The best way to turn your great business idea into a reality is through the creation and use of a well-thought-out business plan. A strong business plan not only attracts investors or secures financing in the early stages of business development, but can also function as a roadmap for the future.
Great business plans have a structure that allows you to define what your business is, the market it serves, how it will conduct operations and the money it will make and spend. Here are the sections the Small Business Administration recommends including in your business plan.
Executive Summary. The executive summary is considered the most important part of the business plan, and is usually written last. Its purpose is to summarize the rest of the plan, introducing the reader to your business in its most condensed form. It should talk about the highlights of your business, your mission statement, the history of your company and what you see in its future.
Company Description. This section goes into more detail about your products and services, how they meet the demands of the market and the differentiators that set you apart from your competitors. [See Related Story: Business Plan Tools for Startups]
Market Analysis. This is where you show off what you know about your industry, and in particular, the market your product or service will serve. Discuss your target market, its size, the distinguishing characteristics of your offering, and how much market share you can capitalize on accordingly.
Organization and Management. This details how you are going to run your company and conduct day-to-day operations to meet company goals. Talk about organizational structure, the management team and what makes this team qualified to run the company.
Service or Product Line. In this section, describe your product or service and the consumer needs that it meets. If applicable, talk about patents filed on intellectual property. Describe the product's life cycle, and any research and development activities for new versions or products.
Marketing and Sales. In this section, discuss your overall marketing strategy, including market penetration, growth, channels of distribution and communication. Your sales strategy includes your sales force and sales activities — what will get your product or service into the hands of the customers your marketing strategy created.
Financial Projections. Here, you will discuss historical financial data and the prospective financial data developed after you've analyzed the market and set clear objectives for your business. Projections should explain any assumptions you've made in developing the data.
Funding Request. If you are planning on using your business plan with financing institutions or investors, your business plan must include a funding request. Discuss your current funding requirement, the requirement over the next five years and how you intend to use the funds.
Appendix. This is not in the main body in your business plan but can contain data that would be of interest to financial backers. This can be your personal credit history, résumés, letters of reference, contracts, list of business consultants and other documents.
In an email interview with Business News Daily, Tameka Montgomery, associate administrator of the SBA's Office of Entrepreneurial Development, shared some additional thoughts on what entrepreneurs should know about writing a business plan.
Business News Daily: What are the most important qualities of a good business plan?
Tameka Montgomery: It's very important your business plan is thorough and well written, but you also want it to be clear on what you have to offer. Ask yourself: Beyond basic products or services, what are you really selling? Identify your niche. You don't want to become a jack-of-all trades and master of none, because this can have a negative impact on business growth. As a smaller business, it's often a better strategy to divide your products or services into manageable market niches. Small operations can then offer specialized goods and services that are attractive to a specific group of prospective buyers.
BND: What are some of the challenges new business owners face in creating their business plans?
Montgomery: One of the big challenges for smaller businesses is actually building a business plan. SBA can help [with its] Build a Business Plan online tool. It provides a step-by-step guide to help new business owners through the process of creating a basic, downloadable business plan. The great thing about this tool is they can build a plan in smaller bites, save their progress and return at their leisure.
BND: Is there anything entrepreneurs often overlook when making a business plan?
Montgomery: Entrepreneurs often overlook concrete, specific plans and sales forecasts. All businesses need to project sales because the plan versus actual impact of sales is the key to ongoing management in changing times. Your costs and expenses pivot on sales.
BND: Do you have any general tips for creating a good business plan?
Montgomery: Business owners should reach out for help. SBA has an extensive network leveraged through our resource partners and available to small businesses nationwide. The resource partners include 950 small business development centers, more than 100 women's business centers, and 350 chapters of SCORE volunteers who provide training and counseling. Counseling is free, and training courses may have a small fee to cover costs through this strong network that provides management and technical assistance. In addition, SBA's online training offers free courses and online tools to assist entrepreneurs with business management resources.
Ready to write your business plan? Here are some more free templates to help you get started.