We’ve talked before about business plans, and why they’re so important for a successful small business. But what exactly does a business plan contain?
Even though each business plan might be a little different, the overall structure will include some core elements that stay the same, regardless of the type of business you might start. Only the length and focus of the business plan might change, depending on the audience.
The standard business plan format
- Cover page and table of contents.
- Executive summary: A one to two page description of the whole business plan.
- Description of the current situation: Basic company information like what the business is about, what products and services you’ll offer, your management team, type of business organization (sole proprietorship, partnership, corporation or co-operative), and what your goals are for the future of this business.
- Description of opportunity and market: Who are the buyers, who are the competitors, what are the competitive advantages? A market consists of a group of current and/or potential customers with the willingness and ability to buy goods or services to satisfy a particular class of wants or needs. You should explain how many customers will buy, what they buy now and how much they buy.
- Description of the marketing and sales strategy: Explain your marketing strategy, which is usually a combination of four strategies: product, price, place, and promotion.
- Basic facts on the financials: Cash flow projections, income statement, balance sheet, and funding requirements.
- Risk analysis and possible exit strategies: Because of the many assumptions about an unknown future, most people will agree that there’s tremendous risk in any entrepreneurial venture. A serious business plan needs to account for this. It needs to include statements on the risks associated with the business, and on the actions the entrepreneur plans to take if issues occur.
- Conclusion and appendices: Résumés, other sources of information, and any technical descriptions necessary for the reader to better understand your business plan.
Some basic business plan rules to follow
The content of a business plan is important and there’s a lot of information to include. It’s also important to keep the length of a business to between 10 and 40 pages. Brief, focused, and concise. Also, follow basic rules of grammar, punctuation and style. Information should be clearly organized, and logically presented. Make the executive summary as strong and compelling as you can, because most people will quickly judge the venture on that portion of the plan.
Why a business plan is important
The real value of creating a business plan isn’t having the finished product in hand. The value lies in the process of researching and thinking about your business systematically. The act of planning helps you to think things through thoroughly, study and research if you aren’t sure of the facts, and look at your ideas critically. It takes time now, but can help you avoid costly, maybe even disastrous, mistakes later.
It’s a lot of work, but it’s one of the most important things you can do in a small business. It helps you work out the kinks and reorganize things early on, before you’ve spent all your money and time setting up shop.