A business plan is an indispensable roadmap for business survival and success. This essential document usually projects 3-5 years ahead and charts out the course a venture or company intends to take to grow revenues. It typically contains the executive summary, company description, market analysis, organization and management plan, service and product type, marketing and sales, funding request, financial projection and appendix. The business plan document is usually arranged in this listed order. This article intends to educate the general public on how to write your outstanding business plan that will meet up with your entrepreneurship needs.
The executive summary is regularly regarded as the most essential part of a business plan. Executive summary section informs your reader in brief where your business/company is, where you intend to take it, and why your business idea will be profitable and successful. In case you are seeking financing, the executive summary is a good and first opportunity to capture the interest of a potential investor.
Your executive summary is supposed to emphasize the strengths of your general business plan write-up and therefore should be the last section you write. Though, it frequently appears first in your business plan document.
Below are numerous main points that your executive summary should consist based on the phase of the business in question.
Executive summary for an Already Established Business
If the business is already established, be certain to include the following information in your business plan:
1. The Mission Statement – This clarifies what your business is all about. It is supposed to be between some sentences and a paragraph.
2. Company’s Information – Consist of a brief statement that includes when your business was established, the names of the founders and the roles they played, number of workers, and the business locations.
3. Trends in Company Growth – Include instances of company growth, such as interesting information about finances or markets share and profit margin. Graphs and charts can be of help in certain cases for clarity.
4. Company’s Products/Services – Short description of the products or services you offer.
5. Company’s Financial Data – In case you are looking for financing, incorporate any information concerning your current bank and other important investors.
6. Review future business plans – Give details of where you would like to take your business in the future.
With the exemption of the mission statement, the executive summary should be well-covered in a brief manner and limited to one page. The executive summary is the first part of your business plan and a lot of people will see it, so each word should count!
Executive Summary for a New Business Startup
For individuals that are just establishing a business, there is no information as an established company. Instead, the center of attention is on your experience and background coupled with the decisions that made you to establish this specific enterprise.
You must show that you have carried-out painstaking market analysis. Add information regarding a need or gap you intend to fill in the target market, and how your exact solutions can fill it. Satisfy the reader that you can actually succeed in your intended business, then clarify your future plans.
Keep in mind that your Executive Summary will be the last thing you write. Therefore, the first section of the business plan that you will undertake is the Company Description section.
This part of your business plan presents a high-level appraisal of the different components of your business. This can help readers and potential investors to quickly recognize the goal of your business and its unique intentions.
The following should be included in the Company Description of your business plan:
1. Explain the features of your business and make an inventory of the marketplace needs that you are intending to satisfy.
2. Describe how your products and services meet these needs.
3. Itemize the particular consumers, ventures, organizations or businesses that your company serves or will serve.
4. Describe the competitive advantages that you trust will make your business a reality and success such as the location, skilled personnel, well-organized operations, or capability to give value to your customers.
The next section of your business plan is the Market Analysis section.
The content of the market analysis section of the business plan should demonstrate knowledge about your industry and market as well as any of your outcomes of your investigation and conclusions. It is frequently written after the company description.
The following should be included in Market Analysis of Your Business Plan
1. Industry Report and Outlook – Illustrate your industry, as well as its present size and extraordinary growth rate including other trends and uniqueness (e.g. stage, predicted growth rate). Then, list the main customer groups within your business industry.
2. Information Concerning Your Business Market – Reduce your business target market to a reasonable and manageable size. A lot of businesses make mistake by trying to attract too many target markets.
3. Distinctive characteristics – It must include the critical needs of your potential customers. Also, the demographics of the group and there location should also be identified.
4. Size of the business main target market – The size of your target market and data about the annual purchases your target market makes in sector/industry should be added. Also to be included is the forecasted market growth for the group.
5. The value market share the company can gain – The market share percentage and number of customers you expect to obtain in a defined geographic area must be written here.
6. Pricing – Describe your pricing structure, gross margin levels, and any price cut that you plan to use.
7. Competitive Analysis – Competitive analysis of your business plan should identify your competition by product type or service and market segment. It must assess the market share, strengths and weaknesses, importance of your target market to your competitors, barriers that may hinder you as you enter the market, window of opportunity in the market, indirect or secondary competitors and barriers to market like, changing technology, high investment price, lack of quality personnel.
8. Regulatory Framework/Associated Restrictions – incorporate any customer or governmental regulatory requirements influencing your business and your level of compliance. Also, include any operational or cost value in the compliance process on your business.
The next section of your business plan is the Organization & Management Plan section.
ORGANIZATION & MANAGEMENT PLAN
Organization and Management plan is done after the Market Analysis. It should include: your company’s organizational arrangement, information concerning the ownership of your company, profiles of your management team, and the qualifications of your board of directors. It should include the role of each stakeholder, their background and the reason for bringing them into the business as board members or employees. This is necessary because it will make the reader of your business plan to know who’s in charge. Make a clear description of each division or department and its function
The section should consist of the personalities that make up the advisory board and how you intend to keep them there. Kind of salary, promotion structure, benefits package and incentives you are offering should all be stated.
