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

You might be asking yourself, “Do I need a business plan?” These documents can be time-consuming and tedious to put together, and you’d probably rather be running your business than writing about how it works and creating financial projections. But, yes, you do need one.

Why You Need a Business Plan

A business plan is almost always necessary to obtain financing, whether you are operating a new business or an existing one and whether you’re seeking a bank loan or venture capital. (For more on winning over potential investors, read When Your Business Needs Money: Angel Investors.)

Why do lenders and investors want to see a business plan? Try to see the situation from their perspective: If you were going to give someone $100,000 or more with the hope of not only getting that money back but seeing a return on your investment, wouldn’t you want to know exactly how your money would be used, who would be in charge of it, what makes them qualified to succeed in the business you’re funding, and what the business’s assets, liabilities, cash flow and profits look like? Of course you would. Your business plan must demonstrate your company’s financial stability, growth potential and uniqueness. It must demonstrate your team’s expertise about your company and its industry – and your clarity about your goals and the path to those goals. (To find out how your business can get the money it needs even when the bank says no, see 7 Unconventional Ways Businesses Can Borrow Money.)

Ranging from friends and family members to banks and venture capitalists, outside investors can vary a lot. Regardless of their level of sophistication, however, they are all looking for four things:

  1. Trust in you - You build trust by demonstrating ethics and integrity, so your business plan should demonstrate those qualities.
  2. Understanding of the business - It is your job to clearly articulate your mission statement, your product offerings and how you will make money. Your may have to tailor your plan to suit your audience: less-sophisticated investors may be scared off by industry jargon, while investment professionals will probably expect it. (Read Getting To Know Business Models for further reading on how businesses make their money.)
  3. Financial confidence - Clearly articulate the risks of investing in your business. Also, show investors how they can recoup their money - whether your venture succeeds or fails.
  4. A good return on investment - Over the period of 1928-2007, the geometric (exponential) return for stocks was 9.8%, while for 10-year Treasury bonds, it was 5%. Historical private-equity returns are more difficult to measure, but, in general, investors will expect a premium of anywhere from 2-5% over public-equity market returns. The return on equity for your new business must be in the private-equity range.

Elements of a Business Plan

Although they are adaptable to any type of enterprise, all business plans cover certain crucial elements, presented in something like the following. Except for the Executive Summary and Mission Statement, which obviously should be at the beginning of the plan, the exact order of these topics can vary a bit.

  • Executive Summary
  • Mission Statement
  • Product or Service Offerings
  • Resumes of the Company Principals
  • Target Market
  • Marketing Plan
  • Industry and Competitive Analysis
  • Pro-Forma Financials
  • Your Offering (what type of financing you're seeking)
  • Appendix (any other pertinent information)

 

Getting Help with Your Business Plan

If you don’t have the time, the desire or the expertise to write the plan yourself, there are several sources you can turn to for help.

– Free business plan software. Bplans.com has more than 500 sample business plans for businesses ranging from bakeries to medical billing companies to insurance agencies and self-storage facilities. You can find a plan for a business similar to yours and rewrite it to be specific to your business. You’ll learn what information to include and how to present it. If you follow a template, make sure to only include information that makes sense for your line of business, and examine several sample plans to make sure you aren’t leaving out any key categories of information.

– Paid business plan software. LivePlan will guide you step-by-step through the process of writing your business plan with written instructions, prompts, examples and video tutorials. It will automatically create error-free financial projections based on your inputs and compare your numbers to those of similar businesses. It will also generate charts and graphs to add visual interest to your plan. The result will be a professional-looking document suitable for lenders and investors.

– Professional business plan writers. LivePlan also lets you hire an MBA to write an investor-ready business plan in as few as seven days. You’ll still have to do some work, since the writer can’t create a plan without information about the business and its finances that you’ll need to provide. But this will save you time on writing and bring to the process the writer's expertise from writing other plans.

– Business plan coaches or consultants. These professionals share their expertise and experience and help you put together a professional plan, but they leave the plan writing to you. Writing the plan yourself can be a benefit in that you’re more likely to be thoroughly familiar with it and able to discuss it intelligently in conversations with lenders and investors.

Now that you know why you need a business plan – and how to get help creating one if you don’t have the time or the skill to do it alone –  let’s discuss the plan’s first section: the executive summary.


Business Plan: Composing Your Executive Summary
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