Your business plan is the roadmap to the life of your dreams

 

More battles are lost in the strategy room than on the battlefield. Success depends on a solid plan. Your business plan isn’t a checklist of the things you think you need. It’s a detailed map that charts a course from where you are now to where you want to be 3 to 5 years down the road.

 

Why do I need a business plan?

A solid business plan is crucial to getting other people – like lenders and investors – on board to support your business. It proves you have vetted your idea and you are fully prepared to make it a reality.

Writing a business plan forces you to get crystal clear on your goals and your potential for success. Daydreaming about owning a business is one thing. When you write your business plan, you confront realities like income and expenses. You see if the business you’re dreaming of can stand up to the real world.

 

What does a business plan look like?

Your business plan should include:

• An executive summary
• A company description
• An objective statement
• Management structure
• Products and services
• Marketing and sales plan
• Financial analysis
• Financial projections
• An appendix

 

Executive Summary

The executive summary is a high-level description of your business. It includes your vision (why the business exists) and your mission (how you achieve your vision). It also summarizes the kind of services or products you provide, the ownership structure, and your 5-year goal.

 

Company Description

The company description is the nuts and bolts of your business. It includes the company’s registered name and any d/b/a associations, addresses of physical locations, and the names of important people like owners, board members, executives, accountants, and attorneys. It also includes a brief history of the business, industry, and business type, and a list of your product and service categories.

 

Objective Statement

The objective statement clearly states your business’s goals in both the short and long term. These should be specific, measurable goals. Not “become one of the best coffee shops in Seattle,” but “open 2 locations doing at least $1 million in revenue by DATE.”

This section is critical if you are seeking a loan or investment. It explains to investors why you need the funds and exactly how you will use them to achieve your goal.

 

Management Structure

This section outlines your business’s legal structure, such as sole proprietorship, partnership, or corporation. It lists all owners, along with what percentage of the business they own and the extent of their involvement. It should also list managers and any other key employees.

 

Products and Services

This section dives into the details of what you sell. List not only the products and services you offer or plan to offer, but also:

• How the product or service works
• Pricing structure
• Typical customers or clients
• Sales and distribution strategy
• How your product or service is superior to competitors
• How you plan fill orders
• Current or pending patents or trademarks

 

Marketing and Sales Plan

You do not need to include your entire marketing plan in this section, but you should be able to provide a simple, clear overview of your marketing strategy. How will you reach new customers or clients? How will you convince them to choose your business over your competitors? How will you develop customer loyalty to drive repeat business? Identify the unique strength that sets you apart from the competition.

 

Financial Analysis

This section lists assets and debts and shows exactly how money flows in and out of the business. List ratios that are an important measure of your business’s financial health: Net Profit Margin, Current Ratio, and Accounts Receivable Turnover. If you are seeking financing (or might be soon), include a statement of income or profit-and-loss.

A startup may not have any financial statements yet. You should still be able to list your assets and debts, and offer a realistic projected cash flow.

Be realistic and be honest. Inflated numbers are a deal-breaker for many lenders and investors.

 

Financial Projections

This section tells lenders how you will generate enough profit to make your loan payments and tells investors how you will provide a return on their investment.

Project monthly or quarterly sales, expenses, and profits over at least the next 3 years. Your projections should assume you have received the loan or investment you are hoping for.

Analyze your past financial statements and the state of the market. Your goals can be aggressive as long as they are realistic. You want to show your company will have enough cash flow to cover its existing debt plus payments on the new loan.

Be completely transparent by addressing any risk factors involved. Loan officers and investors want to know you have considered all the potential risks and taken some action to mitigate them.

 

Appendix

An appendix is not required. It’s your opportunity to list key information that didn’t fit any of the previous sections. Licenses, permits, certifications, contracts, patents, and other documents that have an impact on your business should be included.

 

 

Though it sounds daunting, your business plan should actually be short and to the point. Try to cover all the important details in 25 pages or less. This is a high-level strategic document, so don’t get bogged down in technical details.

You might have different versions of the business plan tailored to different audiences. For example, a lender will want to see detailed financial information. An investor may be more interested in your executive summary. And your team will get the most value from the marketing and sales plan. All versions will have the same basic information but may go into more or less detail on specific sections.

 

How do I write a business plan?

• Start with a ton of research. A general doesn’t march into battle without knowing the lay of the land. Expect to spend twice as much time researching your business plan as you do writing it.
• To write a solid business plan, you need to be an expert on your business, your products or services, your industry, your market, and your competition.
• Identify the goal of the plan. If you plan to obtain financing or attract investors, you will need a version of the plan that targets the things those audiences care about.
• Document everything. Your business plan will be a lot easier to write when you have pieces already in place. Create a thorough profile of your business you can use to draft the executive summary, company description, management structure, and products and services sections. Collect all of your financial documents, licenses, and legal documents so no detail is missed.
• Tap into your passion. Your business is not just facts and figures – it’s the realization of a dream. Write down exactly why you care about your business. What excites you about it? What do you want to accomplish? Why are you excited for the future?
• Your passion should shine through in every version of your business plan. Nobody will care about your business as much as you do unless you tell them why they should.
• Create a strategic marketing plan. You have no business without customers, so a marketing strategy needs to be a solid part of your business planning. A good marketing plan outlines your goals – like gaining market share, introducing new products, or entering new territories – and how you are going to achieve them.
• Be realistic. Your financial projections can be aggressive, but they still need to be grounded in reality. Lenders and investors are going to be familiar with your industry and market, so you can’t impress them with inflated figures. You’re more likely to hurt your chances.

 

You’re going into business for yourself. Not by yourself.

Writing a business plan is a daunting task. Don’t be afraid to ask for a professional opinion from the experts helping you get your business off the ground.