Writing a Business Plan

Predicting and planning the finances of your business is an important task, not just to attract investors, but to demonstrate whether your business idea will be successful. If your first projections show your business losing money, you have an opportunity while still in the planning stages to make sensible adjustments, such as raising your prices or cutting costs. If you do your best to make realistic predictions of your expenses and revenues, and accept that your approximations may not be completely correct, you can learn a great deal about how the financial side of your business is likely to look in its early months and years of operation. Even an inaccurate picture of your business’s finances will be more helpful than having no picture at all.

Formatting the Plan

The form of every good business plan, although not set in stone, tends to run along the same basic lines, containing the following key sections:

Cover Page: The cover page should be professional and informative and should contain an appropriate confidentiality legend.

Executive Summary: A strong executive summary is the most vital section of a business plan. It is generally written last, after the other parts are completed, summarizing the key details of the operation.

Company Description: Convey a sense of company history, as well as the company’s goals.

Management: Identify key members of the management team, describe their responsibilities, and establish their relevant experience and accomplishments. Consider including a resume that stresses accomplishments and relevant track records.

The Product: What is the product is or will be and why it can penetrate the existing or developing market.

The Market: Understanding your target market helps you further develop the benefits important to your customers, and enables you to focus your marketing efforts to reach the right audience. Define the target customer in as much detail as possible, including demographic traits, as well as more subjective terms such as lifestyle and personality type.

Competition: Identify competing business—both direct and indirect competitors—and compare your operation with the competition. How will your store be different? What will make it successful? Identify who the competitors are, what they sell, what market share they hold, and what strengths and weaknesses they have. Identifying that competitors exist in the marketplace proves a market truly exists for your business.

Financial Statements and Projections: The body of the plan should include a summary of the key aspects of the financial forecasts, which appear in more detail in appendices. These may include total cash requirements, the time frame for positive cash flow, and the anticipated growth in sales and profits. The financial forecasts appendices should have more detail, including balance sheet income statements and cash flow projections for a three- to five-year period, with the information presented monthly for the first year, and quarterly for the following years. The projected income statement is probably the most important projection. The most significant aspect of these forecasts is the set of assumptions supporting your numbers. Make sure your discussion sufficiently communicates the basis of your assumptions—they must be realistic, logical and attainable. If you are not a financial statement guru, get help from an accountant or another reliable source. Credible financial forecasts are very important.

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