What's in a plan?

So what should be included in a business plan?  Do I really need one?  That's a lot of work just for a thick report that I won't ever look at again.

Sound familiar?  Some of these issues were addressed in a previous entry.  The do I really need a business plan type questions were addressed in the December 9th post "DO I REALLY NEED A BUSINESS PLAN?".  The question of what should be included in a business plan is one I get asked frequently.  So frequently, that I have posted a Sample Business Plan Table of Contents on the resources page of my main site.  Each business and the environment in which it operates is different from most every other business.  My Sample Business Plan Table of Contents is merely a suggested starting point.  Use this list and add to or subtract from it to make it appropriate for your business.

You can download my complete sample above or by going to the resources & links page of the web site.  Here are the major topics that should be covered in most every business plan.

Executive Summary
Organization
Industry & Markets
Marketing Plan
Financial Plans
Addenda

The Executive Summary should be a one-page summary of your entire plan.  It should include a summary of need, that is how much money do you need to borrow or want from an investor, how you will repay the money and what it will be used for.  You should also discuss the overview of your business and a brief summary of your marketing plan.

In the Organization section, you should describe your company from a physical, technological and intellectual standpoint.  Who are the main players, what are their qualifications, what are your professional associations, how will you handle accounting and business records and so forth.

The Industry & Markets section is one of the most important.  In this area you will discuss your industry, trends and special rules and laws that apply to your industry.  Then in more detail, you'll discuss your particular market segment within the industry.  Describe each of your competitors and what they do well and not so well.  Then identify your customers being as specific as possible.  The more specific you can be about your customers likes, dislikes, locations and so forth, the better able you'll be to provide the exact product that they need the way in which they want it.  Finally, you'll need to describe your company in strategic terms.  A SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) is a good method of categorizing your firm and identifying, well, strengths, weaknesses, opportunities and threats.

The Marketing Plan describes how you will promote your product or service, how it will be priced and how you'll get the product to market.  An important part of the marketing plan is a means for measuring your success.  If you don't have an objective and a means to measure whether or not you've achieved success, how will you know i you got there?  Before you begin is the time to do this.

The final section of the plan is the Financial Plan.  In this section you'll identify your financial goals and objectives and describe the assumptions that drive your financial statements.  Historical and at least three years of pro forma statements are the general rule.  You should include an income statement, cash flow report, balance sheet, sales projections, start-up expenses, capital investments and so forth in this section.

The Addenda section is a catch-all section for additional supporting documents required by the reader of the plan.  The contents of the addenda will be driven by the banker, investor or other reader. 

The business plan can be a complicated and detailed document.  But don't let that stop you.  Pick a format and attack the process one section at a time.  I start with the sections that I know off the top of my head and work into the sections that will require research.  I generally put together a preliminary income statement and cash flow report and modify the assumptions and projections as I do my research.  Be careful not to modify your financial projections arbitrarily.  Be conservative, that is, assume you'll sell less that you hope to sell and assume your costs will be higher than you think they will.  It's always better to beat your projections than be surprised by how much it really costs to operate a business.

If you need help putting together your business plan or creating the financial statements to reflect your assumptions, give us a call and we'll see if it makes sense for us to work together.