How to Write a Business Plan
Tanell Evans
Table of Contents
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Table of contents
Introduction
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Chapter One- What Does a Business Plan Need?
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Executive Summary
Company Description
Product and Services
Market Analysis Summary
Strategy and Implementation Summary
Web Plan Summary
Management Summary
Financial Plan
Income Statement
Cash Flow Projection
Balance Sheet
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15,16
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Chapter 2: Top Six Mistakes when Creating a Business Plan
Mistake two and three
Mistake four and five
Mistake six
Index
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Introduction
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Introduction:
A business plan is a simply a resume for your proposed business. Its primary importance is
that your business plan becomes your reference. Anytime you are going in to talk to a
property manager about leasing space for your business, or you are meeting with a potential
lender or investor, your business plan will announce/outline who you are and what your
purpose is. This plan is created to explain and illustrate the vision you have for your business
and to persuade others to help you achieve that vision. With your plan you need to be able to
convince others that your business concept can be successful, and will be profitable. A
business plan will be your guide and help you be detailed about the many expenses involved
to open your business, the projected sales and monthly expenses of actual operation, and the
volume of business you will need to generate to meet your obligations.
Here are the top ten reasons why entrepreneurs need a business plan:
1. Business plans are created to express a purpose in such a way that it is easy to see how
the results will impact the bottom line. Business is about making money, and business
plans can help move a business from a start-up to a money-making prospect.
2. A well-written business plan will help to forecast the future, even if the future is not
well known.
3. Business plans help determine the best way to distribute scarce resources, such as
budgets, inventory, and other assets. By projecting a company’s financial vision, a
business plan can help leaders avoid pitfalls that may lead to failures along the way.
4. A business plan can help to clarify business niche and growth potential.
5. For businesses hoping to earn capital or start-up funding, a business plan is a must.
Many funding sources will not consider investing without a formal business plan that
outlines the future potential of the business.
6. Successful business leaders know that a well-written business plan can provide day-today operational assistance. Organizations that stay focused on their business plan have
a higher chance of success; when used as a road map, it can help business leaders stay
focused on business growth, mission and goals.
7. A comprehensive business plan will include a marketing element. Knowing how your
product's market is similar or different from others can be very useful in helping build
and promote your brand and services.
8. For start-ups, a business plan is not optional if success is to be maximized. Business
plans help channel energy, money and time in a focused direction, thereby helping to
assure success.
9. While the main purpose of a business plan is to help businesses move from start-up to
success, a business plan can also be used as a tool for future development and growth.
10. A business plan portrays a formal seriousness that investors, employees and others
involved in the development and growth of the business like to see. It means that
someone has taken the time to explain their plans and intentions for the business and its
future success. This vital step is an important element that most start-up companies fail
to realize.
Chapter 1
Chapter 1
Step one: Create the cover page
The cover page should include your company logo and primary contact information.
Immediately after this page, enter a table of contents page; this makes it easier for readers to
navigate through the document.
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How to Create a Business Plan
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Executive Summary
Step Two: Write the Executive Summary
The first paragraph of the executive summary should include:
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Business name
Business location
What product or service you sell
Purpose of the plan
What else should be in the Executive Summary?
Another paragraph should include:
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projected sales and profits,
unit sales,
profitability
keys to success
mission statement
Include the news you don’t want anyone to miss. This is a good place to put a highlights
chart, a bar chart that shows sales, gross margin, and profits before interest and taxes for the
next three years. You should also cite and explain those numbers in the text.
Chapter 1
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Step Three: Write the Company Description:
1. The purpose of the business description is to give the reader an overview of the company,
including the company structure, current status, future plans and any other information
you feel they need to know.
2. Where will your business be located?
3. Describe the industry you work in; this will give the reader some perspective as to how
your business fits in and it will show them why yours is a good industry to be in. Discuss
how the industry looks today—trends, growth and volumes—as well as a projection of
what the future may hold.
4. Explain whether your company is a new or established business.
5. How long you have been in business and your performance to date?
6. Discuss your structure. Is your company a corporation, sole proprietorship or
partnership? Discuss who the principal owners or officers are and what expertise they
bring to the company. Does your company do primarily retail or wholesale business?
Service or manufacture? How many employees do you have, and what is your general
management structure like?
7. Discuss your current and future goals. Talk about your short- and long-term goals for the
future, whether they involve reaching a certain level of sales, plans for expansion or
achieving a specified level with your quality metrics. Whatever your goals are, they
should be quantifiable and reasonable for you to achieve within a specified time frame—
but not too easy.
How to Create a Business Plan
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Step Four: Describe the Products/Services
When writing about your product or service include:
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The uniqueness of the product or service
What makes your product or service different from your competition?
How will you price your product or service?
All prices must cover your costs. Do not ONLY price against a competitor; price to sell.
The most effective way of lowering your sales prices is to lower costs.
