Many entrepreneurs write a business plan only when they need to secure financing. However, a business plan isn’t just a fund-raising tool. It’s an invaluable roadmap for launching and growing your business.
Writing out your business plan forces you to review everything at once: your value proposition, marketing assumptions, operations plan, financial plan and staffing plan. This will answer the question on where you want your business to go and how you’ll get there.
Writing an effective business plan is easier if you take time before starting the writing process. Conduct your research and gather the information you need to incorporate into it. Entrepreneurs and business experts recommend researching and gathering information on the following:
A business plan can come in all shapes and sizes and what you choose to include in it usually depends on your audience, the question it seeks to answer or the problem it seeks to resolve, and your personal preferences. With that said, they also usually contain the following common elements:
The executive summary is an overview of the key points contained in your business plan. It always appears first in the document although it’s recommended that you write it last. Its purpose is to educate and inform the reader about the company. It should explain where the company is at the present time, where it is going and how it plans to be successful. If you prepared the plan for an external audience, such as investors or bankers, the executive summary is the first opportunity for you to engage the interest of the reader.
Your executive summary should include the following information:
This section of the business plan is an overview of the company. This includes the company’s legal structure, its owners and management, a brief company history, information about the products or services it offers, markets the company will serve and other information to demonstrate how the company plans to introduce its product into the marketplace.
The market analysis section of your business plan should illustrate your industry and market knowledge as well as any of your research findings and conclusions.
The following information should be included in your Market Analysis:
The marketing strategy section of your business plan describes the activities you will use to promote and sell your product or service.
An overall marketing strategy should include these four strategies:
The operations and management plan is designed to describe just how your business functions on a continuing basis. This section should also include your company’s organizational structure, details about the ownership of your company, profiles of your management team, and the qualifications of your board of directors.
This section of the business plan provides readers with a picture of where your company has been and where it is going from the point of view of its finances. If you have an established business, you should supply historical data related to your company’s performance. Banks, venture capitalists and other lenders usually request data for the last three to five years, depending on the length of time you have been in business.
Financial forecasts should include the following documents:
Your forecasts should cover a range of scenarios, and you should include the contingency plans you’ve developed to offset any risks. You can also review benchmarks and averages for your type of business and discuss your business’ position.
An appendix usually contains extra documents such as tax returns, your resume, research, leases or contracts, letters of recommendation, etc.
Note that business planning is an ongoing business activity. You should revise your business plan as circumstances change to keep it updated and modify it for different readers, such as employees and lenders.