Business Plan Guideline
A formal business
plan can be invaluable. It will be needed for obtaining financing, it
can serve as a guide for the policies, strategies and tactics needed for
running your business, it can be shared with potential key employees,
it can serve as a key document when you sell your business and the process
of preparing it will force you to focus on the issues that are essential
for the success of your business.
To prepare your plan,
you may want to initially organize it in a three-ring binder with each
of the numbered items as separate sections. Your business plan should
be a "living document" that is reviewed often and modified as
needed. Using a binder will enable you to easily make changes. You can
always print the current plan for formal presentations.
1. Title Page
The title page should include the name and address of the business, the
owners of the business, contact information (person, phone number and
email address. You should also include your logo, if you have one. You
may also want to include the date it was originally prepared and note
the date of any changes.
2. Executive Summary
A succinct summary of the plan should run no more than one page and less
than a page if possible. The summary should give the reader insights into:
- What your business
- Who your customers
- What your competitive
- The financial dynamics
of your business.
- Any capital requirements,
if it is being used to help secure financing.
- A short history
of the business including major developments and the key employees.
While this sounds
like a lot to summarize in less than a page, here is one sentence that
covers the first, second and part of the sixth items above. ABC Bicycle,
Inc. was formed by John Smith, the current majority shareholder, in 1994
to manufacture high-end mountain bicycles for sale to specialty bicycle
retailers in the Rocky Mountain region.
3. Table of Contents
The Table of Contents deserves a full page and a separate section because
it will be the reader's guide to the plan. For each section, include a
one sentence description of what is included.
4. Business Description
Describe your business in a way so the reader will understand how your
business fits into its industry and fits into the market place. This includes
an overview of the industry and major competitors. Industry trends should
be supported with references to authoritative sources such as government
publications or industry analysis from professional research firms.
You should also include
information on the legal structure of your business with details on ownership,
the principal employees and your directors, if you have a Board of Directors.
The business description
should include information on your products or services. Be sure to describe
how your products or services compare to those of your competitors. Any
unique competitive advantages should be spelled out in detail. The reader
of the plan will ultimately make decisions (financing, employment, purchasing)
based on their perception of the potential for the success of your business.
Be sure to give them all the information they need to arrive at a fully
5. Marketing Strategies
No matter how good your products or services are, someone has to buy them.
This section will include a great deal of information and the results
of your research and your thinking.
- The Market
- Include information on your market in terms of overall size, any geographic
constraints, pricing constraints, growth trends of the market and how
your estimates on what share of that market you can secure.
- How you intend to have customers and potential customers view your
products or services compared to those of competitors is critical. Generally,
you must convert the features of your products or services into perceived
benefits for the customer. Then, you must have a convincing argument
for why your products or services are superior to those of your competitors.
Often it comes down to a quantifiable differentiation by the unique
nature, quality or pricing of your product or service. In other cases,
it may be through a level of service offered to customers.
- Setting your prices can be one of the most important factors in determining
the ultimate success of your business. The description your pricing
strategy must not only include the financial aspects (making sure your
prices cover your costs), but also include how you are using your pricing
to compete. Include your intention to use short-term and long-term pricing
strategies to accomplish your goals - gain share, maximize current profits
or maximize the long-term value of your business.
- How are your products or services sold and who does the selling to
the ultimate user? Do you sell directly to consumers, sell to retailers
or use manufacturer's representatives? Include details on any distribution
agreement you may have in place.
- How do you inform potential customers about your products or services?
Include descriptions of your advertising and public relations efforts
as well as information on any direct mail or sales promotions you may
This is a good place
to include copies of brochures, advertisements and company literature
you may use.
You as well as the reader of your business plan must understand where
your business fits in your industry. Not only should you identify your
competitors, you should identify their strengths and weaknesses and how
your business can take advantage of their weaknesses and compete against
their strengths. Detailing why competitors are successful or unsuccessful
demonstrates that you understand your market and provides insights into
how to copy their successes and avoid their failures.
