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BUSINESS PLANS

The Essential Guide to Writing a Business

Plan
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 Image credit: Startup Stock Photos

Carolyn Sun
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Grow Your Business,
President Dwight D. Eisenhower once said, “In preparing for Not Your Inbox
battle I have always found that plans are useless, but Stay informed and join our daily
planning is indispensable.” If you’re starting a business, you newsletter now!

should have a business plan regardless of whether you’re

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bootstrapping it or looking for outside funding.
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The best sorts of business plans tell a clear story of what the
company plans to do and how it will do it. Given the high
failure rate of startups in their first year, a business plan is also an ideal opportunity
to safely test out the feasibility of a business and spot flaws, set aside unrealistic
projections and identify and analyze the competition.

A business plan doesn’t need to be complicated, but for it to serve its purpose and
set you up for success, it must be clear to whomever is reading your plan that you
have a realistic handle on the why and how your business will be a success.

To get you moving in the right direction, here’s a guide on how to write a business
plan.

Overall tips

There’s a lot of advice in the infosphere about how to write a business plan, but
there’s no single correct way. Your approach depends on your industry, who is
reading your plan and what the plan is intended for. Are you trying to get funding?
Sara Sutton Fell, founder of FlexJobs, a job site for flexible telecommuting jobs, says
her business plan was an initiator for more in-depth conversation with potential
investors. “A plan does help to see if investors and entrepreneurs are on the same
page with general expectations for the business,” she says.

A business plan serves many purposes, but there is universal consensus on the
following when it comes to your business plan:

Have several versions tailored for specific audiences: “One of the mistakes
that inexperienced business owners make is not understanding who they’re
writing the plan for,” says David Ciccarelli, a small business owner who got
consultation from his local Small Business Association (SBA) when he was
starting his company Voices.com, which connects employers with voiceover
talent.

Your plan is a living document: Tim Berry, the founder of a business planning
software company Palo Alto Software, took his company from zero to $5
million in sales in its first three years. To do so requires frequent review and
close tracking, says Berry, who met with his management team every month to
review the plan versus what actually happened -- and then to revise. “There is
no virtue to sticking to a plan if it’s not useful and responsive to what actually
happens,” he cautions.

Be realistic about financial estimates and projections: “When you present a

plan to bankers and financiers, or even to your employees, people will get way
more excited about what’s real rather than some huge thing that’s never going
to happen,” says Ciccarelli. So present an achievable sales forecasts based on
bottom-upwards information (i.e. how many units per month get sold in how
many stores) and stop over projecting profits.

Writing your business plan is about the process and having a blueprint:
Your business plan “reflects your ideas, intuitions, instincts and insights about
your business and its future,” according to Write Your Business Plan
(Entrepreneur, 2015). The plan serves as a safe way to test these out before you
commit to a course of action. And once you get your business going, the plan
also serves as a reference point. “I still print the document,” says Ciccarelli.
“You’re capturing it in time. If you’re changing it all the time, you kind of don’t
remember where you were last year.”

Back up any claims: Follow up your projections and assertions with statistics,
facts or quotes from a knowledgeable source to lend your plan credibility.

Presentation counts: Reading any long, text-heavy document is hard on the

eyes, so format with this in mind. Consider formatting your text pages into
two-columns and break up long passages with charts or graphs. Arial, Verdana
or Times New Roman are standard industry fonts.
Writing your business plan isn’t busy work or a luxury; it’s a vital part of the process
of starting a business and arms you with information you need to know. So, let’s get
into what information goes into your business plan.

Related: Business Plans: A Step-by-Step Guide

What goes into a business plan?

A typical business plan is 15 to 25 pages. Its length depends on a variety of factors,

such as whether your business is introducing a new product or belongs to a new
industry (which requires explanation to the reader), or if you’re pitching to bankers,
who generally expect to see a traditional written business plan and financials.

“Most equity investors prefer either an executive summary or pitch deck for first
contact, but will often request a more detailed plan later in the due diligence
process. Potential customers don’t need all the details of your internal operation.
Your management team needs access to everything,” says Akira Hirai, managing
director of  business plan consulting service Cayenne Consulting.

Most business plans include these seven sections:

1. Executive summary: The executive summary follows the title page and explains
the fundamentals of your business. It should provide a short and clear synopsis of
your business plan that describes your business concept, financial features and
requirements (i.e. cash flow and sales projections plus capital needed), your
company’s current business position (i.e. its legal form of operation, when the
company was formed, principals and key personnel) and any major achievements in
the company that are relevant to its success, including patents, prototypes or results
from test marketing.

2. Business description: This section typically begins with a brief description of

your industry and its outlook. Get into the various markets within the industry,
including any new products that will benefit or hurt your business. For those seeking
funding, reinforce  your data with reliable sources and footnote when possible. Also
provide a description of your business operation’s structure (i.e. wholesale, retail or
service-oriented), who you will sell to, how you will distribute your
products/services, the products/services itself (what gives you the competitive
edge), your business’s legal structure, your principals and what they bring to the
organization.

