The success of a small business is highly dependent on its business plan. A robust and detailed plan lays out a clear path for the future, forces you to consider the viability of a business idea, and can give you a much better understanding of your business’s financials and competitors.
The business plan typically looks out over three to five years, detailing all of your goals and how you plan to achieve them. If you’re applying for a loan or looking for investors, a business plan shows you’re prepared and have thoroughly vetted your business idea, says Craig Allen, a financial advisor. He teaches business plan writing classes at Southern New Hampshire University.
“If you have no financial forecast, which is part of the business plan, it’s tough to show the bank how you will repay the loan,” Allen says.
This is your business plan’s initial page. It should include a mission statement that explains your business’s primary focus, a brief description of the products or services offered, some basic information about your business, such as ownership structure, and a summary of your plans.
This section summarises your small business plan services. It contains critical information about the business, such as its registered name, the address of any physical locations, the names of key personnel, the company’s history, the nature of the business, and additional details about the products or services it offers or will offer.
Objective statement or business goals
An objective statement should clearly define your business’s objectives and include a business strategy outlining how you intend to accomplish them. It outlines precisely what you wish to achieve, both short and long-term.
If you’re seeking outside funding, you can use this section to demonstrate why you need the funds, how the financing will help your business grow, and how you intend to accomplish your growth goals. But, again, the key is to explain the opportunity presented and how the loan or investment will grow your company.
For instance, if your business is launching a second product line, you could explain how the loan will enable your business to launch the new product and double its sales in the next three years by 50%.
Business and management structure
Here, you’ll list your business’s legal structure — such as a sole proprietorship, partnership, or corporation — and critical employees, managers, or business owners. It should also include the percent ownership of each owner and the extent of each owner’s involvement in the company.
Products and services
This section can detail the products or services you offer or plan to offer. It should include the following:
- An explanation of how your product or service works
- The pricing model for your product or service
- The typical customers you serve
- Your sales and distribution strategy
- Why your product or service is better than what the competition is offering
- How do you plan to fill orders
Additionally, you can discuss any current or pending trademarks or patents related to your product or service.
Marketing and sales plan
This is simply an explanation of your marketing strategy and how you will execute it. Here, you can address how you plan to persuade customers to buy your products or services or how you will develop customer loyalty that will lead to repeat business. Additionally, this section can highlight your business’s strengths and emphasize what sets you apart from the competition.
Business financial analysis
If you’re a startup, you may not have much information on your business financials yet. However, suppose you’re an existing business seeking small-business loans. You’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes in and goes out of the company.
You may also include ratios that highlight the financial health of your business, such as:
- Net profit margin: the percentage of revenue you keep as net income
- Current balance: the measurement of your liquidity and ability to repay debts
- Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year
This is a critical part of your business plan if you seek financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.
Your goals may be aggressive, but they should also be realistic, It’s OK to be optimistic if you can justify it,” Allen says. But, generally, you don’t want to stand out negatively by being too bright.”
You want to show that your business can generate strong enough cash flow to cover the regular debt payments. It would help if you also addressed dress the various risk factors of the company, Allen says.
The List of any supporting information or other additional information that you couldn’t find elsewhere, such as resumes of key employees, licenses, equipment leases, permits, patents, receipts, bank statements, contracts, and personal and business credit history. If the appendix is lengthy, you may consider adding a table of contents at the beginning of this section.
Business plan tips and resources
Now that you’ve written your business plan, here are some tips to help your hard work stand out:
Avoid over-optimism: If you’re applying for a business loan at a local bank, the loan officer likely knows your market. Providing unreasonable sales estimates can hurt your chances of loan approval.
“They know what you can expect in sales for that type of business in that market. Of course, you can always put supporting information or other vital details in the appendix.
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