The Business Plan as an Entrepreneurial Tool
An entrepreneur trying to start their own business needs to have a business plan. The business plan is a guide helps business owners stay focused on their goals and serves as a tool to lure investors and lending institutions to finance the business. To write an effective business plan, you need to complete several steps to ensure that the final plan includes the necessary elements.
- Use the outline format of any word processing program to create a business plan. An outline format makes the plan easier to read and easier to fill in any details you need to add later.
- Describe your business in the first section. Explain the kinds of products or services your business will offer, how you plan to manufacture the product or administer the service and what materials you will need. Include details about the kind of facility you will need and the types of equipment required.
- Create a business budget and break it down into three parts: start-up costs, ongoing operating costs and a breakdown of the overhead into sections such as manpower and materials. Provide as many details as possible in the budget section. Forecast your budget needs for ongoing operating costs for at least three years. Break the budget down by department, including sales, marketing, production and support.
- Develop a profit projection that shows the percentage growth you expect for the next three years. Cite reasons for your forecast and give examples of how you intend to grow your company.
- Present a sales and marketing plan that includes detailed analysis of your competition, how you intend to address the competition and a detailed explanation of how you will bring your product or service to the marketplace.
- Create a biographical section that features information about all executives and partners who will be involved in the company. Include compensation plans, detailed job descriptions for each person and resumes that outline past experience within the industry.
- Word processing software
- A business plan is a road map that helps navigate a company to success. It describes all aspects of your business, including history, products, services, marketing and finance. The plan indicates that a qualified management team exists. It communicates information to those interested in your business, such as an investor who reviews your plan to determine the likelihood of receiving a good return on an investment. Without a plan, a business will likely fail.
- Create a mission statement about why your business exists. For example: “Develop Internet-based software that provides easy project management.”
- Define a vision of what your business wants to become. For example: “To become a respected software vendor that possesses 60 percent of the market for project management software.”
- Define the market that your business will serve. Include the business outlook for your industry, what customer needs are addressed and a profile of targeted customers. For example: “Customers are project managers who manage multiple projects at construction businesses.”
- Describe products and services, including their pricing. Include what makes the products and services competitive.
- Describe the company’s legal and management structures. Explain how business activities are accomplished. Indicate what permits and licenses your business maintains. Include biographies of key managers.
- Define marketing strategy, including pricing and promotion. Include customer groups whose needs are met by your products and services.
- Provide a balance sheet, which is a snapshot of the company’s value. For an existing business, this should cover the past three years.
- Provide an income statement, which indicates the profit or loss over a period. For an existing business, cover the past three years.
- Provide a cash flow statement, which indicates revenue, expenses and available cash. These are projected amounts if the plan is for a startup business. For an existing business, provide amounts for the past 12 months. Actual and projected amounts are used to project working capital.
- Provide each principal’s personal financial statement and prior year’s federal tax return if your business is applying for financing.
- Append miscellaneous information that helps define your company. Include marketing materials, contracts and key employee resumes, for instance.
- Write an executive summary that defines what your business does and why. This becomes the first section in the plan.