Understanding your Business Plan Content

Understanding your Business Plan Content

In the last blog, I defined the business plan, its purpose, benefits and common misconceptions. In this blog, I will give you an overview of the contents of a business plan. While my blog is geared toward startup businesses, it is also valuable if you have an existing business. The major difference between a business plan for a startup and one for an existing business is that a plan for an existing business will include historical information. Today I will provide a high-level guide to the business plan elements. There will be future blogs that detail each section discussed today.

The Business Plan Cover Page

While your cover page should attract your reader’s attention, it should be clean and simple. Your cover page should include the business contact information, identify the business owners and display the business name and logo. I also recommend that you include your consultant’s name (if you utilized a business consultant to help with your plan) and a plan tracking number. You should keep track of how many plans you distribute.

Confidentiality Agreement

You should include a confidentiality notice in your business plan. A confidentiality agreement will let your audience know (1) with whom they can share your plan and (2) how they can utilize your plan.

Table of Contents

Always include a table of contents (TOC) in your business plan. The TOC increases the ease of use of your business plan so that readers can quickly reference key areas of the plan.

Executive Summary

While your cover page may attract your reader’s attention, the executive summary must command it. This part of the plan is critical and should be considered the “make or break” part of your plan, especially if you are trying to raise funds. Your executive summary must tell what actions you are expecting from your reader. It should be a briefing of your entire plan but should not be longer than two pages. It should also include the following:

• An overview of your business concept
• A short bio on the key executive members of your organization
• A brief explanation of your market and how much of the market you are looking to capture
• A high-level description of how much funding is needed to start the business, how you will use the funds, the funding sources and the period the funding covers
• A financial overview that includes highlights from key financial statements

Company Overview

The company overview section provides information regarding your organization’s purpose. Along with information regarding the legal formation of your business, your industry and your organization’s core competencies, the company overview section should include:

• Your vision and mission statement
• Your business goals and objectives
• The keys factors to success
• The guiding principles that will govern your company

Product and Services

You will describe your product in detail in the product and services section of your business plan. While you should provide information such as pricing, elements such as detailed price lists, brochures, specs and photos should be stored in the appendices. The product and services section should also include your competitive advantages and disadvantages. It is also important to discuss how or what technologies affect your product development. Lastly, share any future product or service offerings in this section.

Marketing Plan

The marketing plan section of your business plan is one of the most involved sections. This section holds the key to many assumptions in your sales forecast. The section includes:

• Your market analysis, which is the result of all the market research you conducted to understand your customer base.
• An outlook of your industry. This includes the industry market size, how much of that market you hope to capture, market trends and growth and barriers to entry. You should also define the unique portion of the market that you plan to pursue.
• Benefits your product will offer your consumers as well as the reason why they would choose your product or service over your competition.
• Detailed market demographics.
• A competitive analysis.
• A description of your marketing strategy in terms of your pricing, how you plan to promote your business and how you will sell your product.

I usually divide my marketing plan into four sections:

• In the industry section I provide information about the industry on a macro level. Within this macro look at the industry I also conduct a Five Forces Analysis, which includes:
• An assessment of how much leverage suppliers and consumers have in the market
• The intensity of rivalry in the industry
• An analysis of how easily your consumers can fulfill their own needs by seeking alternatives to your product or service
• How easy it will be for new businesses to enter into the market
• The market analysis section includes a closer look at your market in terms of the size of the market in the area you will be servicing as well as the size of the market you are pursuing. It also includes your customer demographics and your market niche.
• The competitive analysis includes a close look at your direct competitors as well as a general assessment of the competitive climate in your market region.
• The marketing strategy section covers how you will promote and sell your products. I also include any strategic alliances in this section. If I have a milestone list, I also include it in this section.

Sales Forecast and Strategy

Your sales forecast is based on all the hard work you have done to understand your market. Along with your sales forecast, be sure to list key assumptions so that readers understand how the figures were derived. Your sales forecast will also include the costs associated with building your products or services.

Your sales strategy deals with how you will close your sales. Your strategy should not only include how you will close prospects, but also who will close prospects, what tools will be used to close sales quickly and what pricing and promotional strategies will be utilized to increase the close rate. If you have any sales programs, you can also list them in this section.

Operational Plan

Your operational plan is all about the day-to-day activities that support your company’s objectives. This section is as intense as the marketing section as far as the information it needs to supply. You should deal with your key operations in this area. It should include:

• Your product development policies.
• A description of the facilities where your products or services will be produced.
• A description of the terms and policies that affect your operations. This includes:
• Licensing and bonding requirements
• Permits, regulations and zoning requirements
• Risk management requirements such as insurance
• Intellectual property requirements

The amount and type of personnel you need as well as the policies that govern pay, training and responsibilities (you can include a human resource plan if your personnel plan is robust).

• Inventory policies and procedures.
• Listing of key suppliers, their history and policies.
• Your accounting policies and procedures, which includes your credit policies as well as your account receivable and payable procedures.
• Key policies regarding human resources and other departments such as sales, marketing and information technology.