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SERVICE OR PRODUCT TYPE
After the completion of the Organizational and Management Plan section of your Business plan, the next section of your business plan is where you give the details of your service or product, with emphasis on the benefits to potential and present customers. Concentrate on the reason why you think your specific product will fill a need for your target customers.
The following should be included in Your Service or Product Type Section
1. The Description of Your Product and Service – Consist information concerning the exact benefits of your product or service – from your customers’ viewpoint. You should also write about your product or service’s capability to meet consumer needs and any advantages your product has over that of your competitors, and the current growth phase your product is in (e.g., idea level, already developed prototype).
2. Facts About the Life Cycle of Your Product’s – Be sure to include data concerning where your product or service is in its life cycle, together with any factors that may influence its cycle in time to come.
3. Intellectual Property – In situations where there is any existing, pending, or any expected copyright or patent filings, make a list of them here. Also reveal whether any main aspects of a product may be categorized as trade secrets. Finally, include any information regarding any existing legal agreements.
4. Research and Development (R&D) Projects – State any R&D activities that you are carrying out or are planning. State the results of future R&D activities you are expecting and be sure to evaluate the R&D efforts of not only your own business, but also of other competitors of yours in the industry.
Then, the next section is the Marketing & Sales Management Plan section of your Business plan.
MARKETING & SALES PLAN
After the Service or Product Type section, the next section of your business plan should center on your marketing plan and sales management strategic plan for your business.
Marketing is the practice of building customers, and customers are the mainstay of your business. In market and sales plan section, the first thing to do is to define your marketing strategy. There is no solitary way to define a marketing strategy; your strategy is supposed to be part of an ongoing business-assessment process and exclusive to your company.
After developing an inclusive marketing strategy, you can then describe your sales strategy. This covers how you plan to actually sell your product. Sales force strategy can be adopted using internal or independent representatives. The number of sales persons needed, recruitment process and compensation mechanism should be well considered.
Next section is for businesses seeking financing. The section is Funding Request section.
In case you are looking for funding for your business venture, this section can be used to outline your requirements. However, funding request for your business plan should include the following information:
1. The current funding requirement for the business
2. Any potential/future funding needs for over the next five years
You are to include how the fund is intended to be used. It should also be stated if the funding request is for capital expenditure, working capital, debt retirement, or acquisition note that any critical financial situational plans for the future, such as: debt repayment plan, a buyout or selling your business. These areas are very important to a future creditor, since they will directly influence your ability to repay your loan. When you are writing your funding requirements, be sure to include the amount you want now and the amount you want in the future. Also include the time period that each demand will cover, the type of financing you would like to have (e.g., equity, debt), and the conditions that you would like to have applied. Also, to back up your funding request is the need to provide historical and prospective financial information of your business.
After completing the funding request section, move on to the next section of your Business plan which is the Financial Projections
Financial Projections section is developed after you have researched about the market and already have clear objectives. This is when you can allocate financial resources efficiently. The following are the things that must make up the critical financial statements your business plan.
1. Historical Financial Data – for owners of an established business, you will be requested to provide historical data associated to your company’s performance. Most creditors request information for the last three to five years, depending on the time span you have been in business. The historical financial data is to include your company’s income statements, balance sheets, and cash flow statements for the years you have been in business (usually for up to three to five years). Often, creditors are also concerned about the collateral that you may have that could be used to secure your loan, regardless of the phase of your business.
2. Prospective Financial Data – Every business, whether new or growing, will be required to provide prospective financial information. Often times, creditors will want to know what you expect your company to be able to do in terms of earnings within the next five years. Each year’s documents should include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. For the first year, you should provide monthly or quarterly projections. Later, you can extend it to quarterly and/or yearly projections for second years through five.
Be certain that your projections are equivalent to your funding requests; creditors will be watchful for inconsistencies. It is much better when you see mistakes before they do. In case you have made assumptions in your projections, make sure to summarize what you have assumed to prevent reader from guessing.
Lastly, you should include a short analysis of your financial information. Include a ratio and trend analysis for all of your financial statements (both historical and prospective). Given that pictures speak louder than words, you may want to incorporate graphs of your trend analysis (particularly if they are positive).
The next and the final section to include is the Appendix of your Business plan. This can comprise items such as your credit history, resumes, letters of reference, and any supplementary information that any lender may request.
The Appendix of your Business plan should be provided to readers only when requested. In other words, it should not be added to the main body of your business plan. Business plan is your communication tool; in that case, it will be seen by several people. It is not all the information in the business plan that you will want everyone to see, but only specific individuals (such as creditors) may want to know this information to make lending decisions. Therefore, it is important to have the appendix that will contain all these information.
The appendix should include:
1. Building permits
3. Copies of leases
4. Credit history (personal & business)
5. Curriculum vitae of key managers
6. Details of market/industry studies
7. Legal documents
8. Letters of reference
9. Licenses, permits or patents
10. List of business consultants, including attorney and accountant
11. Pictures of Product
12. Relevant magazine articles or book references
All the copies of your business plan should be effectively controlled by keeping a distribution record which will allow you to update and maintain the business plan anytime as required. Don’t forget to include a private placement disclaimer with your business plan in case you plan to use it to raise capital.
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