Top Things to Include in a Business Plan
Ready to write that business plan? There are 2 primary components: (1) the narrative or text portion (i.e., the words) and (2) the quantitative or financial portion (i.e., the numbers). The words need to clearly explain your business concept, the strategies you plan to implement, the competitive environment, etc.
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Ready to write that business plan? There are 2 primary components: (1) the narrative or text portion (i.e., the words) and (2) the quantitative or financial portion (i.e., the numbers). The words need to clearly explain your business concept, the strategies you plan to implement, the competitive environment, etc. The numbers need to support the words. This will result in a business plan that tells a coherent story and has realistic numbers to support that story. Specifically, our expert says you will need to include the following:
- Business description
Describe it simply and clearly. What is the opportunity? In other words, what pain are you solving for paying customers? What do customers currently pay to solve that problem? Your business model, i.e., the source(s) of your revenues.
- Products and/or services offered
What are you selling? At what price? At what cost to you? What are the features and benefits of what you are selling? What makes it different and desirable? Why will customers buy it from you? How will products be manufactured? What are the mechanics of your website if selling via the Internet?
- Market analysis
Industry overview—describe the size of your industry and its unique characteristics. Define your target markets. What is the size of your target market? What is its growth potential? Is the market competitive? If not, why not? Who are your customers? Give demographic information. Why will they buy from you? How will you reach your customers? What is your marketing/sales plan?
Where will your business be located? Are there zoning issues? Do you need to rent or buy space? How much square footage do you need? What characteristics are required? Preferred? At what price? If renting, who pays for utilities? Who pays the real estate taxes? Are renovations or build-out required? Who pays, if renting?
Give an overview of the competitive landscape. What is your competitive advantage? Is it defensible (i.e., if it works, will your competitors be able to copy you)? List your 5 closest competitors and describe: who they are, their products/services, their strengths and weaknesses, and what you’ve learned from watching them—how will you be better than them?
Why are you (and your team) qualified to build/run this business? What is your (and your team’s) professional background and experience? Do you have relevant personal experience in this industry? Who reports to whom? Who makes final decisions? Describe any advisors or other professionals who are assisting you (and their backgrounds).
Who will you be hiring? For what positions? Describe their responsibilities. At what pay rate? Who reports to whom? What is the staffing/hiring plan (i.e., when will you fill each position)?
8. Application and expected effect of investment/loan
How much money are you trying to raise? What, specifically, will it be used for? Why do you need it at this stage?
9. Sources and uses of funding
This is a numerical restatement of the Application and Expected Effect of Investment/Loan section in the narrative portion of your business plan. Here you are listing the specific expenditures you will make with the loan/investment.
- Capital equipment list
This is the equipment you use to provide your service; manufacture your product; or sell, store, or deliver your merchandise, not equipment that you use in the normal course of business. Equipment that you expect to replace frequently (annually or more often) is not included. Capital equipment can include office furniture, computers, store fixtures, machinery used to make products or deliver services, delivery vehicles, etc.
- Balance sheet
A balance sheet shows the assets, liabilities, and net worth of a business at a specific point in time.
- Break-even analysis
A break-even analysis shows the point at which your business will be breaking even, i.e., neither making a profit nor losing money—shown either in dollar sales or unit sales. The basic break-even formula is: Sales = Fixed Costs + Variable Costs.
- Projected income statement
An income statement (or profit & loss statement) shows a business’s financial state over a period of time. It is also important to include an explanation of your assumptions.
- Cash flow projections
This is your most important spreadsheet because it shows when cash will flow in and out of your business over time. Cash is king, so make sure you have enough to cover slow periods and/or slow-paying customers. A good cash flow projection can be the difference between success and failure.
Source: As a seasoned start-up advisor and founder of Startup Distillery, Diane Tarshis has spent 20+ years helping entrepreneurs across the U.S. and around the globe start and grow their businesses. You can reach her directly at (773) 871-0110 or by visiting her website at startupdistillery.com.