What are the benefits to the customer?
What position in the market do you want to have?
Chapter 1
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Step 5: Create the Market Analysis Summary
The purpose of the Market Analysis Summary is to describe your target audience. You need to
know exactly what the people who might be interested in buying your product or service are like,
and how many of them there are. When writing this section in your business plan answer these
questions:
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How old are they?
Where do they live?
What gender are they?
What is their family structure? (number of children for example)
What do they do for a living?
What is their income?
What do they do during their spare time?
What is their lifestyle like?
What motivates them?
What is the size of your target market?
After you have determined your target audience you need to describe your projections about this
target market.
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How much of your product or service might your target market buy? (Estimate this in
gross sales and/or in units of product/service sold.)
What proportion of your target market might be repeat customers?
How might your target market be affected by government policies (e.g. new bylaws or changes in taxes)?
How might your target market be affected by economic events?
How might your target market be affected by demographic shifts?
How to Create a Business Plan
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Step Six: Write the Strategy and Implementation Summary
The Strategy and Implementation Summary highlights what makes your business concept
compelling and how you will attract and maintain a client/customer base. The first element of
this section is to plan a strategic position. This informs an investor that your business will not be
all things to everybody. You have to answer the question, “What do you do, and what don’t you
do?”
You also have to explain exactly how you're going to maintain your customer base. How will
you retain customer/client loyalty? Another major component of this summary is actually
delivering on the promises your business plan has made. For example; if you say your business
provides exemplary customer service means that your company must always perform at that
level of service. Customers (and investors) can always tell when a company has over-promised
and under-served. Ensuring that the claims in your Strategy and Implementation Summary's
claims are valid is a critical element of your business. Include these factors in this section:
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Value Proposition
Competitive Edge
Marketing Strategy
Positioning Statements
Pricing Strategy
Promotion Strategy
Distribution Patterns
Marketing Programs
Sales Strategy
Sales Forecast
Sales Programs
Strategic Alliances
Milestones
Chapter 1
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Step Seven: Create the Web Plan Summary
A Web plan should always have a market analysis, website strategy, specific development plan,
sales forecast, and expense budget. A Web plan must also be measured by the results it produces.
In the Website Strategy include the strategic focus, mission and objectives, development
strategy, and Web marketing strategy.
The plan should include enough detail to track sales month by month and follow up on plan-vs.actual analysis. A plan will also include specific Web development plans, back end, front end,
tactics, programs, management responsibilities, and promotions.
How to Create a Business Plan
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Step Eight: Create the Management Summary
Writing your management team summary is very important. Sometimes investors will make a
decision whether to invest based on how specific and detailed the management team is
structured. It should include names and job titles of the managers, management personnel that
will be added to the company at a later date, managers' compensation rates, any consultants that
the company plans to hire, management structure, and management style.
A business plan's management summary will begin with the founder, followed by the managers
who will oversee all day-to-day operations. You should always keep the management summary
limited to the five or six people who are or will be most responsible for the success of your
business concept. A start-up business plan's management summary will display the owner's
experience in the industry s/he wants to enter.
Another key for the management summary is how you will structure your company. Your lines
of authority can be structured traditionally as "top-down," where information is incorporated into
one or two sources, or it can be set up to more horizontal. It is important to list the job titles of
the company's managers, even if the company has not formally decided upon this information.
Having this detailed information already prepared makes the company seem well-organized and
detail-oriented. When investors see that the company has been planned to the smallest detail,
they will be more likely to feel comfortable investing in the company. Always include
information on management that will be hired at a later date in your business plans. If you know
that your company is going to need an office manager, but that person is not part of the founding
of the company, include that information in your business plans. If a lender notices that your
company cannot possibly run efficiently without someone managing the office, but you did not
state that you planned to hire such personnel, it can make your business plans look weak.
The four major components of your management summary are:
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Organizational Structure
Management Team
Management Team Gaps
Personnel Plan
Chapter 1
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Step Nine: Create your financial plan
The financial plan section consists of three financial statements, the income statement, the cash
flow projection and the balance sheet and a brief explanation/analysis of these three statements.
Separate your expenses into operating expenses and start up expenses. Some of the start up
expenses may include:
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Business Registration Fees
Starting Inventory
Rent deposits
Business licensing and permits
Utility Set Up fees
Down Payment on Equipment
Down Payment on Property
Examples of Operating Expenses include:
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Utilities
Promotions
Maintenance
Distribution
Salaries
Rent or mortgage payment
Raw materials
Storage
Loan Payments
Office Supplies
Telecommunications
If you multiply these numbers by 6, you have a six month estimate of your operating expenses. Then add this to t
start up expenses list, and you'll have a ballpark figure for your complete start up costs.
The Income Statement shows your Revenues, Expenses, and Profit for a particular period. It's a
snapshot of your business that shows whether or not your business is profitable at that point in
time; Revenue - Expenses = Profit/Loss.
