If you want to start a business, it is important that you have a good plan to help you along. A business plan is especially important if you plan to seek funding from an outside source. Before a bank — or almost anyone else — is likely to take a risk on funding your business, someone will want to see that you have a plan for success.
As you create your business plan, it is important to cover the essential points of your idea, and to lay out benchmarks that you hope to achieve. Additionally, you will want to show that you have thought about your market, and given thought to how your product or service will result in eventual profitability. Here are 7 sections to include when you write your business plan:
1. Executive Summary
This is your business plan, in essentials. Your executive summary should be between two and four pages long. It offers insight into your general business strategy, and summarizes your business model. An executive summary should clearly define your ideas and goals. No need for a great deal of detail; that comes later. But this section needs to be polished. Even though the executive summary is often presented first, writing it last can be beneficial, since you will have a better idea of what to include, and how to explain your ideas concisely.
2. Company Origins and Goals
A short section on your company’s origins should be included. Explain why you want to start this business, and how you came up with the idea for the business. You should also be able to communicate the goals you have for your business. What do you want to accomplish in the short-term? The long-term? What do you expect your primary customers to get out of the product or service? A few paragraphs on why you are starting the business, and what you hope to accomplish are a good idea.
3. Management Team
Name your management team, and provide background information. You should also include expected responsibilities. If you can show capability in your management team, it will go a long way toward helping you get the funding you need.
4. Product or Service, and It’s Market Potential
Next, you should describe the product or service that you want to provide. Make sure you include information about how it is different from similar offerings on the market (or how it is completely new). This section should also describe the market potential of your product or service. Describe whether the market is local or more widespread. Offer insight into whether you will operate a brick and mortar operation or an online business (or both). You can do some research online to find out what sort of demand you would be filling, and the customer base you would serve. You want to be able to show that there is demand for your idea.
5. Marketing Strategy
How will your potential customers learn about your product or service? Your business plan should include marketing ideas, and the strategy you hope to follow. Lay out your plan in terms of offline media advertising, as well as online media advertising. If you have a social media plan, describe that. Also, explain how you hope to use search methods to help you market your product or service.
6. Five Year Projection
Take the time to make a realistic financial forecast for your company. Your business should have a five year projection. There are formulas that can be used with spreadsheets to help you project the likely revenue from your business. Be realistic in your goals. You can use this section to breakdown your projected startup costs, and where you will get the funding (including startup loans), and what kinds of bank accounts you might open. It might be worth it to get professional help with the financial modeling part of this section, especially if you are not well-versed in the process of financial modeling.
7. Your Exit Strategy
Even though you don’t want to think about it, you will likely need an exit strategy as part of your business plan. You need to consider what indications would be present for you to call it quits with your idea. Lay out the steps that would be taken, and the signs that it’s time to slow down. You can consider management wishes, poor market outcomes, or a certain amount of losses.
[Editor’s Note: There are many software options available that make writing a business plan hassle free. I have personally used the Business Plan Pro software from Palo Alto and can wholeheartedly recommend it. One of the main stumbling blocks for a new business owner is making financial projections, specially if the business owner does not want to learn the intricacies of accounting and how income statement is related to cash flow and so on. These software make sure that all the accounts are balanced and every projection is consistent through out the plan. As a bonus, you can continue to use the software every year to develop and refine your annual plan as your business takes shape. Quickbooks also offers a rudimentary business plan but I have not really used it much. The plan, of course, is important if you are looking for outside funding, but even if you are not, the very process of planning will do more for the success of your business than anything else you can do in the beginning stages. So do not skimp on the business planning time.]
Miranda is freelance journalist. She specializes in topics related to money, especially personal finance, small business, and investing. You can read more of my writing at Planting Money Seeds.