Business Plan Format Made Easy: How You Can Do One Yourself!
Reality check: majority of start-up businesses fail.
In the cut throat world of business, hard work alone doesn’t guarantee success. Neither does having a good idea. You need to sketch out your business, up to the nitty-gritty, before you can believably say it has a chance. You need to identify your contractors, suppliers, facilities and equipment. You need to know if a market exists, and whether your packaging and pricing choices will appeal to your target consumers. You have to scope out the rivals, and find your competitive advantage. You need to identify the key people that will handle your operations. You have to foresee problems, and figure out early how to address them.
You need to have a business plan.
What is a business plan?
A business plan is a written document that summarizes your venture, in a way that highlights the company’s goals and how management plans to achieve them. A business plan must be able to show that the business is feasible: that it has low risk of folding up and high likelihood of making a profit.
There are two main reasons why entrepreneurs are recommended to write a business plan.
First, a business plan can serve as internal guide for the company’s daily operations. A business idea may be completely fleshed out in the owner’s mind, but seeing it all outlined on paper surfaces considerations important in getting from A to B. It’s not unusual for business owners to suddenly realize that, after writing a business plan, their idea may not work after all. Isn’t it better to figure viability early before you’ve invested time, money and effort in your business?
Second, a business plan can be a persuasive tool in getting financing. Put yourself in the shoes of a lender or investor. Don’t you need to see a complete roadmap of a business venture before you part with your cash?
What should you find in a business plan?
There are many business plan formats that you can use. The content of a business plan depends on how you’re going to use the document. Is it just for your personal reference? Then perhaps you don’t need to go into detail regarding operations you already know. Is it for the guidance of your team members? Then perhaps milestones and deliverables per operational stage must be outlined explicitly. Is it for applying for a loan? Then you need to invest time crafting the section on financial projections, so that you can impress your lender with your potential to pay back what you’ll owe.
Wherever you’re going to use your business plan for, the following are standard parts of a business plan format:
Executive Summary. Usually written last, the Executive Summary provides an overview of the entrepreneur, the product or service being offered, and the product’s or service’s market viability. Think of it as like the abstract of a research paper, although it’s usually a page or two long. The Executive Summary highlights your company’s competitive edge: that little something that makes you stand out from other players in the industry. It also provides a synopsis of how well and how soon the company can turn a profit.
Mission Statement. Sharing the company’s Mission Statement can help readers understand what the business aims to accomplish. “To be one of the Top 3 producers of cocoa-based candies in Oregon by 2015” is an impressive goal to work for, and tells everyone that you have a vision for your company’s growth. Note: all the other details of your business plan must be consistent with your mission statement.
Company Background. This section provides information about your company, including the origins of your business (how did you come up with the idea?), your organizational structure, developments in your company thus far (not necessary if your business is a start-up), and your business’ place in the industry it belongs to.
Products or Services. This part of the business plan format provides a detailed yet concise description of the products or services your company is offering consumers. Best features must be emphasized to show how consumers can benefit from patronizing your company instead of the competition.
Market Analysis and Marketing Strategy. How do you plan to advertise, sell and distribute your products or services? This section shares the characteristics of your target market, an intelligent estimate of the demand, your marketing approach (include pricing, packaging and delivery plans) and your sales forecast.
Management Plan. This part shares the experience and qualifications of the key people in your company’s management. Their detailed résumés can be included in your business plan’s appendix section.
Operational Plan. Here is where you’re asked to account for the “how?” of your business. Information needed in this section of the business plan format includes: facilities (e.g. factory location and lay-out, costs of factory overhead), equipment (types of equipment to e used, sources of equipment, estimated cost of maintenance and repairs) and labor (e.g. labor availability, costs of labor, labor productivity) needed. The specific processes involved in sourcing supplies, production, marketing and distribution must also be described.
Critical Risks and Problems. This section asks for an honest discussion of all possible hiccups that may be encountered in the course of your business. Details of how you plan to avoid or manage the risks should also be included.
Financial Plan. Numbers! This section includes the company’s financial standing as well as financial projections for the future. Relevant data includes the project cost, your business’ cash-flow statement, profit and loss statement, estimated Return of Investment (ROI) and if seeking financial assistance, proposed loan repayment schedule.
The order these sections should appear in your business plan depends on what you want to emphasize. The same goes with how much detail you should include in each section, which is why a business plan can be as short as 10 pages of text or as long as a couple of hundred.
Don’t get intimidated if all these information seems overwhelming at first. Take writing your business plan one section at a time. Trust me; you’ll be glad when you’re done!