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How to Create a Business Plan
The second component the financial plan needs is the Cash Flow Projection. The Cash Flow
Projection shows how cash is expected to flow in and out of your business. As part of your
business plan, a Cash Flow Projection will give you a much better idea of how much capital
investment your business idea needs. For a bank loans officer, the Cash Flow Projection offers
evidence that your business is a good credit risk and that there will be enough cash on hand to
make your business a good candidate for a line of credit or short term loan, but do not confuse a
Cash Flow Projection with a Cash Flow Statement. The Cash Flow Statement shows how cash
has flowed in and out of your business; it describes the cash flow that has occurred in the past.
The Cash Flow Projection shows the cash that is anticipated to be generated or expended over a
chosen period of time in the future. Although both types of Cash Flow reports are important
business decision-making tools for businesses, investors are mainly concerned with the Cash
Flow Projection in the business plan. You will want to show Cash Flow Projections for each
month over a one year period as part of the Financial Plan portion of your business plan.
There are three parts to the Cash Flow Projection. The first part details your Cash Revenues.
Enter your estimated sales figures for each month. Remember that these are Cash Revenues; you
will only enter the sales that are collectible in cash during the specific month you are dealing
with. The second part is your Cash Disbursements. Take the various expense categories from
your ledger and list the cash expenditures you actually expect to pay that month for each month.
The third part of the Cash Flow Projection is the Reconciliation of Cash Revenues to Cash
Disbursements. This section starts with an opening balance which is the carryover from the
previous month's operations. The current month's Revenues are added to this balance; the current
month's Disbursements are subtracted, and the adjusted cash flow balance is carried over to the
next month.
The Closing Cash Balance is carried over to the next month. The most common mistake people
make when preparing this projection is they are too idealistic about the projected sales. After you
have your Cash Flow Projections completed, prepare the Balance Sheet. The Balance Sheet
presents a picture of your business' net worth at a particular point in time. It summarizes all the
financial data about your business, breaking that data into 3 categories; assets, liabilities, and
equity.
Assets are tangible objects of financial value that are owned by the company.
A liability is a debt owed to a creditor of the company.
Equity is the net difference when the total liabilities are subtracted from the total assets.
Chapter 1
Here are a few pictures so you can get a better idea of what these statements should look like.
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How to Create a Business Plan
Chapter 1
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Chapter 2
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Chapter 2
Top 6 Mistakes People Make When Creating a Business Plan
According to Inc.com the first mistake people make when creating a business plan is “Being All
things to all people”
You cannot expect your business plan to appeal to every audience, so pick one business model
and focus on one industry or problem. If you try to appeal to everyone you risk spreading
yourself too thin and this will not make potential investors interested.
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How to Create a Business Plan
Mistake Number Two: “Being Boring”
If a potential investor reads two pages into your business plan and becomes bored that is a
terrible sign. You have to keep the reader interested and engaged in your ideas.
Mistake Number Three: Measuring the Size of the Market Too Freely
It is very impressive to be confident in your business, but if you are too optimistic it can turn
investors away. Do not make huge promises to your target market or creditors unless you are
absolutely sure you can keep them.
Chapter 2
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Mistake Number Four: Lacking the Confidence to Sell Your Product
Entrepreneurs try to seem so confidant in their business ideas that they ignore the competition
and challenges that a new company can face. Even if your concept is completely original, you
should take into account forces that compete with your product or service, including different
solutions to a problem, different ways that customers might choose to spend their money.
Mistake Number Five: Repeating Yourself Too Much
Avoid repeating catchphrases and a few simple ideas in many different forms. Nobody wants to
hear the same thing over and over again. Be sure to keep your plan's fundamental message
consistent throughout, but use creative language and appealing imagery to present your ideas.
How to Create a Business Plan
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Mistake Number Six: Using Too Much Jargon
Remember that not everyone in business is familiar with cross-industry lingo. If you have a
background in a specific industry, for example; science or engineering, use simple, specific, and
concrete phrases to describe your business. Rely on general terms that most everybody will
understand.
VS
Index
Index
Business plan 11, 12, 14, 16, 21, 22
Mistakes 16, 21, 22, 23, 24
Investor’s v, 12, 14, 16, 21, 22
Management 9, 13, 14
Profit 8, 15
Expense v, 13, 15, 16
Structure 9, 11, 14
Loans 16
Market v, 10, 11, 12, 13, 22
Revenue 15, 16
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How to Create a Business Plan
Resources
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http://www.jumpstartinc.org/Blog/what-goes-into-my-business-plan.aspx
http://www.ccbov.com/blog/business-plan-part-ii-24
http://retai.about.com/od/businessplans/p/products.htm
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http://www.ict.ox.ac.uk/strategy/plan.xml?ID=S6
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