How to Write a Business Plan

“To secure ourselves against defeat lies in our own hands...” Sun Tzu, The Art of War

Before you can hope for success in business, you need to know exactly what else you want: Where do you want to go? When do you want to get there? How do you want to travel? And what's your starting point?

A business plan is used primarily to convince financial backers to invest in a business, but even if you are planning a one-person, work-from-home, low-investment, low-overhead company, the business plan can help you in a number of way.

Don't panic: Writing a business plan is not difficult. You've already done most of the work in your head; now you just need to put those thoughts on paper. A business plan is just the hard copy version of your brilliant ideas.

What Can a Business Plan Do For You?

1. It will help you spot potential problems and ward off catastrophe
2. It will help you organize your ideas.
3. It will reveal gaps that exist in your mental plan.
4. It will help you define your talents, skills, strengths, weaknesses, opportunities, and liabilities.
5. It will help you determine where you are now and give you an idea of where you'll be in the future.
6. It will help you make decisions about the nature and future of your business.
7. It will help you define your goals for the company.
8. It will send a message to employees, customers, and potential investors, telling them that you are organized, business-like, and bound for success.

There is no hard-and-fast rule for writing a business plan, so take the basic elements outlined below and modify them to suit your needs. Then pretend you're a potential investor, a potential client, or your own competition, and read over the plan you've devised. What questions would those people ask after seeing your plan? Do you have answers for them? If not, go back to the beginning and think through your plan one more time.

What Goes Into a Business Plan? Any or All of These:

• Cover page
• Table of contents
• Executive summary
• Market analysis
• History and description of your company
• Marketing strategy
• Organization overview
• Product or service description
• Funding request
• Financial data
• Appendix

Let's take those items one by one and see just how simple this really is.

Cover Page Contains:

1. The name of your business.
2. The name, address, and phone number of the contact person.

Table of Contents Contains:

Exactly that - a list of the contents in your completed business plan.

Executive Summary

The Executive Summary (or Summary, if you feel the former is too pretentious for you) is a synopsis of all the items listed above. It's very likely that potential investors will read only the summary, so spend time on it. It's okay to write the summary after you've put together the rest of the package, but for goodness' sake, don't rush it!

The Summary should provide the reader with an overview of your business, explaining what it is, where it stands, and your vision for the future. Describe the nature and goal of your business, your employees and their assets, your product/s or service/s. Explain why your business is unique, or provides something unique to potential clients.

The Summary needs to be simple, succinct, and snazzy. Keep to within two pages and include only the essential information, such as:

• Your mission statement
• A brief history of your business, including the date of start-up
• Information about owners/management, their skills and experience
• Size, location, and type (sole proprietorship, partnership, corporation) of your business
• The product or service your company provides
• Information about any current investors
• Current status and expected growth of your business
• Future plans for your business

Market Analysis

The object here is to show potential investors that you've done your homework and that you are familiar with your market. Convince them you've researched the industry, that you've studied the competition, and that your target market is clearly defined in your plans.

Include in This Section:

• Any conclusions you've drawn about the market based on your research, including your take on the current status of the market.
• Information and conclusions about your particular target market.
• Everything you know (and it had better be a lot!) about your competition.

History and Description of Your Business

• The exact nature of your service/s or product/s.
• The type of business (sole proprietorship, partnership, corporation).
• Date of start-up.
• Location of the business.
• Facilities.
• Your strategy for making your business competitive.
• Any other information about the business history or status that is pertinent.

Marketing Strategy

• The needs of your target market.
• The number of potential clients for your product/service.
• How/why you are well suited to help your target market.
• Your pricing plan, including details of any group or individual discounts you provide.
• Trends that might affect the numbers or purchasing habits of your target market.
• A secondary market.
• Promotion and advertising strategy.
• Sales force description and strategy.

Organization Overview

• Describe the structure of your company.
• Provide information about the ownership or officers, including profiles and qualifications.
• Explain the departments and functions within your company.
• Provide information about the board members, including names, positions, backgrounds.
• Information about salaries and benefits your company provides to employees .
• Any additional resources related to the organizational structure.

Product or Service Description

• Give a detailed description of the service/product your company provides.
• Include copies of any relevant copyrights or patents.
• Describe any research and development projects, either in progress or planned.
• Stress the unique features of your service or product.

Funding Request

• Your current financial requirement.
• A projection (5 years) of future financial requirements.
• Detailed explanation of how the funds will be used.
• The type of funding you're requesting.
• The terms you desire and a suggested repayment plan.

Financial Data

• A financial history covering the past 3-5 years.
• Income statements.
• Cash flow statements.
• Collateral.
• Forecasted income (1-5 years).
• Balance sheets (quarterly for one year).
• Capital expenditure.

Note: Double and triple check your math!

Appendices

Here's where you put anything that might woo the potential investor. Some suggestions:

• Market share.
• Return on investment.
• Organization charts.
• Credit history.
• Resumes.
• Pictures of your product.
• Letters of reference.
• Market studies.
• Media coverage you've received.
• Licenses, permits, or patents.
• Any related legal documents.
• Leases.
• Contracts.
• List of consultants.
• Census or demographic information.

If all this seems overwhelming, then break it into sections. Work on only one section of information at a time. Enlist the help of your partners. Ask a friend or family member to help you gather and organize information.

Remember to take your time when writing your business plan. Details matter, and giving over a few weeks or even months to preparation will prevent headaches in the future.