Whether you want to start a new business, open additional markets for an existing operation, or give an enterprise a completely new direction, you will need a detailed business plan. It is an absolute necessity if you want the help of a bank, venture capitalist, or any other source of financial backing. Even if your financing is in place, you still may find a business plan very helpful in making your idea a working reality.
Your business plan will cause you to formulate concrete, logical, step-by-step plans that will take you directly to well defined objectives. You will have clear-cut success criteria against which to measure progress. Crafting a business plan can help clarify and flesh out ideas about your new products / services, the market to be served, and how that market is to be reached. You can also expect to gain a more thorough understanding of the organization, people, skills, materials, and processes needed to get the job done. As a result, you will be better able to project actual costs and envision a realistic rate of return.
Although rules for organizing business plans are quite flexible, the content areas described below must be covered in considerable detail:
This section, which can be three or more pages in length, provides an overview of the entire plan and is virtually always located immediately after your contact information and table of contents. It should give readers enough information to conceptually understand the entire plan without referring to any of the following sections. Decisions to further explore and evaluate your proposal will often depend on the impression made by this initial summary.
This section (1-2 pages) provides a snapshot of your company's current status, reviews relevant history, and looks forward to your vision for the long-term as well as the immediate future. It delineates your business's current scope of operation and describes its legal, ownership, and decision-making structure. Your business model is presented, and the concrete objectives that it is expected to achieve are spelled out. This and the following sections should be consistent with the executive summary that introduces them.
This portion of the plan (1-2 pages) catalogs your relevant product / service offerings and focuses on the changes / additions that your proposed enterprise will make. It details the features and benefits of these projected new or improved offerings. This section defines the anticipated market and provides reasons why your product or service will be in demand. It is important to show how your offering differs from that of the competition and why potential customers should care. You also want to address your planned production / delivery methods and how they will affect quality and cost. Finally, you need to address issues such as industry positioning, market perception, pricing structure, and expected profit.
The focus in this segment of your plan (2-3 pages) documents shifts within the environment in which your proposed business will operate. The market research that you cite here will support your identification of unmet needs and market opportunities. Here, you lay out a survey of your industry, covering trends in the market it serves and assessing the strengths and weaknesses of competitors. You want to identify your market's traditional and emerging segments, describe potential customers, and highlight their expressed unmet needs. This section should also describe how information and products / services are distributed and how buying decisions are made in your industry / marketplace.
In this part of your presentation (3 or more pages), you describe how your product / service is to be brought to the marketplace and sold at a desirable profit. You define your target market and put yourself on the line regarding the share that you expect to capture. You include a profile of your customers / end users and spell out how they will be educated / motivated and how your product / service will be delivered. Cite specific evidence to show that potential customers have a need and that they believe your offering will meet that need. How has it been designed to fulfill customer requirements and what are the attributes that will lead buyers to choose it over its competitors? This is the portion of your plan that addresses in detail your plans for public relations, distribution, pricing, advertising and promotion, and sales.
This section shows how the "rubber will meet the road." It lays out in orderly sequence the detailed steps you will take to implement your plan. You commit yourself to a development timetable and state goals for results at each of its stages. You explain / justify expenses and assess risks. Factors that could produce cost overruns or slow the timetable must be addressed and contingency plans spelled out.
This section (2-3 pages) characterizes production, distribution, inventory management, information technology, customer service, and any other operational elements that may be critical to the success of your plan. It relates operations to the marketplace and the customer and also speaks to issues such as the balance you will strike among quality, cost, timeliness, and flexibility. Other likely considerations may be vendor relationships, strategic partnerships, cutting-edge production processes, and advanced delivery systems. You also want to deal with the people factor, including what will be done about needed skills and staff recruitment, development, and motivation. Your reader will pay particularly close attention to the management team, examining the strengths of people already on-board and evaluating your plans to recruit additional talent.
This all important narrative (2-3 pages) presents the cost and revenue projections that must parallel your developmental plan. Readers will look for at least a four- to five-year planning horizon. You need to state the assumptions about the economy, materials / labor costs, the marketplace in which you will function, and any other factors that may directly affect your operation. You would be wise to offer best, worst, and most likely case scenarios. Once this groundwork is complete, you get to the ultimate point. You spell out your needs for capital and the timetable for its infusion. Investors will want to know about the sources and amounts of on-hand funding as well as any additional backing to be sought. Your credibility, to a great extent, rests on your frank discussion of financial risks and the measures you have already taken or will take in the future to minimize those risks. Finally, you address the point at which investors can expect to make a profitable exit from the project and what their options would be.
This short, concise, and probably quite simple few paragraphs is the final piece of the puzzle. It is what all else builds toward. It simply states what funding support you want and when you want it. Of course, it must also include a realistic description of loan interest, ownership share, or other consideration that the business is prepared to give in return.
Relevant source and reference materials should be easily accessible at the end of your narrative proposal. Financial data should be organized in tabular or graphic form. Among the documents that you need to include are clearly labeled current and projected income and expense statements, balance sheets, and cash flow statements. In addition to this essential financial information, you may want to include selected other reference materials such as management résumés, market survey summaries, pictures of prototypes or facilities, sample ad copy, and anything else that may help your reader get a clear and complete understanding of your enterprise.