What Makes a Good Business Plan?

Why Do You Need a Business Plan?
A business plan is usually developed for external distribution to attain financing with a bank, other lender, or an equity investor. Alternatively it can be developed for internal assessments and tracking within an organization for senior management to approve a new business line or division.

The Six Key Sections of a Business Plan
A good business plan will have the following sections:

When preparing your projects, ensure that you include the effects of anticipated financing and equity requirements. In addition, it is important that you ensure your assumptions and growth targets used in your projections are realistic and attainable.

Ensure that you focus on how your business will relate to the industry and connect your goals with the growth opportunities in the industry.

• • Executive Summary – The Executive Summary provides a concise overview of the business opportunity and the business plan to allow the user to gather a high level understanding of the opportunity before delving into the detailed sections. The summary should be no longer than 1-2 pages in length.
  • Business Overview – This section provides the user with information about your business, along with its history, its mission and vision, business and ownership structure, your competitive advantage or unique differentiating factor and an overview of your business model. You should also expand upon the product or service opportunity and a focus on its features and benefits to be obtained while also outlining any possible synergies with other products, services and business units.
  • Industry Overview – Provides details of the industry including:
    • Size
    • Growth opportunities in the industry projections
    • Key target markets within the industry
    • Risks in the industry
  • Marketing Strategy – This section describes the target market segment, the competition, how your product or service will meet the needs of the market and how the product or service will be sold. It should also provide details of your pricing model and include an overview of your promotion strategy (eg. print media, social networking, radio/TV, etc)

Other considerations

• • • If you are asking for financing from a bank, you will likely need to provide a personal statement of net worth.
    • Have your plan reviewed by others to get their feedback prior to supplying it to a potential lender or investor.

Common Mistakes

• • • Too long – the plan needs to convey the information but it should be concise.
    • Too much detail – focus on key aspects of the business and its priorities.
    • Overly optimistic – ensure the plan is reasonable and attainable.
    • Copying – don’t rely on a template. Use it as a framework for the plan but don’t copy.
    • Ensure that you address the competition – how will your company excel compared to the competition in the marketplace

Writing a Business Plan

Are you planning to write a Business Plan? Below you will find the subjects to address, the order in which they should be tackled and a short description of the subject matter to be included under each section.

Executive Summary
This section must appear at the beginning of your business plan but since it summarizes the basic components of your plan, you should write it last. Its objective is to deliver an overview of the plan and should contain:

• • • your business type, plus the products or services you will provide
    • a mission statement
    • your market and customer base
    • marketing and sales plans
    • your anticipated competition
    • business operations and financial projections

Industry
Write this section in two segments: an industry overview and a summary of how you see your business inside that industry.

When writing your industry overview, address these matters: size of your industry, sectors included, major players, markets and customers, estimated sales in the industry for the last three years, economic trends and the industry’s expected long-term outlook.

As for your company’s position within the industry, first note the products or services you plan to sell and what you believe will be unique about your business to make it stand out from your competitors. Also note if you anticipate any barriers for your business and if so, how you plan to address them. Write about your competitors and their market share of the industry, what you see as your competitive advantage and your target market.

Market Analysis

This section should address your major target market and include location, target market demographics and if and how their needs are being met. When researching this section, make sure to answer these questions about the people in your target market: age and gender, where they live, family composition and income, their jobs and lifestyle and the size of your target market.

Research and write projections about your target market, including what percentage has used a product comparable to yours, how much of your product or service they are likely to buy, what percentage you expect to be repeat clients, if your market is affected by swings in demographics, economic events or government policies (e.g. by-laws).

When writing your market analysis, be sure to name all your sources of information.

Competitive Analysis

Investigate, analyze, and report on your direct or indirect competition. Include an appraisal of their competitive advantage and an examination of how you plan to overcome any obstacles as you enter your selected market. To begin, establish who you consider as your competitors. That is fairly easy as far as local companies are concerned. It’s more difficult however, to determine range for a locally operated business (how far a customer is willing to travel for your type of product or service). Also, y ou must consider competition from businesses that aren’t local – big box stores and online catalogue companies, for example. It is important to identify your competitors up front.

