A formal business plan is an absolute prerequisite for when your business is seeking funding from an outside source. The whole process of writing a business plan will help you formalize your company’s identity and formulate the goals you need to meet in order to succeed. You want to measure your progress, come up with a marketing plan and hire specific experts for the appropriate positions within your company. A great, even good, business plan does not just state who you are and what you do, it’s your explanation of how you’re designing your company’s future.
This document will let lenders know that they are lending their money to professionals, people that know what they’re doing, and not amateurs. Your business plan should be clear, concise and detailed, and no greater than 20 pages in length. Without a properly formatted and appropriately lengthy business plan, your chances of profitable growth are slim to none. So here is a breakdown of rules and policies you need to follow when writing a business plan.
Have the Right Content
While there isn’t an exact formula for writing a complete business plan or what it should look like, there are areas that almost all successful business plans cover. We recommend that you add your own personal spin to the concepts. The areas your plan needs to cover are as follows:
Executive Summary: The most important piece of the puzzle, this piece must convince readers that this plan is worth reading and hearing out. If they don’t want to continue after the Executive Summary, you’ve lost them. Executive summaries are usually a page long and cover these six topics:
- Mission Statement: What your company is and what are your goals?
- General Company Information: State of incorporation, founders and employees and physical locations.
- Highlights: What kind of traction are you seeing early on? What opportunities are possible?
- Products and Services
- Financial Goals: Do you want a business loan, grant or other funding?
- Future Plans
Company Description: What does your business do, and what makes it different than your competitors? What market or type of customer will you cater to? What is your company’s strengths? This is your elevator pitch. Make it count.
Market Analysis: Show that you know how to research your industry and have a master understanding of all the details. Your market analysis should include an industry description; target market overview and characteristics; target market size and growth potential; your market; share potential; market pricing and promotional strategies; potential barriers to entry and research on competitors.
Business Organization: What is the logistical and legal structure and hierarchy for your organization? For your logistics, have a chart that covers your company’s organization and who is in charge of what. Lay out responsibilities, background and experience for all your employees and any immediate hiring needs. Also, is your company a sole proprietorship, LLC or S Corp? Let your lenders know what legal protections you have in place.
Product Development Plan: Cover your products sold or services provided here. What needs are they satisfying and why would customers purchase said products or services over those offered by your competitors. Detail sourcing and fulfillment, intellectual property rights, current status of your products and any future plans for growth and improvement.
Marketing and Sales Plan: Settle on the two key points of positioning and promotion. Positioning covers your branding, company culture and reputation. Promotion focuses on your plan for bringing attention to your company, covering ad space to marketing practices. For sales, discuss each step by step of your sales process, from who makes them, which tools are used and what is the strategy of obtaining, converting and maintaining leads.
Financial Plan and Projections: Cover your current and future financial situation. New businesses are expected to present projections and forecasts for your future financial success. List projections for a minimum of 12 months into the future. The best business plans usually go three to five years down the line. Adjustments will be made as variables change. You want to create a baseline that you will hopefully exceed.
Funding Request: You have described your financial expectations, now describe how an additional infusion of funds will lead you to success. What amount of funding will be necessary over the next five years? Why? Where will these funds be invested in your business? Lay out expectations for your lenders and investors.
Appendix: Add your supporting documents, materials, contracts, permits, licenses, resumes, credit histories, etc. Charts, graphs and points of reference also make the appendix their home.
Formats for Your Business Plan
There are two basic formats to use to layout your business plan. The Traditional Business Plan is the standard structure and usually spans about 12 pages or more. It contains heavily detailed analyses. While they require more work, in the end you’ll have a thorough outline. Lean Startup Business Plans are typically one or two pages of summaries of the most important aspects of your business plan. They should have most of the same sections as the Traditional Business Plan, but are shorter to give readers a brief overview instead of a thorough analysis of your company. Lean Startup Plans should also cover key business partnerships, key resources and customer relationships. Lenders and investors usually prefer a Traditional Business Plan; however, a Lean Startup Plan is a decent place to begin if you expect major changes on the horizon or would like to have a quick document that quickly explains the fundamentals.
Writing the Best Possible Plan
Research Exhaustively: Know your business and industry back and forth.
Make It Adaptable: Modify your plan based on your audience. Emphasize your financial projections; for investors, amplify the value your team is bringing to the table.
Make It Personal: Express yourself and your passion. When you let others know why you care, others will follow suit.
Regardless of whether your business plan is traditional or lean, for your own use or to convince investors to work with you, you need one to operate as a business. Any new business venture will not survive without a business plan in place to set goals and procedures for the present and future.