A business plan is a roadmap defining your business’ focus and intended growth. It communicates your business’ target market and the value proposition that it brings to its market.
Warning – Do not let this section scare you. Many businesses fail because they perform inadequate Research and Planning. The amount of time spent on planning and the detail and length necessary for an appropriate plan will vary based upon these 3 key factors:
- The complexity of your business
- The amount and source of funding
- The extent of damages you will incur if your business fails
For example, if you are creating a basic Internet business that you can launch with a meager amount of your own funds, a brief outline is sufficient to organize your thoughts, strategies, tactics and goals. However, if you are seeking investors to gamble thousands of dollars on your solopreneur endeavor, you will need to create a convincing plan based upon a realistic definition of your target market, the competition and your business’s unique value proposition supported by objective, verifiable data.
The following categories are standard for a professional business plan:
- Executive Summary
- Company Summary
- Products & Services
- Market Analysis Summary
- Strategy & Implementation
- Management Bio
- Financial Plan
I highly recommend that once you create your plan, you put it in front of other professionals before you launch your business or before you present your plan to investors (if needed). This is a great test to see if your plan makes sense and if it covers all of the important bases.
Below, is a description of each category with key information to include and consider when drafting your plan.
A. Executive Summary
The Executive Summary contains three primary aspects:
- A clearly defined, easy to understand description of your business
- A definition of your target market, its size and growth trend
- A description of your business’s unique value proposition
If investors will be viewing your plan, make sure that your summary is written in a language that is easy for professionals outside of your market to understand. If an investor does not understand your business after reading your Executive Summary, you run the risk of losing them.
B. Company Summary
The primary data to include in your Company Analysis is:
- The launch date of your business
- The stage your business is in (for investors if already launched)
- Past accomplishments (for investors if already launched)
- The legal structure (sole proprietor, LLC)
- Business location
- Unique qualifications
This section will organize for you the intended structure of your business and its unique qualifications (or unique value proposition) for servicing your target market. If your plan is intended to entice investors, you will need to include any past accomplishments that indicate your business’s ability to succeed.
C. Products & Services
In this section, you will describe your products or services … or both depending upon what you are offering to the market.
There are three key factors about your products and services that you want to detail in your plan:
- Product / Service Description
- Features & Benefits
Product / Service Description
The description section is rather obvious. Simply describe your product in layman’s terms as if you would describe them to someone who isn’t familiar with your industry. Keep it simple.
Features & Benefits
Features and benefits get a little trickier since they are often confused. There is an abundance of bad marketing out there that prove the point. Let me give you some examples of common features that you see in advertising and then explain their benefits to help differentiate the two.
- Batteries Included
- Lifetime Guarantee
- Open 24 Hours
- Custom Design
- Ready to use out of the box (Batteries Included)
- Worry-free (Lifetime Guarantee)
- Here to serve you when you need it (Open 24 Hours)
- Made just for you (Custom Design)
In this section, you will describe how you will develop the products. If you are only providing services, you won’t need to include their development in your plan. When describing the development of your products, you want to include any critical people, partners, milestones and expenses.
D. Market Analysis Summary
Your Market Analysis Summary should cover the following five key areas:
- Target customer
- Market size
- Competitive Edge / Barriers-to-entry
If you will be presenting your plan to investors, it is imperative that any facts and figures listed in this section are objective, realistic, verifiable and supportive of the business plan’s predictions. Include the sources of your data. Investors will do their homework. If your numbers don’t match with their research, they will believe that you either lack knowledgeable about your market or that you are a salesman pitching a scam. Neither perception will help you capture the capital that you require.
The Target Customer description must define the target customers’ needs that your business plans on servicing. The definition of the target customers must be specific. For example, to state that your business will focus on customers in the age range of 18 to 35 is not enough. There are too many varying characteristics and needs within this range. Instead, it is more appropriate to state a focus on males, ages 18 to 35, located in major metropolitan areas, and earning $100k + annually.
Other key points in this section are:
- Key decision making factors of the target market
- Your customers’ customers (if your customers are not the end users)
- Additional longer-term target markets
- Joint Venture (JV) partners
Market Size & Trends
It is important that you describe your market size and trends in specific terms and include the source of the data. Don’t use generic terms like “sizeable”, “large” or “huge”. Instead, describe your market size and trends using actual numbers and percentages of change.
