For new business owners and seasoned entrepreneurs alike, crafting and making use of a business plan could be the difference between a success and a fail.
Your business plan, if done correctly, is the perfect guide to properly starting and managing your business—and it’s tailored to your company’s exact needs.
Here are the key ingredients to a traditional business plan.
The executive summary isn’t just a basic introduction to your business—it’s where you hook your reader and give them a reason to believe your business will be a success.
Here is where you briefly go over the company’s mission statement, services and products, financial plan, and other key information before diving deep into the details later in your business plan.
Tip: Write your executive summary last! Yes, it’s the leading page of your business plan, but because it requires you to pull information from the rest of the document, writing it last will help you clearly and confidently highlight the key points since you’ve already gone in-depth.
Every good product and service solves a problem. What problem does your company solve? What makes your team better than the rest? Can you go into detail about your strengths?
Your company description should clearly and thoroughly answer these questions, plus some. Anyone reading your company description should have a complete understanding of your company’s ins and outs.
Tip: Get specific. Everything from your company’s goals to location and opening date should be included in your company description. Don’t skimp on the details!
This section asks you to give a full rundown on both your competitors and potential customers. You will need to know both of them from the inside out if you’re going to have a fighting chance in your respective industry.
For your customers, you will need to know personal details such as their general interests, income, education level, and even race, age, and location. For your competitors, look at their strengths and weaknesses and then see how your company stacks up against them.
Tip: On average, market research takes five weeks to conduct. Diversify your research methods and sources in order to get the best data for your analysis.
Organization and Management
Organizational structure is important because it gives your reader an idea of how your company will be run. The positions you offer and the people you choose to fill them are important because both aspects contribute to the company’s overall strength and efficiency.
According to the SBA, this is also the time to talk about the legal structure of your company as well:
“Describe the legal structure of your business. State whether you have or intend to incorporate your business as a C or an S corporation, form a general or limited partnership, or if you’re a sole proprietor or LLC.”
Tip: Instead of writing full paragraphs about who does what within your company, create a chart that includes each person’s experience and qualifications.
Service or Product Line
The service or product line section of your business plan is meant to describe the products and/or services your business offers with a focus on the value it creates for the customer.
While this part may be the easiest of all sections, you still need to give a thorough breakdown of what’s being sold. The SBA recommends you include important documentation as well:
“Share your plans for intellectual property, like copyright or patent filings. If you’re doing research and development for your service or product, explain it in detail.”
Tip: You have the opportunity to make your product or service stand out! Other businesses in your industry may be doing the same thing, but there’s a reason why it’s better when your company does it. Don’t be afraid to flex your value.
Marketing and Sales
Using what you learned from your market analysis, your marketing and sales section asks you to describe the strategies you will use to bring in and retain customers.
Describing your marketing strategy is one of the more distinctive aspects of your business plan because it’s usually a combination of multiple methods and will most definitely change and evolve over time.
This section is dedicated to describing how you will effectively find your potential customers and successfully make a sale.
Tip: If you’re struggling with forming the basis of your marketing and sales strategy, refer to the 5 P’s of marketing: Product, Price, Place, Promotion, and People. These five categories will at the very least help you get a proper outline going.
Your funding request is a crucial part of securing loans and grants from lenders. The objective is to outline what you will use the funding for, such as merchandise, equipment, utilities, and other business-related expenses.
You will have to get specific about what you will use it for and because funding requests typically involve large sums of money, be prepared to talk in-depth about 3-5 years’ worth of company expenses.
Tip: Familiarize yourself with debt vs equity financing. Debt financing involves borrowing money that you eventually payback, while equity financing involves selling a portion of the company.
Determining early on which option is right for your business will help you craft the right funding request.
The ‘financial projections’ section should add some strength to your funding request. This is where you describe your financial goals, 5-year financial outlook, and ultimately convince the reader that your company has the potential to succeed and may be worth investing in. According to the SBA, there are a few different elements you should include in your projections:
“Provide a prospective financial outlook for the next five years. Include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. For the first year, be even more specific and use quarterly — or even monthly — projections. Make sure to clearly explain your projections, and match them to your funding requests.”
Tip: The best way to organize the financial portion of your business plan is to use graphs and charts so that your data is easy to read and understand.
If you’ve successfully made it to the appendix, congratulations! The hard part is out of the way and you can pat yourself on the back. Now all you have to do is include important supplemental materials such as legal documents, reference letters, licenses, permits, and the like.