Business Plan: Describing Your Business
  1. Business Plan: Introduction
  2. Business Plan: Do You Need One?
  3. Business Plan: Describing Your Business
  4. Business Plan: Composing Your Executive Summary
  5. Business Plan: Analyzing Your Industry
  6. Business Plan: Marketing And Sales
  7. Business Plan: Your Organizational And Operating Plan
  8. Business Plan: Your Financial Plan
  9. Business Plan: Presenting Your Plan
  10. Business Plan: Conclusion

Business Plan: Describing Your Business

By Amy Fontinelle

In order to prevent your executive summary from being too long, and to give readers more detail on what your business actually does, you'll want to include a business description section in your business plan.

You probably spend most of your waking hours (and some of your sleeping hours) thinking about your business. You understand what you do, how you do it and why you do it better than anyone. (These wacky inventions didn't look like the money machines they became for their creators. Find out more in Ridiculous Ideas That Made People Millions.)

When you're writing your business plan, you have to think about your business from the perspective of an outsider. The person who will be reading your plan knows nothing about your business except: (1) what he or she knows about similar businesses, if there are any and (2) what they assume. What the reader thinks he knows (if anything) may not actually apply to your business. So, you need to explain everything a financier might want to know about it.

Start with the basics: provide your business's legal name, operating name, contact information (address, phone number, fax number, website address, email address), and the name of at least one contact person. Also include the names of any owners other than yourself and the names of your lawyer, CPA and insurance agent, if applicable.

Next you must explain what, exactly, your business does. "We run a grocery store" is not as descriptive as "We run the only grocery store in the greater Springfield area that exclusively sells foods grown or produced within a 100-mile radius." The latter description not only explains that you are in the grocery business, but it also says why your business is unique and shows that it fills a potentially untapped market. Also include your mission statement, which should describe your company's purpose, values and goals.

Relate the problem your business solves for consumers, and state the facts you have gathered to support the existence of this problem. Be as specific as possible. For example, describe the limited availability of locally grown and produced foods for purchase despite the abundance of farmers and artisanal food producers in the area. Describe the demand for these products and how your business would make them accessible and affordable.

Define the industry that your business belongs to, the major characteristics of that industry, and the major existing players in that industry. Where do their strengths and weaknesses lie? How will your business be able to compete with their strengths and improve on their weaknesses?

Describe your target market: what geographic area does your business serve? What are the demographics of the customers you intend to reach? What are the psychographics of your target customers? (Psychographic characteristics include purchasing motivations, lifestyles and values.)

When and how was your company formed? Provide a brief history of your company, lay out how your business is operated and outline its key players. Then explain how your firm operates. What are the steps it takes to bring its product or service to market? Are there unique characteristics of the way your company does this that gives it a competitive advantage? For example, Wal-Mart's highly efficient distribution system is one of the main factors that helps the company undercut its competitors' costs. Specify how your company sells its product or service and what quality control and customer service measures you use to make sure customers are satisfied. (Find out how VC firms make the market go round, and round, and round. See Cashing In On The Venture Capital Cycle.)

How do your firm's products or services fit into their industry, and how to they interact with market conditions to create a potentially profitable opportunity? Explain the concrete reasons you expect your business to flourish, and enumerate the steps you will take to achieve your company's goals.

You should also state where your business is headed. What strategies have you planned but not yet implemented to expand your business and your customer base? (The answers to these questions may tie in directly with why you are seeking financing.)

Provide an overview of the important financial details that will make your business successful, such as your anticipated sales volume, the profit margin on key products and when you expect to reach your breakeven point. What are your financial goals? What existing financing do you have, and what financing are you currently seeking and why? Where does your company currently stand, financially speaking, and where has it been in the past? (This easy but essential process helps owners ensure that their businesses can stay afloat, check out Six Steps To A Better Business Budget.)

The business description provides greater detail than the executive summary, but it is still essentially a summary. In later sections of the business plan, you will get into the fine points of your marketing and sales plan, your organizational and operational plan and your financial plan. The business description should provide a shorter and less technical explanation of these things. Like the executive summary, the business description should be one of the last things you write, since it draws on information contained in other sections of your plan.

Remember that the reader doesn't really care if it is your lifelong dream to open a local foods grocery store. They want to know how you will make the business profitable and why they should invest or lend you money. Your description should be based on facts, not feelings. Furthermore, every fact you present should be specific, detailed and supported by credible secondary sources and by primary research your company has conducted.

Business Plan: Composing Your Executive Summary

  1. Business Plan: Introduction
  2. Business Plan: Do You Need One?
  3. Business Plan: Describing Your Business
  4. Business Plan: Composing Your Executive Summary
  5. Business Plan: Analyzing Your Industry
  6. Business Plan: Marketing And Sales
  7. Business Plan: Your Organizational And Operating Plan
  8. Business Plan: Your Financial Plan
  9. Business Plan: Presenting Your Plan
  10. Business Plan: Conclusion
  1. Operating Cost

    Expenses associated with the maintenance and administration of ...
  2. Venture Capitalist

    An investor who either provides capital to startup ventures or ...
  3. Cost Test

    A standard test applied to a process to determine if the net ...
  4. Enterprise Investment Scheme (EIS)

    A UK program that helps smaller, riskier companies to raise capital ...
  5. Per Transaction Fees

    An expense a business must pay each time it processes a customer’s ...
  6. Path To Profitability (P2P)

    A clearly defined route to profitability as described in a business ...
  1. How has Google's operations strayed from its original mission statement?

    Google's (GOOG) mission statement has been the same since its inception in 1998: "Organize the world's information and make ... Read Full Answer >>
  2. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  3. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  4. What are the benefits of financial sampling?

    Financial sampling allows auditors to approximate the rate of error within financial statements. For accounting purposes, ... Read Full Answer >>
  5. What are the benefits of prorating expenses?

    When a person prorates expenses between personal and business expenses, he is able to capture the maximum amount of tax benefits ... Read Full Answer >>
  6. What are the responsibilities of the principal in a company?

    Principals have different roles depending on the nature of an individual business, but the universal responsibility of a ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!