Organizational Plan

The organizational plan describes the structure of the business. It covers the management staff’s experience, the unique competencies as well as any gaps in your management staff’s skill set. You should also include an organizational chart. If your organization is small (you may have two or three people playing multiple roles), then identify your chart by the various positions followed by the manager assigned to that role. Finally, include any consultants or mentors who are pivotal to your organization’s success. Your advisory board may include outside professionals such as your attorney, business consultant, mentor and accountant. Demonstrating a strong support system works in your favor. Potential lenders and investors understand that as a startup, you may have limited resources. Filling these gaps with a strong advisory board will be looked upon favorably.

Startup Funding Requirements

This section covers your startup expenses and your capitalization needs (I will get into the difference between these two in a later blog). Along with the funds needed for expenses and equipment, you will also want to ensure you obtain enough funding to cover your operational expenses until your business is able to carry the load on its own.

Personal Financial Statement

If you are seeking a loan, chances are you will need to include a personal financial statement for all of the primary business owners or major stockholders in the company. While there are financial companies that promise the ability to fund a startup without using your own credit history, I will urge you not to fall into deceptive practices. You are asking banks and investors to believe in your business concept enough to risk their financial assets to fund it. Banks and investors will look to see what you are willing to risk for your own business. If you are seeking SBA-backed loans, then you will be required to fill out the following forms:

• Application for Business Loan (Form 4)—You will have to provide details such as information about yourself and all business owners, information about your business, any current or previous SBA loans, current business debts and information regarding the reason for your loan request.
• Schedule of Collateral – Schedule A (Form 4(a))—This form requires that you list all the collateral to be used as security for your business loan. This includes real estate and personal properties.
• Personal Financial Statement (Form 413)—The SBA requires that any person meeting any of the following conditions fill out a personal financial statement: (1) each business owner or (2) each limited partner who owns 20% or more interest in the company and each general partner or (3) stockholders owning 20% or more voting stock or (4) any person or entity providing a guaranty on the loan. Each qualifying individual will provide a list of all their assets, liabilities, debt, stocks and bonds, real estate owned, unpaid taxes, other liabilities not mentioned and life insurance policies.
• Statement of Personal History (Form 912)—You will find that while government programs are there to assist small businesses, that assistance does not come without a price. One of the costs is the amount of information you have to give about yourself. The Statement of Personal History requires you provide:
• Your name including all former names used as well as information such as date and place of birth
• The percentage of ownership or stock you have in the business
• Your citizenship status
• Your present and previous address (covering a period of 10 years)
• Your criminal background status
• Authorizations for the SBA to run a criminal background check to determine whether you are eligible for assistance under one or more SBA programs
• Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion Lower Tier Covered Transactions (Form 1624)—By signing SBA Form 1624, you are certifying that all principals of the firm are eligible to participate in federal programs.
• Statement Regarding Lobbying (Form 1846)—By signing SBA Form 1846, you are certifying that you have disclosed any monetary support in efforts to influence or attempt to influence any member or employee of Congress.

Financial Plan

The primary purpose of the financial plan is to forecast the company’s future financial health. Your financial plan should include:

• Your proposed offer to investors and lenders.
• All key financial statements including a profit and loss statement, cash flow statement and balance sheet statement for your business, which covers a forecasted period ranging from three to five years. Your first year must show the monthly details, while the subsequent years can be shown on an annual basis. It is also acceptable to include your long-term forecast in the appendix.
• A break-even analysis along with key ratios and explanations. If possible include an industry comparison and explain any deviations from those standards.
• A list of key assumptions used in your forecasting methods. Some of these assumptions will include local tax rates, depreciation schedules and market growth rate.
• You can include your succession plan either in your financial plan or your organizational plan. Your succession plan is important to your organization’s long-term financial stability. A succession plan for a small business may include training other family members to assume responsibilities in the future. It may also include plans of selling your company in the future.

Appendices

• Your appendices should include all your supporting documentation such as:
• Bios for your management team
• Photos or specifications of your products
• Facilities blueprints and plans
• Maps and photos of your location
• Key surveys or market studies
• Brochures as well as advertising materials
• List of equipment owned or ones to be purchased
• Copies of any relevant leases and contracts
• Letters of support from peers and customers
• Materials that support assumptions in your plan
• All documentation required for your loan including a list of assets utilized as collateral for your loan

Conclusion

While writing a business plan is very involved, it is a task that is attainable. Even if you hire a consultant to complete your plan, you should at least understand what needs to be included in your plan. As you can see, even describing the contents of a business plan at a high-level is pretty involved. The future blogs will deliver bite-size portions of each section discussed above. Knowledge is power and knowing empowers. The more you understand about what it takes to start a business, the more effective you will be at minding your business!

Related Blogs

Understanding the Importance of a Business Plan for Your Startup

Additional Resources

SBA business plan course

Alpha Teach Yourself Business Plans in 24 hours

The Entrepreneur Magazine Small Business Advisor

Score Business Plan Templates

About The Author

Jowanna Parris-Daley owns and operates jowanna inc™, a small business consulting company that offers services including business plan writing, e-consulting, website design and technology services for startup businesses.

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