Collect as much information as possible on your competitors and use that data for competitive analysis. Competitors will often play it close to the vest when it comes to disclosing company information, so you may have to be creative to dig more deeply. What you need to ascertain is: the segments of the markets they serve, the kind of benefits they offer, and why customers are loyal to them. Learn as much as possible about their products and services, including prices and marketing/promotion. You can gather much of the information you need about your competitors  from their websites. Also, talk to their clientele to learn what makes them successful.

Marketing Plan

This should include an in-depth description of your company’s sales, pricing and marketing strategies, and the benefits of your products and services. As you begin to develop your Marketing Plan, refer to the market research you undertook when writing your Competitive Analysis.

The Products and Services portion of your Marketing Plan must focus on what you consider to be unique and how your clients will benefit from your products or services. Consider these questions while reviewing these facets of your plan:

• • • What are the main attributes of your product or service and how will they differentiate themselves from your competitors?
    • How will your clients gain most from your product/service—include tangible and intangible advantages.
    • What sets your products/services apart from all others? The uniqueness of your product/service is really the heart and soul of your marketing plan and you must communicate this information to your clients.

Operating Plan

This section should describe the physical requirements of your operation—the location, including equipment and facilities. It could also include information on  inventory, suppliers and a brief description of your manufacturing process, but all that would be contingent upon the business type. If you remain focused on the bottom line, then it will be easier to coordinate this section of your business plan. This section should be looked as an outline of the capital and expense requirements  needed to conduct business on a daily basis.

It’s best to split this section in two parts—Stage of Development and Production Process.

Under the Stage of Development, discuss how your product will be made and identify any possible production issues. Indicate that you are aware of industry standards and actions you have taken to comply with applicable regulations. Also, provide information about your suppliers and any alternatives should your supplier of choice become unavailable. Detail what quality control measures you plan to establish.

In the Production Process section, describe details of the day-to-day operations of your business, plus the size of your location and type of premises. If applicable, detail any necessary equipment (plus worth and costs) and list your assets—buildings, equipment, furniture and inventory, etc.—including their worth. List any special requirements, production and inventory costs, materials, plus detailed product cost estimates.

Financial Plan

Although the Financial Plan falls at the end of your business plan, it communicates whether or not you have a viable business idea. It is also a key factor in establishing whether your business plan is likely to attract investors for your business objective. The financial plan should include three financial statements—income, cash flow projections and a balance sheet—along with a brief analysis of each.

Break down your business expenses into two categories, start up and operating expenses. Any costs needed to start your business are expenses and should include at least: business registration, licensing and permits, inventory, down-payments of property or equipment and utility set-up fees.

Operating expenses that keep your business running should minimally include: salaries, rent/mortgage, utilities, telecommunications, storage, distribution, loan payments, promotion, office supplies and maintenance.

Your income statement should indicate your revenues, expenses and profit for a certain period. You will need to be guided on a template to explain how you should set up the income statement

The cash flow projection will show the amount of cash anticipated to be generated or spent over a specific period of time. It also indicates how you plan to manage your cash flow and  will help you understand the amount of capital investment you need for your business idea.

The cash flow projection includes three parts—cash revenues: submit your estimated monthly sales figures; cash disbursements: list the per-month cash expenses you have estimated; and reconciliation of cash revenues to cash disbursements: add the current month revenues to the previous month’s balance and deduct disbursements from the current month. The adjusted balance will be deferred to the following month.

Finally, the balance sheet will indicate the net worth of your business at any given time. It will also summarize the financial data and divide it into assets, liabilities and equity. In effect, you will create a balance sheet aimed at summarizing all information included in the income statement and cash flow projections. In reality, a balance sheet should be prepared once per year.

Please remember this business plan outline is a guide for you to follow. Please call me for more detailed information on writing a business plan at: 905-633-6360 or by email at mdossajee@sbpartners.ca.