What To Place In Your Business Plan

July 30, 2009

Every business – both large and small – needs to have a business plan in place. Especially as an entrepreneur, you’ll find that this helps to guide you in how you’re starting your business, how you’ll operate your business, and how you’ll fund your venture.

Every business – both large and small – needs to have a business plan in place. Especially as an entrepreneur, you’ll find that this helps to guide you in how you’re starting your business, how you’ll operate your business, and how you’ll fund your venture.

Every business plan has essential components. They combine to form a road map to your business for you, for your employees and for your funding sources.

First is the overview. It provides a summary of your business’s history (if business is currently operational. If not, this may be omitted), your business model (products/services offered), your company vision or mission, and outlook on future operations.

The market analysis is also pertinent. It reviews the current market situation, such as industry leaders, trends, customer segmentation and target market. First, give a synopsis of the industry – discuss how long this industry has existed, which products or services exist in your product or service category, and how much money is generated in sales annually for the category as a whole. Noting the industry leaders is also important; the important players and how much market share they have earned may have an impact on your business’s strategy. Is there room for another player? Does no one company currently dominate the category? These questions should be addressed in your market analysis.

Industry trends should also be examined briefly. What has been the industry’s growth over the past five years? Is it increasing, declining or has it leveled off? How long has the industry existed? Is it in a state of maturity, or is it still in its infancy? This will also affect your overall business strategy. A discussion of customer segmentation and your target market is also included in this section. Who are you targeting as users of your product or service? Knowing this will influence all of your business decisions. What are the demographics of your customer (age, gender, income, education, occupation, etc)?
It is then necessary to discuss your strategy. What are your core strengths (as positioned against your competitors’ offerings)? What areas present a weakness for you, and how do you plan on addressing those? Which external situations offer an opportunity for you to take advantage of, and conversely, which external situations threaten your business’s success? These are all important points to address in any business plan.

A discussion of your business’s product or service should also be included. What are you selling? How have you positioned it in the marketplace? What makes your product or service competitive, and why would consumers purchase your product over the competition? Do you have a long-term product development strategy, or will you be concentrating on your existing products? These matters should all be addressed.

Your sales and marketing strategy should be covered as well. What is your marketing strategy? Which vehicles will you use to publicize your product offering? Advertising, public relations, point-of-purchase materials and product literature, packaging and sell sheets are all methods of increasing awareness. Depending upon your budget restraints, you may decide to concentrate on public relations, as it is usually lower in costs than is advertising. However, focused attention must be given to your product’s literature, packaging and sell sheets, as this is your primary information exchange with consumers.

Your operational structure should be discussed in detail in your business plan. This will include your human resources capital, including but not limited to your business’s leadership. Is it a sole proprietorship? Do you have a partner? (If so, is it a limited or general partnership?) Have you taken on investors? Have you incorporated your business and, if so, is it a C or S corporation? Your management structure also falls into this category. Who are your leaders? What is their background in this industry? What form of compensation do/will they receive? Who else do you have in positions that have the potential for company-wide impact, and what are their qualifications? All of this is necessary to be included in your business plan.

Your company’s financial situation should also be discussed. If this business plan is for an existing business, historical data should be used. Prospective investors or bank representatives will want to see your company’s income statements, cash flow statements and balance sheets for the last three to five years. Prospective data will also be included (for both existing and start-up firms). Forecasts for the next five years are needed for your business’s income statements, cash flow statements, balance sheets, and capital expenditures. Also in this section should be an analysis of your financial information. Provide a ratio and trend analysis for your historical and prospective data.

You should also prepare an appendix, which would be provided upon request. Documents that could be included are: credit history, market studies, management personnel’s resumes, product patent information.

More resources are available at sbc.gov and inc.gov.