Why write a business plan? You could start your business without a formal business plan, and many entrepreneurs are successful without one. A business plan however, is recommended for various reasons, it can:
- Force you to think about various elements of your business, this will help you come up with strategies to take advantage of your opportunities and mitigate threats. It is important for owners and managers to have a clear understanding of the various aspects of the firm’s market, such as competition and customers.
- Help you determine whether or not the business is feasible in the first place, and if not, it will save you a lot of heartache.
- Help you remember ideas you had.
- Make it easier to get any required financing. Few lenders are willing to finance a new venture that has no business plan.
- Serve as a benchmark for measuring the success of your venture. Over time you can use your business plan to see if you have achieved your goals.
Elements of a business plan
Business plans will vary from business to business and industry to industry. But most should have certain important components in common. A brief summary of these components follow.
- The executive summary. This out lines your business and summarizes concisely what rest of the plan says. It should be one page long. For readers, the executive summary is the most important part of your business plan. If nothing else, they will read the executive summary.
- The opportunity. Your plan must explain, in layman’s terms, what you want to sell and why you think people will buy it.
- The Market Analysis. A good business plan will include a general description of the industry (such as size and trends), information about your target market and competition.
- Operations. Describing how you intend to implement your ideas is important to investors and to you, the owner. What initial setup steps are required? Whom do you need to hire and will training be required? You also need to describe the manufacturing equipment required for your business. Who will be your suppliers and how will inventory be controlled? Basically, elements required for the smooth operation of your business should be described here.
- The management. This section should describe the company’s ownership structure, and management and board member profiles. It should also outline employee responsibilities.
- Financial information. Financial statements are another requirement of any business plan. If you business is established, include the past three to five years of historical financial data – balance sheets, income and cash flow statements. Regardless of whether your business is a startup or already established, you’ll be required to provide prospective financial statements. Usually, you’ll include expected financial performance for the next three years. Lastly, include an analysis of your financial information – financial ratios such as debt to equity ratio and return on investment as well as a break even analysis.
The Appendix. Your plan will be read by a variety of people. Some of the information will be of greater interest to certain people. For example, a general outline of the qualifications of key managers can go in the body of your plan, where as detailed resumes should go in the appendix. Other items in the appendix might include:
- Industry statistics
- Detailed profiles of key managers
- Product details such as photographs
- Details of market studies
- SWOT analysis
- List of partners and consultants
- Financial spreadsheets
The Evolving Business Plan
Your business plan shouldn’t be a document forgotten once you’ve started your venture. Refer to it periodically to determine if you’re reaching your goals and what changes are needed in the plan as time progresses. For example, you may find that external factors in the market have changed. For your plan to make sense, parts of it will probably need to be updated to reflect these new realities.
There are many other resources online to help you with your business plan. Try searching the Internet for some of the many free samples out there that can be used as a guide.