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A business plan provides a selling tool for borrowing money, getting investors, employees, vendors, customers, etc. A well written business plan proves that the business owners are serious about the business and are committed to its success.
A business plan can be as short as 1 page or as lengthy as 30+ pages. As long as it is a good representation of the business, the number of pages does not matter.
A business plan is not a static document. It should be updated periodically as business conditions change. A business plan is not just for start-up ventures or a business in need of financing, it's for every business!
A typical business plan includes the following topics:
Executive Summary, Company Overview, Industry, Market Analysis, Marketing Strategy, Operational Strategy, Critical Risks, Management Team, and Financial Plan.
Executive Summary: This section is the quick summary of the whole business plan. It pulls together the key information that is included in the other sections. The objectives of the business would be stated and also the keys to success. It provides the reference for what the plan contains.
Company Overview: The mission of the company is stated in this section. It tells the reader what the company is all about. The background of the company would be included as well as a description of its products or services. In addition, the location of the company and any legal issues would be documented in this section.
Industry: A description of the industry as well as a description of the major industry competition would be explained in this section.
Market Analysis: This section includes the description of the market, market research findings, major market competition, a competitive analysis, the prospective on market growth, segmentation of the market, and the needs of the market.
Marketing Strategy: The marketing strategy is a description of how the company will meet the needs of the particular section of the industry that it is targeting. It explains the positioning of the company within that section.
Operational Strategy: This section includes an explanation of how the products will be produced or services will be provided. It states where the business is located, the human resources/personnel policies, the expansion strategy, the accounting and information technology systems to be used, and the key alliances with vendors, etc.
Critical Risks: This section details critical risks to business success and the risk reduction strategies to lessen those risks. Critical risks could include: environmental, economic, regulatory, and competitive risks. If insurance can protect against a critical risk it should also be noted in this section.
Management Team: The owner and key personnel should be noted in this section along with their relevant experience and amount of involvement in the day to day operations of the business. A board of advisors should also be described in this section along with its relevant experience. People to include on a board of advisors include: business attorney, accountant, insurance agent, etc.
Financial Plan: The financial plan is the key section if the business plan is prepared in order to obtain financing. This section details the projected financial plan for the next year and 3-5 years into the future. A balance sheet, income statement, and cash flow statement should be included in this section. In addition an analysis of breakeven (amount of revenue required to meet fixed and variable costs at that level of revenue in order to not have a loss or make a profit) for one year should be included so readers can ascertain if that level of revenue, at a minimum, appears attainable.
In closing, a business plan is key to business success. Every business owner should ensure that he or she has a good understanding of the topics noted above and how they relate to his or her particular business.
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