What do I need for a business plan?
This is a question that I hear most of the time when working with a small business. The idea of a business plan in written form is a fairly new concept over the past few years. If you are a startup business or have only been in business for a few years, you will need one to get most types of financing. I will break down the parts of a business plan, what each section means, and explain how they are evaluated by a lender.
1. Executive summary
In this section you will summarize what you hope to accomplish with the business. The summary is where you want to grab your reader's attention and make them want to learn more. The executive summary should include items such as business name and address, owner name, products or services offered, and the purpose of the plan.
The purpose can be for financing to start up or obtaining investors. Although this section is the first of a business plan it may be easier to write after the rest. By focusing on all the parts individually you will then have a template for your summary.
2. Company description
This should be a very broad synopsis of your business. This would include what your business does, how you operate, how your company was formed and for what purpose, and a summary of your short and long term goals. This will provide your reader with a high-level view of where your company has been and will be going.
3. Products and Services
This section will focus on what your company makes, or the services you offer. In this section, you should address what your company's value proposition is and why you believe your customers buy from you and not your competitor. You should include any relevant industry unique aspects such as patents, copyrights, or trade secrets.
4. Market research
Here you will focus on your market area and how you can capitalize on that information. Your will address certain statically important aspects such as demographics, income levels, economic statistics. This is a good way to make sure you are positioning your business to reach the optimal amount of people willing and able to purchase your products or services.
5. Strategy
How will you position your business to reach the most amount of customers for your products. Will you sell on price only such as lower than your competitor? Will you compete on value-added products?
In this section, it is important to describe how you will set yourself apart from your competitors. The strategy section is very important if you will be purchasing an existing business.
When asked how you will run the business differently than the previous owners, you must make a compelling argument about how you can improve the processes and continue profitability.
6. Management Team
The management team section should include all of the key members involved with the daily operations. In the management section, it would be good to include resumes along with relevant experience within the industry.
A prime example of this is with my own side business. I maintain all of the record-keepingQuickbooks, payroll, and office tasks. My brother is a driver and maintains physical trucks. The partnership works because we both utilize our strengths and outsource our weaknesses.
The resumes that we provided in our business plan showed how each of our pasta can work within the business.
7. Financial projections
Projections are not only good for securing money for a loan but also help you to realize initial costs. Putting numbers in a spreadsheet is a great way to find hidden costs. A famous saying and I don't know the author" no one projects themselves out of business" this is very true and I have seen it a thousand times.
Businesses will always over estimate income and underestimate expenses. I believe this is the very nature of an optimistic entrepreneur. In reality, your expenses will always be proportional to your income. As one increases, so will the other and vice versa. Allowing for enough unexpected expense in your projections shows that you are realistic in your assumptions.
Starting a business can be very exciting but freighting at the same time. I encourage anyone that is looking to start a business or currently owns a business to take the time to write a business plan.
Having a well-written plan can give you insight as to how you are doing and where you would like to see your business in the future. Another favorite quote is " no one plans to fail, they fail to plan."-Unknown.
Thank you for taking the time to read my blogs. I am in no way a subject expert and these are simply my opinions. I welcome any thoughts and discussion.
