How to Write a Business Plan

There are two main reasons to write a business plan.  One is that you are trying to start a business and are seeking venture capital.  Part of an investor’s due diligence prior to giving you startup capital will be reviewing your business plan.  The other reason to write a business plan is simply to gain clarity in the development of your startup.  Sometimes writing everything down on paper allows you to conceptualize your plan of attack, rather than just winging it.

If you are writing a business plan for the purpose of seeking venture capital, your plan will have to be formal and have a lot of information regarding revenue projections.  If you’re just writing it for yourself, try not to leave anything out and cover all the areas that you think need to be properly thought out.  Writing is very therapeutic and just like in psychotherapy, sometimes you don’t realize how much you know until you focus on it, ruminate and dwell upon it.  I never realized how much I knew about business until I starting writing articles like this.  Writing things down allows your brain to sort through the mess of information and organize it in a way that is useful.

The following information is just a guideline.  There are plenty of other resources available regarding this topic.  Whether you’re seeking the attention of venture capitalist or just trying to launch a business on your own, writing a business plan is always a good start.

Executive Summary

This section gives you an opportunity to summarize your concept.  Create a roadmap for the company’s path to success.  Here you will describe the products/services and the targeted demographic. Mention how much capital the startup will require in order to launch.  Also mention who the owners of the startup will be and what their qualifications are.  If you have a mission statement, you might want to include it here.

Company Description

Describe the initial goals of the company in this section.  This is also a place where you can get into the philosophy and methodology of how the company will operate.  What is it that will make this company succeed and why?

Products and/or Services

In this area, you will cover the commodity that the company will be selling in order to generate revenue.  Be as specific as possible.

Marketing Plan

How you will execute sales is a plan that must be thought out in great length because this will be one of your biggest hurdles initially.  Your product or service might make sense to you but how will other people find out about it and gain interest in purchasing it?  These are questions that should be answered in this section.  You should most definitely have a multipronged approach as only utilizing one method to promote your company will not be enough.  Also include the projected cost for launching your marketing campaign.  You also may want to consider a short term and long term marketing plan that will change as resources and finances allow.

Industry

Outlining the landscape of the industry is important for determining your approach and how the company will proceed with its startup plans.  You should conduct extensive research on the industry you’re about to enter and describe it here.  You could mention supply and demand, market trends, consumer behavior, potential problems the company may encounter that are specific to your industry and how you will remedy such problems, government oversight and regulatory compliance, etc.

Potential Customers

It is important to gain clarity on your target market.  It is impossible to create the perfect products or services without knowing precisely what your clients want and/or need.  Create a customer profile in terms of what type of person will be most likely to want to do business with your company and describe every aspect of this individual.  Determine their age range, ethnicity, income, geographic region, level of education, interests, etc.

Competition

As you research the industry, you will need to define what companies you will be up against who will be similarly situated and providing the same types of products/services that your company will be.  In this section you should actually list the names of the companies you believe will be your competitors.  The best army generals new everything about their enemies before going to war.

Revenue Projections

This will undoubtedly be the hardest part of writing your business plan because you most likely have no idea how much money you can expect to make or will be required to spend.  Nevertheless, you have to estimate these figures.  If you’re trying to get a loan, the investor will know these numbers are estimated so don’t worry about getting them wrong.  Just don’t over exaggerate.  Stating how you came upon the figures can be helpful though.  Also, project how the revenue will change over the course of a 5-10 year span.  List how you anticipate revenue growth will change each year for an extended period of time and why.  Other topics to cover in this section are profit and loss, cost of goods sold, assets and liabilities, sales forecast, break even analysis, gross profit margins, fixed and variable expenses, etc.  Spreadsheets and graphs are helpful in articulating your figures.

Personnel

You will need to determine how many employees you will need to start out and what their qualifications will be.  You also may want to include their projected salaries as payroll is typically a startups biggest recurring expense.  List job descriptions for each employee and how many of each you think you’ll need initially.  You can also list subcontractors, consultants or 1099 in this section as well.

Management

A list of key employees with their qualifications will be necessary in this section if you are seeking venture capital.  Most investors know that they are investing in people, more so than in concepts.  Your management team has to be impressive to make your investor feel comfortable giving you any substantial amount of money.

Startup Expenses

This is self-explanatory but it will be a list of expenses that you anticipate having in the beginning but not necessarily in the future.  Knowing how much money you will need to get your business off the ground is important because most startups fail due to a lack of funds.  You must also assume that money won’t be rolling in as soon as you open your doors.  It could take a while for you to finally see any money coming in and when it finally does, that revenue will probably be needed to pay bills.

For more information on how to create a business plan, call Ashlar Consulting Corporation at 305-849-9399 or visit www.AshlarConsultingCorp.com.