A Business Plan is not a type written essay that you keep in the back of your desk drawer. Most business owners believe that a business plan is only needed when funding is necessary. This is incorrect. A Business Plan is a crucial part of any and every business.
A Business Plan is a formal document or report of the goals you have set for your business, the reasons you believe they are attainable, and how you plan on reaching these goals. In other words, a Business plan is your road map of the “WHO”, “WHAT”, and “HOW” of your business. Most people would say: “I have it all in my head”. That’s great! But it is always important to put your plan of action on paper.
A Business Plan is used and viewed often. Not just for a business loan or funding, business purchase or because it looks good in a binder, a Business Plan is your road map to success. View it often to remind yourself of your goals and expectations of the business. Don’t just hope your business will be success. Write down your vision.
A Business Plan contains:
· Title Page or Cover Page
· Table of Contents
· Confidentiality Agreement
· Executive summary which include identification of the company’s owner (s)
· Company description and structure
· Vision and Mission statement
· SWOT Analysis
· Financial goal and plan
· Marketing plan
· USP (Unique Selling Proposition)
· Competitive Analysis
· Exit strategies
Title Page and Contents
A business plan should be presented in a binder with a cover listing the name of the business, the name(s) of the principal(s), address, phone number, e-mail and website addresses, and the date. You don't have to spend a lot of money on a fancy binder or cover. Your readers want a plan that looks professional, is easy to read and is well-put-together.
Include the same information on the title page. If you have a logo, you can use it, too. A table of contents follows the executive summary or statement of purpose, so that readers can quickly find the information or financial data they need.
The executive summary, or statement of purpose, succinctly encapsulates your reason for writing the business plan. It tells the reader what you want and why, right up front.
The summary or statement should be no more than half a page in length and should touch on the following key elements:
- Business concept describes the business, its product, the market it serves and the business' competitive advantage.
- Financial features include financial highlights, such as sales and profits.
- Financial requirements state how much capital is needed for startup or expansion, how it will be used and what collateral is available.
- Current business position furnishes relevant information about the company, its legal form of operation, when it was founded, the principal owners and key personnel.
- Major achievements points out anything noteworthy, such as patents, prototypes, important contracts regarding product development, or results from test marketing that have been conducted.
Description of the Business
The business description usually begins with a short explanation of the industry. When describing the industry, discuss what's going on now as well as the outlook for the future. Do the necessary research so you can provide information on all the various markets within the industry, including references to new products or developments that could benefit or hinder your business. Base your observations on reliable data and be sure to footnote and cite your sources of information when necessary. Continue with information on who the business' customers are, how big the market is, and how the product or service is distributed and marketed.
The purpose of the competitive analysis is to determine:
- Strengths and weaknesses of the competitors within your market.
- Strategies that will provide you with a distinct advantage.
- Barriers that can be developed to prevent competition from entering your market.
- Any weaknesses that can be exploited in the product development cycle.
The first step in a competitor analysis is to identify both direct and indirect competition for your business, both now and in the future. Once you've grouped your competitors, start analyzing their marketing strategies and identifying their vulnerable areas by examining their strengths and weaknesses. This will help you determine your distinct competitive advantage.
Whoever reads your business plan should be very clear on who your target market is, what your market niche is, exactly how you'll stand apart from your competitors, and why you'll be successful doing so.
After defining the product, market and operations, the next area to turn your attention to are the three financial statements that form the backbone of your business plan: the income statement, cash flow statement, and balance sheet.
The income statement is a simple and straightforward report on the business' cash-generating ability. It is a scorecard on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result, which is either a profit or loss. In addition to the income statements, include a note analyzing the results. The analysis should be very short, emphasizing the key points of the income statement.
The cash flow statement is one of the most critical information tools for your business, since it shows how much cash you'll need to meet obligations, when you'll require it and where it will come from. The result is the profit or loss at the end of each month and year. The cash flow statement carries both profits and losses over to the next month to also show the cumulative amount. Running a loss on your cash flow statement is a major red flag that indicates not having enough cash to meet expenses-something that demands immediate attention and action.
Balance sheets are used to calculate the net worth of a business or individual by measuring assets against liabilities. If your business plan is for an existing business, the balance sheet from your last reporting period should be included. If the business plan is for a new business, try to project what your assets and liabilities will be over the course of the business plan to determine what equity you may accumulate in the business. To obtain financing for a new business, you'll need to include a personal financial statement or balance sheet.
In the business plan, you'll need to create an analysis for the balance sheet just as you need to do for the income and cash flow statements. The analysis of the balance sheet should be kept short and cover key points.