It may make sense
to include a table with your comments on each competitor's products, pricing
high quality with unique attributes.
locations with highly knowledgeable personnel.
with little ability to customize.
through the Internet with poor customer service.
medium quality, but with flexibility to upgrade or downgrade to customers'
of the road, but flexibility to customize can result in high or low
capable service personnel, but with limited locations and availability.
features are highly desirable to certain customers.
but perception of quality is accepted by customers.
trained and enthusiastic personnel are available in limited locations.
Quality telephone support is available during business hours.
This section describes your plans for growth of your business. How will
you develop new products, new markets and the organizational capabilities
to grow into a larger, more profitable business? If the purpose of your
business plan is to help secure financing, this section is where you can
justify the need for the financing and describe how it will be used.
If your market analysis
has identified the opportunity to expand your product offering, describe
the new products you intend to develop including the costs of development
and your goals for accessing the potential market. If you intend to enter
new geographic or customer markets, include as much specific information
as possible on your plans for developing those markets.
The other critical
issue to include in this section is to describe how your organization
can and will grow. Specifically, discuss how you will supplement your
management, marketing and selling capabilities. Identify job functions
that need to be filled or need to be strengthened. The readers of your
business plan need comfort that the business can function efficiently
and grow. They also need comfort that the human resources needed for that
functioning and growing are in place or can be in place as needed.
This section includes information on exactly how your business functions
from physical, marketing and human resources points of view.
of your locations, work flow, product development, order processing and
To describe your marketing
and selling, you may want to organize it around the definition of marketing
- identifying and understanding the needs potential customers, positioning
your products or services as solutions to those needs and then facilitating
the purchase decision and fulfillment of that purchase.
In most, if not all
businesses, the ability to attract, retain and motivate employees is critical.
Include information on your hiring, employee evaluation and compensation
practices. Describe any employee benefit programs you have such as formal
insurance and retirement plans and any other perks you offer employees.
9. Management Plan
How are decisions made and who makes them? An organization chart can present
a formal look at the management process, but also include descriptions
of how the flow of information takes place among decision makers. Do the
structural and informal relationships among senior management result in
key information being available and considered as decisions are made?
For many businesses,
especially new ones, the lack of a management succession plan is a serious
weakness. If your business has one, be sure to describe it. If you do
not have a plan in place, create and implement one. It is essential that
the business can continue to function and grow if a key manager leaves,
dies or is no longer able to function effectively.
10. Key Personnel
Readers of the business plan will want to make sure that the people running
the business are capable. The information on key employees should include
their current functions, their history with the company and their professional
backgrounds. Depending on the size and nature of your company, the number
of individuals included will vary. At a minimum, include information on
the CEO, operational managers, marketing and financial executives, major
shareholders and members of the Board of Directors.
You should also include
information on any employment contracts you may have with these people.
11. Financial Information
This section should include historic and projected results. Audited (or
unaudited) balance sheets and income statements for the past two or three
years should be included. Projections of income and cash flow for the
current year and at least one additional year should also be included.
Depending on the nature
of your business, you may also want to include detailed information on
accounts receivable, inventory, fixed assets and investments.
12. Other Items
Your business plan should include a complete picture of your business
and enable readers to fully understand the nature of your business and
make informed decisions. Make sure they have everything they need.
Other items you may
want to include:
- Information on
important patents or proprietary processes you may have.
- Information on
contracts or relationships with major customers.
- Information on
contracts or relationships with key vendors.
- Details on other
important contracts or leases.
- Details on any
current or threatened litigation.
If you are using your
business plan as part of a request for financing, you may also want to
include information on your personal finances such as tax returns or personal
The process of preparing a business plan can be exhaustive. Gathering
the information, organizing it into a logical and understandable form
and then creating a document will take time and effort. If your business
plan is helpful in obtaining needed financing, attracting a key employee
or ultimately selling your business, it will have been worth the effort.
By making your business
plan a living document that is constantly updated and used as a guide
for making operational decisions, it will be an invaluable and integral
tool for running your business more effectively and more profitably.