Business plans are generally required by bankers, investors and partners when they are approached for finance or for their services. It is extremely unlikely that a bank or investor will lend you money based purely on a business plan, but it may help in giving them confidence that you are well researched and professional when it comes to your business and that you are therefore not going to squander their money and that the debt will be repaid in a reasonable time. The most important reason however for writing a business plan is to make sure that your venture makes business sense. It is for your own benefit.
Before you start thinking that a business plan is too complicated and should be left only to professionals, think again. You have already started your plan, but most likely only in your head. What you need to do now is put those thoughts on paper. Arrange your plan under the following headings for a logical and well thought out business plan.
1. Executive summary: In less than a page you need to describe what your business will do, how it will do it and why it should be successful. This summary will give both you and the reader an idea about how the company will operate and what the background is behind the launch. In essence it is a quick summary of everything that follows
2. Business and operations overview: In more detail now describe exactly what your company will do and how it plans to make money. You need to consider daily operations in detail. You must also describe your product and service in a fair amount of detail here focusing on both its advantages and disadvantages. Logistics of getting your product to the market place would also be found here.
3. Marketing plan: Include your market research here, no matter how informal. Why is your product likely to succeed? Who are your target markets? How do you plan on advertising your product and service and letting potential customers know that it is available to them? Who are your competitors?
4. Company Management: Who is going to do what? What are their skills and experience? Often this may just be you the owner but it is still important as you need to make sure you have all the necessary skills to run the business. Will you be outsourcing any functions and if so to whom? When there are more than one person what is the chain of command or who is in charge of whom?
5. Assets and infrastructure: Where will you be operating from? What facilities do these premises have? What equipment do you need? Vehicle requirements and any other special assets that may be used by your company.
6. Financial analysis: Perhaps the most important section. You need to come up with your expected future income statements, balance sheets and cash flow statements.
6.1 Income Statement: The income statement or profit and loss report will simply be a summary of your income and expenses for each month for the first two to three years of the business venture. In the final business plan you may simply have one for each year, but we strongly recommend that you do your own calculations for each month. Simply subtract your total expenses from your total income each month to find out that month’s profit or loss. Do not forget set up costs, repayment expenses and taxes which are often left off the expense list in error.
6.2 Cash flow statement: The cash flow statement is similar to the profit and loss, but if you plan on having accounts for your customers, they will only pay a few months after you invoice them. So in this report for each month calculate the amount of actual money you expect to be able to put in your bank account for that month both from previous month’s sales and current month sales paid on invoice date. Subtract the actual cheques or transfers you will be making out your account in that month. I essence you are predicting what your bank account statements will look like. This is a very important report because you need to consider the possibility of customers paying you late and also the likely scenario of it taking many months before you start making a profit. Do you have enough money to last you until the company is profitable?
6.3 Balance sheet: The balance sheet will simply be a list of all your assets and liabilities at the end of each period (month / quarter / year).
For more detailed information take a look at the following:
Business plan software
Books on writing business plans
Courses offered which include business plan topics