Writing a business plan is the first step to securing funding for your startup, and may be required by your investor if you are a high-risk venture. A thorough plan should include your executive summary, market analysis, financial section, management team biographies and an appendix with any additional information.
This article provides a guide to writing the sections of your business plan as well as some common pitfalls to avoid.
A key component in starting up any company is writing its business plan – a document that outlines the company’s strategy for success and explains how it will achieve this while also ensuring that these goals are aligned with their vision.
A business plan should help investors and other interested parties understand what the business is, what it plans to do, where it plans to go, and most importantly how it is going to get there. A business plan should be detailed enough so that any future owner of the company can pick it up and follow the strategy outlined here in order to keep growing the business.
The following template provides a structure for a comprehensive business plan including executive summary, marketing analysis, financial analysis (including income statements and cashflow statements) additional sections for history of the company (if applicable) as well as competitors analysis.
Writing a successful business plan takes time and commitment. Often, entrepreneurs are too busy putting the business together to take the time to develop their plans. Developing a plan is essential to helping your company prosper as well as giving other potential investors and entrepreneurs an insight into your company’s viability and growth prospects.
Business Plan Template
The following sections provide some guidelines for writing a business plan that will be of assistance when you start creating yours:
- Executive Summary …………………………………….. 1–2 Paragraphs
- Market Analysis ………………………………………. 3–10 Paragraphs
- Financial Analysis ……………………………………. 11–15 ParagraphsManagement Team Biographies ……………………. 16–22 Paragraphs
- Financial Considerations……………………………. 23–26 Paragraphs
- Appendices………………………………………………. 27–32 Paragraphs
- Achievements and experience summary……….. 33–35 Paragraphs
A business plan should start with an executive summary that is a brief overview of your company and the main points of your business. The summary should take between one and two paragraphs to explain what it is you do, why you do it, what are the products/services you provide as well as highlight any achievements you have made so far. Keep it short and relevant with no more than two or three key points – you do not need to go into detail for this section. The main purpose of the executive summary is to help those who are reading the plan to get an overview of what the business is about and why it is an exciting investment opportunity for them.
The market analysis section should cover your company’s primary market (ie: who you are selling to, what they expect from you, how much money your competition earns) and any related markets. Make sure that your analysis is based on real-world data. Some of the more common mistakes in this section include:
- Double counting
- Mutually exclusive markets
- Relative to the company’s main market size, your analysis should indicate that you are relatively small (compared to the “big boys” of your industry) whilst at the same time providing enough detail to satisfy those who read the plan. You should also give some indication that you will be offering a differentiated product and bringing something new and exciting to a very saturated market.
The financial analysis section should cover your company’s gross and operating profit margins, revenues, expected costs and expected expenses. It is likely that your financial analysis will be followed by some questions from the potential investor reading the plan. Your response to these questions can provide valuable insight into how well you understand your business (as it relates to its financials) and how much effort you are putting into ensuring a successful outcome.
Make sure that when you create your financial analysis section that it is easy to read and understand. This is an area where you will want to have a strong understanding of your company’s financials and be able to back up your decisions with actual numbers. It is best to use graphs and charts to present the data as this will help the reader follow the story that you are trying to tell.
The financial analysis section should include:
- Your business’s gross revenue, operating expenses and expected gross profit margin.
- The income statement of your company.
- The balance sheet of your company.
- Historical financial data going back 3 years – including current market income, sales/costs, and operating profit margin.
- You should provide a cash flow analysis (date vs forecast) for the last 12 months. You will need to be aware that there are two types of cash flow analysis that will impact how you present the data: Simple vs Consolidated Cash Flow Analysis
- Your historical financials should be split into three sections – current, forecast, and forecast based on assumptions.
- The forecast must include any potential future acquisitions and expansion. Be sure to note if there are any assumptions you have made when making your forecasts. You should be aware that these differences will have a significant impact on the actual value of the business after it is sold; so a potential investor will want to know what they are.
Sellers beware – if you are including projections into your plan, make sure that they are realistic and show accurate growth numbers based on conservative estimates. An investor can easily see if a sales projection is too high by comparing your historical sales against your projected sales numbers.
Free Business Plan Resources
You should be aware that there are several online tools available where you can get free or low-cost help in creating your business plan, such as:
The Small Business Administration (SBA): The SBA provides free resources and advice for small businesses, including a library of sample plans. These plans range from business plans for start-up to an exit plan for a company looking to sell.
The National Business Incubation Association (NBIA): The NBIA runs a Business Plan Competition hosted by the Small Business Administration. The purpose of the competition is to provide small businesses with resources and opportunities that will help grow successful businesses in order to foster the creation of quality jobs and wealth in their communities.
The US Department of Commerce: This site contains a library that offers free sample business plans, financial management information, general management information, advice on exporting, training sites and videos, etc.