In the first part of this topic “How to write a business plan”, we discussed the tips you have to consider before setting out to write your business plan. We will be taking the discussion further by looking at what a professional business plan should look like.
A business plan emphasises what will be done, when, where, how and why it will be done. The plan describes the business model, i.e. how a business’s products and services create value for customers, the cost structure and the sources of revenue and profit margins.
Although the emphasis and order of business plan components can of-course differ from business to business. Nevertheless, a business plan template or business plan model for most businesses would almost certainly include at least some of the contents we will be sharing in this post.
1. Executive Summary.
The executive summary is the first part of the business plan to be read by potential lenders and investors. In the case of a poorly written executive summary, the executive summary is often the only part of the business plan that gets read.
Accordingly, you should take the time necessary to prepare a dynamic executive summary that describes the business, identifies the stage of the company and its strategic direction, describes the company’s market and marketing plan, briefly discusses the background of management, and states the company’s revenue and profit expectations.
One of the best ways to approach writing the executive summary is to finish it last so you can include the important ideas from other sections. Remember, you only get one chance to make a good first impression.
2. Business Description.
This is your chance to describe your company and what it does. Include a look at when the business was formed and what your core values and mission statements are. These are the things that tell your story and allow others to connect to you. It can also serve as your own reminder of why you got started in the first place. Turn to this section for motivation if you find yourself losing steam.
Some of the other questions you can answer in the business description section of your plan include:
- What is the business model? (What are your customer base, revenue sources and products?)
- Do you have special business relationships that offer you an advantage?
- Where are you located?
- Who are the principals?
- What is the legal structure?
- What are some of the market opportunities?
- What is your projected growth?
Answering these questions narrows your focus and shows potential lenders and backers how you’re viewing your venture.
3. Market Analysis and Strategies.
Spell out your market analysis and describe your target market, marketing strategy, including sales forecasts, deadlines and milestones, advertising, public relations and how you stack up against your competition.
Once the target market has been detailed, it needs to be further defined to determine the total feasible market. This can be done in several ways, but most professional planners will delineate the feasible market by concentrating on product segmentation factors that may produce gaps within the market.
Part of your market analysis should come from looking at the trends in your area and industry. If you can’t produce a lot of data analysis, you can provide testimonials from existing customers. This is your chance to look at your competition and the state of the market as a whole. Your market analysis is an exercise in seeing where you fit in the market — and how you are superior to the competition.
4. Organisation and Management.
The organisation and management plan will highlight the logistics of the organisation such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.
Provide bios of your company executives and managers and explain how their expertise will help you meet business goals. Investors need to evaluate risk, and often, a management team with lots of experience may lower perceived risk. Make sure you highlight the expertise and qualifications of each member of the team in your business plan.
The organisational structure should also be included in this section. The organisational structure of the company is an essential element within a business plan because it provides a basis from which to project operating expenses. This is critical to the formation of financial statements to be included in the business plan.
5. Sales and Pricing Strategy.
How will you raise money for your business and make profits a reality? You answer this question with your sales strategy. A sales strategy is the process of matching the business purpose or mission with a sales plan, then putting in place goals, metrics and sales tactics. The sales strategy will also map out courses of action and allocate resources to achieve the selected goals and tactics.
If it applies to your business, outline your sales strategy. For example, will you have a sales team? Will sales training be provided? Will your sales team be given incentives to encourage them to increase sales and meet or exceed their goals?
The pricing strategy portion of the business plan involves determining how you will price your product or service; the price you charge has to be competitive but still allow you to make a reasonable profit. The most common question small business people have about the pricing strategy section of the business plan is, “How do you know what price to charge?” [Recommeded book].
6. Competitive Analysis.
The competitive analysis is a statement of the business strategy and how it relates to the competition. 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.
Where do your potential customers currently obtain the product or service you are selling? What strengths and weaknesses do those businesses exhibit? How will you offer a superior product or service? Don’t commit the common mistake of claiming that your product or service is so unique that it has no competition you will always have competition either direct or indirect. One helpful way to analyse the competition is to compare them with your business in the form of a matrix called Competitive Analysis Matrix.
7. Financial Statements and Projections.
A business plan is all conceptual until you start filling in the numbers and terms. Financial data is always at the back of the business plan, but that doesn’t mean it’s any less important than the upfront material such as the business concept and the management team.
The three common financial statements are a cash flow statement, an income statement and a balance sheet. Most entrepreneurs should provide them and leave it at that. But not all do. But this is a case of the more, the less merry. As a rule, stick with the big three: income statement, balance sheet and cash flow statements.
a. Income Statement: An income statement shows whether you’re making any money. It adds up all your revenue from sales and other sources, subtracts all your costs, and comes up with the net income figure, also known as the bottom line. Essentially, for a given time period, the income statement states the profit or loss (revenue-expenses) that you made.
b. Balance Sheet: A balance sheet shows a business owns valuable assets that don’t show up on the income statement or that it may be profitable but is heavily in debt. It adds up everything your business owns, subtracts everything the business owes and shows the difference as the net worth of the business (assets – liabilities = equity).
c. Cash Flow Statement: The cash flow statement monitors the flow of cash over a period of time (a year, a quarter, a month) and shows you how much cash you have on hand at the moment. A cash flow statement consists of two parts. One follows the flow of cash into and out of the company. The other shows how the funds were spent. The two parts are called, respectively, sources of funds and uses of funds.