In the Competitive Analysis section, it is important to include your top primary competitors (whether direct or indirect). For example, if your business manufactures and sells alternative energy powered bicycles, your competition may include other distributors of alternative energy powered bicycles (direct competitors) as well as companies that distribute traditional bicycles, mopeds, and motorcycles (indirect competitors).
Realize that if you are creating a business and identify little to no competition, chances are that there isn’t enough of a demand in the market for your products. On the other hand, if you easily identify numerous competitors, you will find yourself trying to carve out a merger profit in a saturated market. The optimal scenario is to provide a unique solution in a maturing (not saturated) market.
If you are creating your plan to attract investors, it is beneficial to include profitable public companies in your Competitive Analysis section. Public companies provide an opportunity for investors to gain access to regulated financial data, market data, and provide a proven profit-making plan.
When listing your competitors, it is necessary to define their strengths and weaknesses (in an objective manner) and delineate your competitive advantage usually in a matrix. This will lead to a description of how your business creates a barrier to entry for other competitors – a reason why customers will stay with you once you capture them.
E. Strategy & Implementation
In your Strategy & Implementation section, include the following:
- Company philosophy
- Marketing Plan
- Sales Strategy
- Strategic Alliances
- Operations Plan
Your Marketing Plan should contain the following basics:
- A list of your products (or services)
- Your promotions for going to market
- The prices of your products
- A description detailing where you will sell your products
- Any partnerships or contracts required to succeed with your plan
These 5 factors must paint a clear picture of how they work in unison to attract and retain your target customers.
Your Sales Strategy will describe your sales channel. Do you sell you products and services direct to customers via the Internet? Do you sell indirectly through distributors and other middle men?
All the prior sections in your business plan describe the vision for your business. The Operations Plan details how you will turn that vision into a reality.
The Operations Plan will contain a timeline with dates of critical milestones that you must complete in order for the business plan to succeed. The critical milestone dates, the finances needed and finances generated by these activities must be supported by the data within the Financial Plan section later in the plan.
Critical milestones will include the following:
- Dates for securing critical financial funding
- Dates for product creation and launches
- Dates for launching and completing promotional programs
- Dates for securing partnership contracts
- Dates for sales goal achievements
- Dates for additional business goals (certifications, patents, awards)
F. Management Bio
Since you are a solopreneur, this section will take on a different perspective than that of a multi personnel plan. However, you may still have a “team” that you work with to support your efforts. For example, you may have joint ventures or partnerships and other qualified people as advisors.
The biographies in this section should include work experience, past achievements, expertise and education that prove how you (and any partners or advisors) are qualified to successfully achieve the goals in your business plan.
G. Financial Plan
The Financial Plan will have a summary of the past financial performance (if applicable) and future projections of your business, while the Appendix will contain the detailed numbers. This section will indicate the money needed for operating your business and the financial rewards earned as a result of hitting your critical milestones.
Make sure that your plan describes all avenues for earning income. For example, a restaurant business plan shouldn’t simply break out income for food and beverage only. It should include income for food and beverage by breakfast, lunch, dinner, catering and any additional revenue category that may be applicable.
If you are creating your business plan for investors, you will need to include past (if applicable) and future (pro-forma) balance sheets, income statements and cash flow statements in the Appendix.
It is imperative that all other activities mentioned in other sections of your business plan appear in these statements. For example, costs associated with product creation and promotions must be included. Make sure that you differentiate activities that have a one-time costs and earnings from ongoing financial projections.
Investors will want to see their return on investment (ROI) detailed in the Financial Plan including:
- Amount of funding required
- Date(s) funding required
- Equity stake (if applicable)
- Collateral to secure funding (if applicable)
- Interest paid on the loan
- Timeline to repay the loan
- Exit strategy
If they are putting money in, they will want to know the detail of how much they will earn and when according to your plan they will receive compensation.
Warning - Before you agree to bring on an investor, make sure that you do the following:
- Know your investor’s personality
- Detail the investor’s involvement in the business
- Perform a background check
- Be selective
- Have an outside consultant review the information
Bringing on an investor is similar to getting married. Make sure that you don’t tie your business to an unscrupulous, control freak that you can’t get along with.
Your Appendix will include the following data, when applicable:
- Detailed numerical balance sheets, income statements and cash flow statements (for investors)
- A copy of your resume
- Partnership Contracts
- List of key customers
- Customers’ Letter of Intent (LOIs) for future orders
- Technology Drawings
- Nondisclosure Agreements (NDAs) and / or Confidentiality Agreements
- Contact information of person who prepared your business plan (including any third party)