When a person decides to start a business, it can be an exciting and overwhelming time. Like any new endeavor, people are often anxious to get started, but this can cause them to skip steps such as creating a business plan, which is vital to their success. A business plan is a carefully thought-out document that describes a business, its goals, and how one plans to achieve them. It is important in that it forces entrepreneurs to thoroughly examine and prepare their business. While it is never too late to create one, it should ideally be one of the first things completed. Not only does a business plan help with the planning and execution of the business, but it is also a crucial part of obtaining funding. Investors, banks, and other financial institutions need to determine whether a business is a viable candidate for funding. Knowing that an entrepreneur fully understands their business and both has a plan and the ability to create a profit plays a large part in whether they are willing to offer financial assistance.
In creating a business plan, one should start by asking themselves a few important questions, such as how they plan to generate a profit, how they will operate the business if profits are low, who the competition is, and who their target market should be. The answers to these questions will make it easier to create one’s business plan. Although no two business plans are the same, there are certain elements that are not only common but necessary.
An Executive Summary
The executive summary addresses the main points from the other sections of the business plan. It is featured at the beginning of the plan, but it should be written last. As one of the most important sections of any business plan and the first thing that is seen by investors or whomever the intended audience is, it requires careful thought, as a poorly written executive summary has the ability to capture or lose the interest of the individual who is reading it. For this reason, this section should be no longer than two pages, and it must be enticing enough that the reader wants to read further.
Identifying Your Business Opportunity
In this section, entrepreneurs will describe their business and what they do in terms of products or services. This includes explaining it in a way that people unfamiliar with it can easily understand. The name of the business and the legal form of ownership may be included in this section as well. Other information that may be added to this section includes whether a business is new or established, the target market or industry sector, and what makes the business unique.
Marketing and Sales Strategy
A business plan must also illustrate that one has a thought-out plan in terms of how their business’s products or services will be marketed to the public. In this section, the business owner must describe who their customers are and what methods they intend to use to reach them. One should be able to identify who their competitors are and why customers will find their services or products better than the competition. Businesses should also include any branding information and their pricing strategy.
An important part of a business’s success is in having a strong team. In this section, create an organizational chart or outline that illustrates the staffing needs of the business. This includes management and desired qualifications, such as having an MBA, for example. Include a description of each position, the owner’s biography and biographies of any current members of management, and any other relevant information.
Use this section to explain the operational aspects of the business. Include hours of operation, suppliers, inventory and quality control, account management, and customer tracking. Business owners should determine if they will sell on credit and what their credit policies will be. Address its location and whether it will be home-based or in a leased space. If leased, consider the size and information about the lease agreement. Because most businesses depend on technology to some degree, one should also include information about the IT requirements, such as support services and what type of IT systems are needed.
This portion of the business plan supplies information that addresses financial forecasts or projections. It is a very important section, particularly when one is attempting to get a loan. Projected sales, cash flow statements, and profit and loss projections should be included for at least three years. This section should also include a summary that outlines the amount of money necessary to start the business and the amount of money that the owner has personally invested. One should make note of how they plan to repay the loaned money, sources of revenue, risks, and contingency plans. With this information, businesses can compare themselves to similar businesses in the area and in the same industry in general.
Other Useful Sections and Documentation
Other important sections that are frequently a part of business plans include an appendix and an implementation plan. An appendix is a section that includes supporting documentation such as licenses and permits, charts and graphs, and legal documents such as patents or registered copyrights. The implementation plan outlines the path that is to be taken to implement the business plan. This includes setting tasks, deadlines, goals, and milestones.
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