Writing a good business plan is more than just jotting down goals for your new business and estimating how much money you’ll make. Developing a business plan is like test-driving a new car; when you know what’s under the hood, how the car handles around corners and how quickly it accelerates, you can make an informed purchase. Your business plan serves the same purpose; it identifies your market, analyzes the industry and factors in probable costs and profits.
Writing the Plan
Keep it brief, keep it truthful and back up your logic with figures. Clarity is the key to writing your plan. Use everyday language and outline your plan, grouping similar ideas under the same headings. Edit your draft to remove all extraneous comments. A banker or investor doesn’t have time to wade through lengthy explanations. Keep only the essential information and include numbers and statistics.
Business Plan Layout
The business plan layout should visually draw the reader’s attention. Separate the information into categories with clear headings. You can add categories depending on the type of business you’re starting, but standard business plan headings include Objectives, Market Analysis, Industry Predictions, Experience and Knowledge, Customer Benefit, Operations, Short and Long-Term Goals and Financing. If you’re writing a plan for a business expansion, include Business History in one section.
Objectives and Market Analysis
The backbone of a business plan starts with the business owner’s objectives and the potential success of the business based on current and future market analysis. Your market is the group of customers that are likely to purchase your goods and services. Include figures or charts that illustrate recent market trends, economic forecasts, regional demographics, regulations and any other substantial factor that is likely to affect the market for your product or service.
Your business objectives might be feasible, and your market analysis might show customer need, but an investor also wants to know about the industry as a whole. The Industry section of your business plan should list current competition and the likelihood of future competition. If you want to open a pharmacy in a small town that currently has no pharmacy, the competition in your industry is very different than if you want to open a pharmacy in a metropolis that already has a pharmacy on nearly every corner and additional branches in every supermarket. Your business must stand out. Maybe you offer free delivery or online ordering that will set you apart in the industry.
If you’re new to the business world, taking a small business management or accounting course is a valuable investment in the future of your business. The Service Corps of Retired Executives (SCORE) estimates that about seven out of every 10 new businesses that hire employees will survive two years, but only half will still be in business after five years. Beating those odds means understanding how to run a business. The Operations section of your business plan details management structure, employee training, communication, production or sales methods and office procedures. Explain your proposed bookkeeping, invoicing, debt collections and other procedures you intend to use.
Commercial lenders and venture capitalists want to see a comprehensive business plan before financing a small business startup or expansion. The Financing section of your business plan details how much capital you’re willing to invest, how much more money you need, and how you plan to spend that money over the course of your business. Include projected net profit, projected turnover, expected loan repayment rate and profitability expectations. Equity investors want to know if dividends are available, the rate at which you expect to realize profits and the distribution or reinvestment of those profits. Retaining a certified public accountant helps ease investor concerns over financial matters.
Verify and Document
At the end of your business plan, include appendices that back up your projections. Copies of demographics and statistics, applicable articles from the business section of a regional newspaper, copies of market research and photos or descriptions of the services or products you intend to sell are all valuable documentation. Include copies of templates and forms you intend to use for forecasting cash flow, results of test marking and samples of promotional brochures. If you’re seeking funds for business expansion, include a detailed history of your current business practices and growth.