Business Plan

A business plan defines your business in precise terms, identifies your specific goals, and serves as your firm’s resume. The basic components of a business plan include:

  • an introduction and overview of the business
  • the skills and experience of the business owner
  • details on the products or services offered
  • an analysis of the potential market for those products or services
  • specific information that sets the business apart from the competition
  • information on how the public will learn about the business
  • an income statement and cash flow analysis for the business
  • details on how the business will be managed on a day-to-day basis
  • a summary of why the business is likely to be successful

The business plan helps you organize your own thoughts and plans for the business and requires you to formalize and commit to those plans. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions, while staying focused on the entity’s goals. The plan can also be used to inform sales personnel, suppliers, and others about your operations and goals and portray your professionalism.

Business plans are used to keep invested parties (yourself, your partners and/or investors) informed about the company’s operations and goals. Perhaps most importantly, a business plan will be a crucial part of any business loan package. It provides specific and organized information about the company and can explain how a loan will eventually be repaid.

The following outline provides more details of a typical business plan and can serve as a guide. You should adapt it to your specific business. Breaking down the plan into several components helps make drafting it a more manageable task.

Introduction

  • You should give a detailed description of the business.
  • Outline the business goals.
  • Discuss the ownership of the business and provide the legal structure.
  • List the skills and experience that you personally bring to the business.
  • Discuss the advantages you and your business have over your competitors.

Marketing

  • Discuss details of the products/services you will offer.
  • Identify the customer demand for your product/service. Who will buy it and why? What are you sources for this information?
  • Identify your market, its size, and locations. How far will people come for your service?
  • Can they buy it online? What are the ages, income ranges or other demographic information of your primary customer? Is your primary customer male, female, retired, teenaged, rich, poor, educated, uneducated, a veteran, a homeowner? Do they drive a car? Do they go to a gym? Define your customer and determine how many of those potential customers are in your area.
  • Explain how your product/service will be advertised and marketed.
  • Explain the pricing strategy. How much will you charge, and why?

Financial Management

  • Explain your source of initial funding, and the amount of initial equity capital.
  • Develop a monthly operating budget for Year One.
  • Develop an expected return on investment & monthly cash flow for the first year. If someone lends you money, how soon will they be paid back?
  • Provide projected income statements and balance sheets for Year One and Year Two.
  • Discuss your breakeven point. At what point will you have recovered your own initial investment in the business, and at what point will other funders recover their investment?
  • Explain your personal balance sheet and method of compensation. How will you pay yourself? How often and how much?
  • Discuss who will maintain your accounting records and how they will be kept.
  • Provide “what if” statements that address alternative approaches to any problem that may develop.

Operations

  • Explain how the business will be managed on a day-to-day basis.
  • Discuss hiring and personnel procedures. How many employees do you need? Will they be full time or part time?
  • Discuss insurance, lease or rent agreements, and other issues pertinent to the daily operation of your business.
  • Account for the equipment necessary to produce your products or services.
  • Account for production and delivery of your products and services.

Concluding Statement

  • Summarize your business goals and objectives and express your commitment to the success of your business.
  • Once you have completed your business plan, review it with a friend or business owner. Make an appointment to review it with local representatives of the SBA.
  • When you feel comfortable with the content and structure make an appointment to review and discuss it with your lender. The business plan is a flexible document that should change as your business grows.

SOURCE: www.sba.gov