A business plan is a document that lays out what your business is, its goals and how you plan to achieve them. Think of it as a roadmap that projects out 3-5 years and provides milestones for you to use in judging your success. A business plan is a living document and its details may change as market conditions and opportunities change. But overall, it should be a guiding force for you.
For a start-up, a business plan is a key to success. Not only will investors or lenders require a detailed, well thought-out plan, but the process of putting together a business plan will help you think through issues, opportunities, barriers and other considerations that you may not have otherwise considered.
A business plan is not a document that can be thrown together over the weekend. When writing a business plan for the first time, it might require 100-200 hours to complete. The bulk of this work will be research, as you will need to study and understand your market; accurately project costs related to production (where relevant) and operations;
Business Plan Outline
There are countless templates available on the internet that can be utilized. All the different options can sometimes be overwhelming. We suggest that you:
1) Visit the U.S. Small Business Administration website and take advantage of its Online Business Plan Tool. This is a very intuitive, easy to use toll that provides clear explanations and great examples to help you answer questions.
(2) Do your homework! You need to understand who your customer will be, how many potential and realistic customers are there, and how much are they willing and able to pay for your services or products. Visit our Data and Demographics pages to learn more about resources available through SCOPED for collecting data.
(3) Contact the Small Business Development Center (SBDC). The SBDC is a great resource for any small business—new or old. SBDC has counselor available to help you through the business plan process. Whether you still don’t know where to start or you just need an objective third party to critique your business plan, the SBDC is a great resource. Find a local SBDC office here.
Section I – Executive Summary
The Executive Summary is the most important part of your business plan. Because if it doesn’t interest readers, they’ll never even get to the rest of your plan.
Start your Executive Summary with a brief and concise explanation of what your company does. Next, explain why your company is uniquely qualified to succeed. For example, does your management team have unique competencies? Do you have any patents? Are you the first mover in your market? Does a huge, unmet market opportunity exist? Etc.
Finally, include a synopsis of your financial projections in your Executive Summary. Specifically, include your expected revenues, expenses and profits for each of the next five years, how much funding you are seeking, and the key uses of these funds.
Section II – Company Overview
The Company Overview section provides a brief history of your company.
Here you will answer questions such as when and how your organization was formed, what type of legal entity you are, and accomplishments to date. Importantly, your past accomplishments are perhaps the best indicator of potential future success, so be sure to identify and include all key milestones your company has achieved to date.
Section III – Industry Analysis. Your Industry Analysis section has two sub-sections as follows:
The Market Overview section discusses the size and characteristics of your market. For example, if you are a restaurant, you would include the size of the restaurant market, a brief discussion of sectors (e.g., fast food versus fine dining) and market trends.
Relevant Market Size
The relevant market size is a much more specific calculation of your market size. It is the annual revenue your company could attain if it attained 100% market share. Your relevant market size is calculated by multiplying 1) the number of customers who might be interested in purchasing your products and/or services each year and 2) the amount these customers might be willing to spend, on an annual basis, on your products and/or services.
Section IV – Customer Analysis. Your Customer Analysis section has two sub-sections as follows:
Your Target Customers section precisely identifies your current and/or intended customers. Include as much demographic data on your target customers as possible, such as their gender, age, salary, geography, marital status and education.
In this section of your business plan, specify why customers want or need your products and/or services. For example, do customers care most about speed, quality, location, reliability, comfort, price, value, etc.?
Section V – Competitive Analysis. Your Competitive Analysis section has three sub-sections as follows:
Direct competitors are companies that fill the same customer need you fill with the same solution. For example, if you operate an Italian restaurant, other Italian restaurants would be direct competitors.
In this section of your business plan, outline who your direct competitors are, and their strengths and weaknesses.
Indirect competitors are companies that fill the same customer need you fill with a different solution. For example, if you operate an Italian restaurant, a French restaurant would be an indirect competitor.
In this section of your business plan, outline who your indirect competitors are, and their strengths and weaknesses.
Importantly, identify your Competitive Advantages in this section. Specifically, state what is it about your company that will allow you to effectively compete (and win) against both direct and indirect competitors.
Section VI – Marketing Plan. Your Marketing Plan section has four sub-sections as follows:
Products & Services
Here is where you give the details of the products and/or services your company offers.
Detail your pricing here. In particular, discuss how your pricing relates to competition. For example, are you the premium brand? The low cost brand?
Discuss your expected branding based on your chosen pricing model.
Your promotions plan details the tactics you will use to attract new customers. For example, you might choose radio advertising, or online pay-per-click ads, or press releases, and so on. In this section, detail each form of promotions you will use.
Your Distribution Plan outlines the ways in which customers can buy from you. In many cases, they can only buy directly from you, perhaps at your physical location or web address. In other cases, you might have distributors or partners who sell your products or services. In such a case, detail this structure.
Section VII – Operations Plan. Your Operations Plan section has two sub-sections as follows:
Key Operational Processes
Your Key Operational Processes are the daily functions your business must conduct. In this section, you will detail these functions. For example, will you maintain a Customer Service department? If so, what specific role will it fill?
By completing this section, you’ll get great clarity on the organization you hope to build.
In this section of your business plan, list the key milestones you hope to achieve in the future and the target dates for achieving them.
Here is where you set goals for specific and critical undertakings, such as when a new product will be created and launched, by when you plan to execute new partnerships, etc.
Section VIII – Management Team. Your Management Team section has three sub-sections as follows:
Management Team Members
This section details the current members of your management team and their backgrounds.
Management Team Gaps
Particularly if you’re a startup venture, you will have holes in your team; roles that you’d like to fill later. Identify such roles here, and the qualifications of the people you will seek later to fill them.
If you maintain a Board of Advisors or Board of Directors, detail your Board members and their bios in this section.
Section IX – Financial Plan. Your Financial Plan section has four sub-sections as follows:
As simple as it seems, this section of your business plan gives clarity on how you generate revenues. Do you sell products? Do you sell advertising space? Do you sell by-products, like data? Do you sell all of the above?
Your full financial model (income statement, balance sheet and cash flow statement) belong in your Appendix, but in this section you’ll include the highlights. For instance, include your revenues, key expenses, and projected net income for the next five years.
Funding Requirements/Use of Funds
If you are seeking funding for your company, detail the amount here, and importantly for what you will use the funds.
Particularly if you are seeking equity funding, detail your expected exit strategy. The most likely exit strategy is to sell your company to a larger firm. If so, detail the types of firms that might be interested in purchasing you and why. List the specific names of potential acquirers if applicable.
Section X – Appendix
As mentioned above, your full financial model (income statement, balance sheet and cash flow statement) belong in your appendix.
Likewise, include any supporting documentation that will help convince readers your company will succeed. For example, include customer lists, awards, and patents received among others.