Here are some worksheets from Write Your Business Plan that will help determine
your unique selling proposition and analyze your industry.
Click to Enlarge+

3. Market strategies: Here is where you define your target market and how you plan
to reach them. Market analysis requires research and familiarity with the market so
that the target market can be defined and the company can be positioned (i.e. are
you a premium product or a price-competitive product?) in order to garner its
market share. Analyze your market in terms of size, structure, growth prospects,
trends and sales/growth potential. This section also talks about distribution plans
and promotion strategy and tactics that will allow you to fulfill your plans.

Here is a worksheet from Write Your Business Plan that will guide you toward
identifying your target market.

Click to Enlarge+
4. Competitive analysis: The purpose of the competitive analysis is to determine
the strengths and weaknesses of the competitors within your market, strategies that
will provide you with a distinct advantage, the barriers that can be developed in
order to prevent competition from entering your market, and any weaknesses that
can be exploited within the product development cycle. Show why your business will
be a success over others.

5. Design and development plan: You will only need this section if you have a
product in development, such as an app. The purpose of this section is to provide
investors with a description of the product's design, chart its development within the
context of production and marketing and show a development budget that will
enable the company to reach its goals.
6. Operations and management plan: This section describes how the business
functions on a daily basis, its location, equipment, people, processes and
surrounding environment. If you have a product that needs to be manufactured,
explain the how and where; also, describe your work facility, the personnel, the legal
environment (such as licensing, permits, special regulations, etc.), key suppliers and
inventory. This section will also highlight the logistics of the organization such as
the various responsibilities of the management team and the tasks assigned to each
division within the company.

7. Financial factors: Financial data is always at the back of a business plan -- yet it’s
extremely important. The financial data can include your personal financial
statement, startup expenses and capital, your projected cash flow statement and 12-
month profit-and-loss statement. PaloAlto’s Berry stresses that if you’re going after
investors, you’ll need to show a cash flow statement and a break-even analysis -- or
the breakdown to see where your business breaks even.

The best way to prepare for running a business is to have all the components of the
plan ready. So if you are are showing a prospective lender your business plan on 10
PowerPoint slides and get asked about something that isn’t in the presentation, you
can speak knowledgeably and follow up with a more fleshed out plan -- and quickly.

Some business owners hire business plan writing services. Cayenne Consulting’s
Hirai says that his clients generally fall into one of two categories: those intimidated
by the process and those who could write the plan themselves but would prefer to
spend their time on other priorities.

If you find yourself intimidated or stuck, you can always write the parts of plan
yourself that you understand and hire a consultant or researcher to help with parts
that you find confusing.

Or if you’re a startup watching every dollar, then tap the free services of the federal
Small Business Association (SBA). Every state has a district office. Through the SBA,
you can get business plan assistance through its various resource partners, which
includes Women's Business Centers, Small Business Development Centers and
Service Corps of Retired Executives.
Allow this business plan template for Business Plan for a Startup Business to guide
you:

Related: Business Plans: A Step-by-Step Guide

Different types of business plans

Generally, business plans can be divided into four categories:

Working plan: This plan is what you will use to operate your business and is
not meant to be admired. This version of your plan is an internal document
and will be long on detail, short on presentation. Here, you can omit
descriptions that you need not explain to yourself or your team.

Mini plan: The reader may request a mini plan, or a condensed version of your
business plan (1-10 pages), which includes most of the same components as in
a longer traditional plan -- minus the details and explanation. This includes
the business concept, financing needs, marketing plan, financial statements
(especially cash flow), income project and balance sheet. This shorter plan is
not meant to be a substitute for a full-length plan, but serves as an option to
present to potential partners or investors.

Presentation plan: Whether you’re using a pitch deck or a written business

plan, the information in your presentation plan will be, more or less, the same
as in your working plan but worded differently and styled for the eyes of an
outsider. The reader of your presentation plan will be someone who is
 unfamiliar with your business, such as investor or venture capitalist, so lose
any jargon or shorthand from your working plan, which only makes sense to
you. Also, keep in mind that investors will want to see due diligence on your
competition threats and risks as well as financial projections. In addition, looks
count, so use the color printer, a nice cover and bindings and the fancy paper
stock. Or else, if you’re presenting your business plan as a PowerPoint
presentation, you can use this business plan presentation template.

What-if plan: This is a contingency plan -- in case your worst case scenario
happens, such as market share loss, heavy price competition or defection of a
key member of your team. You want to think about what to do in the face of an
of these, and if you’re trying to get outside funds, having a contingency plan
shows that you’ve considered what to do if things don’t go according to plan.
You don’t necessarily need this, but if you are getting outside funding, then it
can strengthen your credibility showing that you have thought about these
what-if possibilities. Even if you’re not going to get outside funding, shouldn’t
you be thinking of the what ifs?

If four plans seem like a mountain of work, don’t panic. Select two to start off -- a
working plan and a mini plan, which will be an abbreviated version of your working
plan.

Take several months to write your business plan. Consider it a journey, not a sprint.

Related: The Ultimate Guide to Writing a Business Plan

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