You are about to embark on the magnificent journey of being your own boss. This new adventure will require a lot of work and may seem a little scary, but with a bit of planning, the fear and risks can be mitigated. A business’s success is determined by the strength of the foundation. To start a successful business, some planning must be carried out. Never jump into anything business-related without a plan or, at the very least, an outline. A business plan creates a firm foundation and allows a prospective business owner to look at all aspects of their prospective business. A business owner looks at all aspects of their business. The plan shows how viable a business idea is. It will give the business owner some much-needed direction in the startup phase. There are nine parts to a traditional business plan, including the executive Summary, company description, market research, organization and management, Service or products, marketing and sales, funding request, financial projections, and Appendix.
Executive Summary
The Executive Summary is located at the beginning of your business plan, but it’s the last section that you write. In this section, you briefly overview your company, what products or services you will provide, and your company mission statement. Try to keep this section down to a couple of paragraphs to a page at the most. You want your reader to quickly understand what your business will do and how you plan on running it. The Executive Summary is essential because it is used for prospective investors. It is used as the hook to make them want to read deeper into the plan. It also shows investors the potential for the business.
Company Description
In this section, you have the opportunity to provide a more in-depth description of the business. It is important to go into detail here. This section has two main objectives: explaining the legal structure of the business and what the business will do. Under legal structure, the topics should be.
- Defining the company’s legal structure and ownership.
- Introducing the management team.
- Providing the company history.
- Mission statement.
Next, explain what your business will sell or provide as a service. Explain what kind of products or services the company offers, what problems your business solves, and how your product or Service differs from your competitors. Also, go into detail about who your business will serve, other companies, or regular consumers. Lastly, list any competitive advantages you may have. Some competitive advantages include.
- Leveraging economies of scale.
- Superior skills and abilities in your industry.
- Efficient operational processes.
- Innovation
- Strategy
- Lower barriers to entry.
In Summary, the company description allows the reader to gain some more detailed information about what the company is really about.
Market Research
The depth of new business market research can make or break a company. Market research allows you to develop a good understanding of your chosen industry and target market, as well as what your competitors are doing. Market research allows you to identify competitor strengths and weaknesses. This section will help you understand if the proposed business is Competitive. In this section, you need to provide the following:
- An overview of your industry, including size, growth rate, and significant customer groups.
- Target market traits, buying habits, common problems, or trends.
- The market share percentage you expect to have upon starting and what you expect to gain over time.
- Your pricing structure and any discounts you plan to offer.
- Competitive analysis of the strengths and weaknesses of competitors.
- How will you comply with the regulatory standards of your industry?
This must sound a little overwhelming, but in the technology age, much of this information is easy and relatively cheap to obtain. You can obtain this information in a few places
- Bureau of Labor Statistics and Economics & Statistics Administration.
- State and local Chamber of Commerce websites
- local chamber of commerce
- Articles in trade journals
- Interviews, focus groups, questionnaires, and surveys from your target market and trade associations
The Market Research section is for you to obtain a clear picture of your industry and your competitors. It also shows how your business will fit into the fray.
Organization and Management
The organization and management section is a place for you to introduce who will run the company. This is where you show how each person’s unique skills will contribute to the company. This section allows the reader to know who your management staff will be and show how they are qualified for their position. A Skilled Staff can give a business a competitive advantage. Lastly, an organizational chart showing who is in charge of each group within the company should be added.
Service or products
The Service or Products section includes descriptions of each item you sell or the services you offer. This section will require you to describe the following.
- each product or Service
- How much each product or Service will cost
- Target customers and why they will purchase
- Customer needs for each product or Service.
Lastly, suppose you own or plan to own intellectual property, such as patents or copyright material. In that case, it will also need to be added in this section.
Marketing and Sales
The marketing and sales section allows you to explain how you will obtain new customers and how you will retain existing customers. To be effective, you need to know who you are selling to, their habits, where they spend their time, and common issues they face. This knowledge will make your marketing budget go further and increase the effectiveness of your sales team. To make this section effective, you must answer a few questions,
- Who will buy my product or Service?
- Why will they buy it (what need does it fulfill)?
- Where will they buy it (Specialty shops, malls, order from phone or online)?
- What do I need to charge to make a healthy profit?
- What products or services will I be competing with?
- Am I positioning my product correctly (finding your unique niche)?
Without an understanding of your target customer, their needs, and how your product can fill that need, your business will fail.
Funding Request
Let’s face it: starting a business requires capital, and if you need to ask for capital, this is the section for it. In this section, you must explain how much funding is needed for the next five years. You also need to explain in detail how the funds will be used. You will also need to explain if you are looking for debt or giving equity in the business and the terms of the agreement.
- Debt taking out a loan- you have to pay the money back per the terms of the agreement.
- Equity: When you give equity, you give partial ownership of the company to someone else. This is when investors buy ownership of the company.
Secondly, explain how the funds will be used. Are they needed to buy equipment or materials, pay salaries, or cover bills until a steady revenue stream is established?
Lastly, include information on the company’s overall financial strategy, such as paying off debt or selling the company. Make sure you establish only an agreement that you can deliver on in a realistic timeframe.
Financial projections
This section mainly convinces your reader that the business can be financially stable. This is where you add the meat and potatoes to your funding request. In this section, you must include a financial outlook for the next five years, including forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. For the first year, you need to go into more detail with details every quarter. You want to try to match your projections to the funding request. If you have already started the business, then include your absolute income statements, balance sheets, and cash flow statements. If you are taking on debt, add any collateral you could put against the loan. Including graphs outlining the information in the financial statements is a good idea. The key here is to show the reader that the business can be financially stable once established.
Appendix
The last section is the Appendix, which includes the supporting documentation for your plan. Common items may include licenses, legal documents, contracts, credit histories, management staff resumes, and patents or copyrights. This section is just a place to keep your source documents and show the readers that your conclusions are based on facts.
Writing a traditional business plan can be daunting, but your business will have a better chance of surviving armed with a detailed plan. This is because a plan is essential in a complex endeavor such as starting a business. For a more detailed explanation of how to create a great business plan or other aspects of starting a business, Click here to check out my book Building Your Empire: From Start To Scale. How To Build A Successful Business, or look it up on Amazon.
