A business plan is an outline of a business’s present condition and its future. It is often used as a tool to obtain financing or investment. Writing a business plan is also a way for business owners to clearly identify their plans, hopes and needs for the future.
Components of a Business Plan
Business plans can range from an informally drawn one-page sheet for a very small business to a multi-chapter project designed to appeal to sophisticated investors. Regardless of the size of the business, most business plans contain some basic components:
- An executive summary provides an overview of the plan’s major points.
- A description of the business gives an overview of the elements of the business and explains how they function together.
- Company history explains what the company currently does, as well as how it came about.
- Market outlines the size of the total market the company operates within, and describes the company’s competitors and analyzes which are dominant and why. It also outlines the niche the company currently fills and the market share it intends to capture going forward. Market attempts to specify the company’s competitive advantage.
- A marketing plan outlines the strategies that will be used to compete in the market, including advertising plans, the hiring of sales staff and pricing. It should describe the goals for sales, and how the effectiveness of the company’s approaches will be measured.
- An operations strategy describes how the company’s production and distribution systems function and what advantages or disadvantages its operations might face compared to competitors.
- Organization and management describes the company’s key people and their backgrounds.
- Financial statements generally include a balance sheet, an income statement, a statement of cash flows and an analysis of current and projected profitability.
- If the business is seeking a loan or soliciting investors, a funding request puts a dollar amount on its needs and explains how the capital will be deployed.
Uses for a Business Plan
Business plans are typically used to help convince bankers or investors to contribute money. They can also help to attract new partners and employees and can serve as a key management tool to track a business’s progress.
The best business plans can be adjusted to appeal to a particular audience. Bankers will want the plan to focus on the risks to the business’s ability to generate cash and repay loans. Investors will expect it to emphasize the potential for growth and how the business plans to attain it.
Because business plans are intended to be read and reviewed by busy people, the most successful plans are written in a style that is simple and clear. Some facts are used to buttress key points, particularly in the marketing plan and financial data sections. Supporting details, such as resumes of company officers, copies of licenses, letters of intent from suppliers and specific sources of market data, are often contained to footnotes or to an appendix.
Help With Writing a Business Plan
Professional consulting firms can be hired to write complete business plans. They can also help generate reports for specific sections, such as financial data or marketing research reports, that might benefit from certain technical skills. Several sources, ranging from banks to universities, have also published sample business plans for business owners to use as templates. The U.S. Small Business Administration includes extensive suggestions for writing business plans on its website, along with an online course.SCORE, a non-profit association of active and retired business executives, maintains an online mentoring service along with a nationwide network of volunteers who provide face-to-face help on business plan writing and other aspects of business management. SCORE also provides online business planning templates that can help guide writers through the basic aspects of producing a plan.
Business Plan Writing Mistakes
Anything that stretches the credulity of an educated reader, such as fanciful financial projections or inflation of the business’s potential market, can undermine the credibility of the business plan.
Including too little information, such as failing to include financial statements for a business that has been in operation for some time, can cause readers to question the owners’ competence.
Failing to update a plan as conditions change also undermines its usefulness and could pose a problem if the business needs to seek financing or investment capital.
Related Business Plan Writing Resources
About.com Biotech/Biomedical: How To Write a Business Plan 
About.com Biotech/Biomedical: Top 5 Suggestions for Financing a Startup 
About.com Desktop Publishing: When Do I Need To Hire A Business Plan Consultant? 
About.com Entrepreneurs: Writing a Business Plan -- Company History 
About.com Entrepreneurs: Writing a Business Plan – Operations Strategy 
About.com Home Business: How to Write a Business Plan 
About.com Small Business: Canada: Business Plan 
About.com Small Business: Canada: Business Plan Outline 
About.com Small Business: Canada: Cash Flow Analysis 
About.com Small Business: Canada: Marketing Plan 
About.com Small Business: Canada: Writing the Executive Summary of the Business Plan 
About.com Small Business: Canada: Writing the Financial Statements Section of a Business Plan 
About.com Small Business Information: Business Plan Samples 
About.com Small Business Information: Business Plan Writing 
About.com Small Business Information: Critical Steps to Writing a Business Plan 
About.com Small Business Information: Business Plan Samples 
About.com Small Business Information: What Are The Most Common Mistakes Made When Writing a Business Plan? 
Bplans.com: Free Sample Business Plans 
Business Owner’s Toolkit: Writing Your Business Plan 
Entrepreneur.com: How to Create a Business Plan 
5min.com: How to Write a Business Plan Video 
Inc. Magazine: Business Plan Building, Section By Section 
Inc. Magazine: Writing a Business Plan 
Microsoft Small Business Center: How To Write a Business Plan 
MyOwnBusiness.org: Business Plan Course 
The New York Times: Five Things Prospective Investors Are Looking for in Your Business Plan 
SCORE: Business Mentoring Online 
SCORE: Business Plan for a Startup Business 
SCORE: Templates for Your Business 
SCORE: Find SCORE Locations Near You 
U.S. Small Business Administration: Online Business Plan Course 
U.S. Small Business Administration: Using the Business Plan 
U.S. Small Business Administration: Body of a Business Plan 
U.S. Small Business Administration: Small Business Planner 
U.S. Small Business Administration: Write a Business Plan 
U.S. Small Business Administration: Write a Business Plan: The Appendix