by Tom Gray
There are two main reasons for writing a Business Plan: to succeed as a business, and to get a loan. The first reason means that every new business needs a Business Plan!
A Business Plan Organizes Your Thinking
Entrepreneurs’ minds are a swirling tornado of ideas and questions. A Business Plan organizes these snippets into a logical sequence. Once you have things in order, you can see the holes, the weaknesses, and the inconsistencies.
For example, one inconsistency would be an ambitious sales forecast without a strong marketing campaign. Another would be a strong marketing campaign without a budget to pay for it.
You wouldn’t get very far trying to build a house without a foundation, or trying to put up the roof without first building the walls. The same need for sequence applies to planning a business. Putting it all down on paper enables your mind to focus and fill in the holes.
Start With a Simple Business Plan Outline
Dozens of business plan outlines can be found on the Internet, in bookstores, and in software. SCORE has found over the years that this outline works best for startups:
1.0 Executive Summary (written last)
2.0 Business and Product Description
3.0 The Market
4.0 Marketing Strategy and Tactics
The plan will be 10 to 20 pages of text, plus some financial attachments and also some Appendix items, used to add detail to items mentioned in your text.
You write the plan in numbered sections, so it doesn’t seem like a huge task to tackle all at once. As the old saying goes, “How do you eat an elephant? One bite at a time.” The numbering keeps both you and the reader on track.
Draft the Easy Sections First
The easy sections are Table of Contents (given above), Business and Products Description (2.0), and Operations/Organization (5.0).
Entrepreneurs have the most trouble with the Market and Marketing sections, and of course the Financials. So we will cover these in dedicated articles to follow.
You write 1.0 Executive Summary last. It will be a maximum of 2 pages, and should not include any ideas that are not explained in the rest of the text. The best approach is to write summary paragraphs in each of the other sections, and tables in the Financials section, which you copy and paste into 1.0. This means you really don’t have to write the Executive Summary at all!
Section 2.0: Business Description (2.1) and Product Description (2.2)
Your Business description can be one or two paragraphs. You can use the one below, replacing the underlined items with your own information.
“ABC is an Illinois S corporation owned by your name. It is located at address and established in year. ABC provides (type of) products (or services); as such it is part of the XYZ industry, NAIC Code ####. ABC’s goal is to provide target market segment (e.g. upscale consumers, or steel processors) with type of product or service (e.g. housecleaning) that is your competitive advantage.
In today’s market these target market customers have difficulty meeting this need, because current suppliers do or don’t do what. The benefit to our customers will be what (e.g. save $ per purchase or per year; avoid some problem; achieve some missing satisfaction).”
This will get you started. You can edit this section later, after drafting the others. For example, you may come up with a different competitive edge after writing Section 3.0. If so, you will want to change 2.1 so the whole plan is consistent on this important point.
The NAIC code – North American Industrial Classification – is available online or at a library with a good business section. Ask the reference librarian. It’s used to reference databases in order to understand how big the market is, and who your competitors are, both considered in Section 3.0.
Next, write a BRIEF product description (2.2). Limit its length to a half page ideally, or a full page at most. Highlight how it delivers the benefits you promised in 2.1. Don’t get into detail on how it works or how you build the product or deliver the service. Those details, if important, can be described in the Appendix.
Section 5.0: Operations/Organization
This section shows you have “thought through” how to produce the product or deliver the service. It also captures your research on the major cost elements that will later be used for your financials. It will be about two pages long. Use bullet items and/or tables rather than long paragraphs.
Start with facilities, software/development, and equipment you will need. Say what they are needed for, and how much they cost.
Then list the positions you plan to staff, what their functions are, skills required for each position (to be able to do those functions), and how much they are paid. Be sure to explain what role you will play in operations, and why you will be good at that. Your resume or bio can be in the Appendix.
List your professional advisors: Banker, Accountant, Insurance, Lawyer, maybe marketing and computer specialist (IT)
What skills are missing, and how will you get them (outsourcing, advisors), and expected cost
Key production processes, if any, can be mentioned here. Longer descriptions or “process maps” (flowcharts) can be in the Appendix.
At this point, it’s a good idea to start a list of what you plan to put in the Appendix, so you don’t forget!
Now you have a framework. Plus you’ve written what you know the most about: your business description, your product or service idea, why it’s good for customers, and how you will make or deliver it. You can always revise these sections later!
Check back next week when we’ll discuss tackling Section 3.0: The Market.
About the Author:
Tom Gray – Mentor, SCORE Fox Valley
Tom helps owners save and grow their companies. He is a management consultant focused on small business and telecom, a Certified Turnaround Professional (CTP), and a SCORE Mentor.