questions, or you find yourself overwhelmed or needing help in this startup process.

Skip Williams

[email protected]