chapter 4

HOW TO WRITE A BUSINESS PLAN

"There never was a good knife made of bad steel."
- Benjamin Franklin

The business plan is often an unsung hero of success. Put simply, it's your stated guide on how you plan to make it in the competitive world of business. It's the culmination of your thoughts and research on what it'll take to make your business a success. Your business plan is also a great tool for marketing your ideas to potential investors or partners. As such, it is the perfect place to show off what makes your product offering unique compared to the rest of the competition—in addition to ironing out the details.

While your business plan needs to be unique to stand out, there are certain other provisions that each and every entrepreneur should consider before getting too far ahead. We'll walk you through what you should include in your business plan:

  1. An executive summary

    There's a lot to cover in a business plan, so you'll want to make sure that your main ideas are introduced up front. A brief executive summary at the start of your business plan should include: basic information about your product/service and your goals; an overview of your financials; and most important, a concise outline of your strategy moving forward. Think of it as a highlight reel, tailored specifically for the person reading your business plan. Our best advice: Be relevant, but be brief.

  2. Company basics

    First things first: you'll want to give an overview of your company. What, exactly, is your business? Let's say you want to start a café, but why? Do you aspire to be a national force, or do you hope to be a neighborhood hideaway providing atmosphere and respite to a local customer base? What do you sell—will you only serve coffee or do you plan on serving food complete with handmade bread and home-grown produce?

    In short: Who are you, what do you do, and why?

    This is your place to lay out the ideas of your business and the factors that will make it a success: location, unique product offering, or personal expertise. Not only will business partners want to see a clear identity, but they'll want to get a firm grasp on your ultimate strategy and, most importantly, what sets you above the competition.

  3. Organizational Structure

    This section is intended to relay the structure of your business—from business entity and management structure, to financial stake and the board of directors. While this may seem like overkill in a one- or two-person operation, it's still important if you plan on attracting investors. Afterall, no one wants to throw money at a business without a clearly defined structure.

    The first basic question to answer is who does what in your business? You may be the founder and CEO, but are you also the lead engineer? Do you have any partners or co-owners that also play important roles in business operation? If the answer is yes, then that information should find its way into your business plan.

    If your company is larger, you'll also want to include a breakdown of each department. The details may start to pile up, but the fact that they can get muddled is exactly why it's important to straighten them out—for your sake and to court investors.

    The basic idea behind presenting your company's structure is to show investors that you're organized and that you've accounted for every task that needs to be done—no small feat. For you personally, it's a great time to ensure that everything is ready to go smoothly. If you realize that you're going to be doing everything yourself, then you may want to consider spreading the workload around or hiring new personnel.

  4. Survey of your market

    This boils down to identifying and defining a target audience for your product and addressing any other businesses on the competitive landscape. You should start with an overview of your industry, pointing out historic trends, its current size, and how it's expected to grow in the future.

    For example: if you're looking to design a mobile app for Apple's app store then you should cite how many people own iPhones and whether that number is projected to increase. In addition, you would want to check on the trends in app popularity—are more people downloading apps or has it plateaued? And even if it has, is the market large enough to still go after?

    For your audience, it's important to define a target market that you believe you have a reasonable shot of capturing. Continuing with the app example: if you were making a game, what percentage of the market would actually be interested in it? Certainly a younger crowd might be easier to target than an older crowd who may be more interested in a news or finance app. Conversely, an app that aggregates stock market data probably wouldn't be a big hit with the teen demographic.

    Competitive analysis is the final consideration. To start, who are your competitors? You'll need to predict your share of the market, how difficult it will be to break into, how you'll price competitively, and emphasize what makes your product unique. This part of the analysis is meant to address the strengths and weaknesses of your product in relation to the market that you're seeking to enter.

    As an example: if you plan to open up a café on the corner, you'd need to account for other restaurants in the area. You may be able to lure customers away from their fast food habits, but national coffee chains may prove tough competition if that's a focus of your business.

    To round out your look at the market landscape, you should include any relevant local and state regulations. While operating a café probably doesn't have the amount of red tape that a fireworks business does, you should still mention the more common regulations, such as zoning, along with the difficulty and expense in obtaining specific licenses, if they will have an impact on business. After all, you could own the only building in town zoned to allow a bar, and that could mean great business.

  5. Product description

    Every business needs a product and you'll want to be sure that your business plan highlights your unique offering in full. While not every product is going to be a new invention, it still must target a need in the marketplace.

    Any business plan should include a complete description of your product or the services that you plan to offer. What does your product do? What makes it stand out? You should also include in your plan any important details surrounding the purchase of your product or services. For example, is it a single purchase or a subscription service?

    Aside from the basics, you should mention any intellectual property that's relevant. If you are applying for patents, own them, or are licensing some, it should be stated here. While this probably won't come up too much if you're starting a café, it could be critical if you're designing a mobile app or other piece of software.

    Finally, what are your plans for the product? Unless you're selling pasta sauce based on your family's generations-old recipe, you'll probably need to update your service or product at some point. So, how is that going to happen? Be sure to outline any procedures that you're considering for the continued improvement of your product—be it periodic reviews and updates, or hotfixes in case any complications pop up.

  6. Marketing strategy and business logistics

    After you've identified your product offering and who your target audience is, the next logical question is how will you pair them up?

    Sadly, unless everyone already knows about your business before you open, you're going to need to do some sort of marketing—be it a newspaper ad, a catchy sign, or a website. No matter the strategy, it needs to be in your business plan.

    A marketing strategy is also more than simply how you plan to build awareness; you'll want to cover the logistics of your business, as well. How many people are you going to attract; how will you supply that amount of product; how will you represent your company while attracting your customers? Furthermore, who's going to be doing the job? You'll want to mention if you have a sales team, if you plan to hire an agency, or if you'll be doing it yourself.

  7. Financial overview

    The bottom line: it's not the most romantic part of running your own business, but it's one that's impossible to ignore. It's critical that you have a sound plan to fund the business.

    Since this is a guide for starting a business, much of this information will be based on the previous sections of your business plan—especially any research into your target market. For now, however, make sure you list what you can. Much of the business numbers will come later, but you should be able to provide an accurate accounting of your starting capital and the initial expenses you'll incur—be they from leasing office space or the starting salaries for yourself and any employees.

    After you've been operating, however, your goal will be to show your expenses, profits, and a reasonable projection on what those numbers will look like years down the road. Regardless, you should include the sources of funding that you have, be it venture capital or your personal assets.

    This data is of great interest to potential investors, partners, and creditors. Not only that, but it should be of immense interest to you. Having a solid plan to follow can help ensure that you're not trying to grow too much too quickly and that any risk being taken is a manageable one.

    Aside from just the bottom line, you should include a brief expense report that details where your funding is going to end up.

Optional Sections:

    Funding Requests

    As previously stated, a business plan is a great way to show off and woo investors. If that's your current audience, or if you need extra funding to get started, then you can add a section to request those funds.

    Whenever you request funding you'll need to be thorough and specific:

    • How much is needed?

    • Why? How will the money be used?

    • Will more funds be needed in the future?

    • What are your future financial plans?

    • What are your financial projections?

    It's fairly basic, but anyone parting with their money will want to know that you have a sound strategy for managing it.

    Appendix

    If you'd like, you can add on an appendix to tie together any loose ends—be it résumés, credit reports, legal documents, or anything else. Naturally, some of these documents are only relevant for certain audiences. For example, potential investors would probably like to see photos and descriptions of your product, while a bank would likely be more interested in your credit history and financial planning.

    Either way, an appendix is your section to add any additional information that you feel is relevant.

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