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What Makes a Good Business Plan?


Gregory Clarke on April 25, 2012 in Advice for Business Owners

On March 20, 2012, I had the opportunity to present to a group at the Burlington Chamber of Commerce on the topic of business plans. I thought that the content of my presentation may be of interest to the followers of the SB Partners blog so I’ve summarized my points below:

What is a Business Plan?
A business plan is a financial document that outlines a business goal or opportunity that provides the user with sufficient information to assess its viability.

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.

  1. 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.
     
  2. 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.
     
  3. 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
  4. 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)
     
  5. Operations Plan – This section provides a profile of you and your management team, details your human resource plan, facility overview, technology plans, supply chain, environmental considerations, and your production plan starting with your current needs and projected needs over the next three to five years.
     
  6. Financial Plan – The financial plan provides an overview of the financial aspects of the plan and should include the following:

    • Minimum of two years of monthly projected financial statements including balance sheet, income statement, and cash flow statements
    • Detailed listing of expenses
    • Outline any assumptions included in your forecast (eg. foreign exchange rates, financing rates, sales growth targets, gross margin, etc) along with sources to support assumptions, such as industry data

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