Definition: A business plan is a written document that describes in detail how a business is going to achieve its goals. A business plan lays out a written plan from a marketing, financial and operational viewpoint. Sometimes, a business plan is prepared for an established business that is moving in a new direction. (Investopedia.com).
Elements: The elements of a good business plan depend upon the talent and needs of each company. A plan may include the following topics.
- Executive summary
- Company history
- Product or service description
- Competitive advantages
- Specific markets
- Growth strategy
- Market size and share
- Targeting new markets
- Research and development
- Historical financial data
- Proforma balance sheet and income statement
- Effects of the loan, investment or the overall goal or strategy
Executive summary: The executive summary is a brief explanation of the history of the company as well as of some of the basic components of the business plan, such as competitive pricing, a desire to expand the market share, the benefits of increased advertising, plans to lower the per-unit production costs, etc. The summary might have a brief recap of the financial goals to give the reader an expectation of the goals of the detailed plan.
Biographies: The biographies of the officers of the company should be brief paragraphs of approximately 120 words for each officer or key employee.
Product description: The reader will want to know a brief description of the key advantages of the company’s product, such as it offers the lowest price in the market, is the most technically advanced, offers the most useful features, saves customers time and money, offers its users better value per dollar spent, provides an alternative way to achieve a similar task, etc.
Service description: The reader will want to know a brief description of the key advantages of the company’s services, such as providing a service which is not presently available in the state, saving the customer time and money, giving an alternative and cost-effective way for the customer to achieve their goals, etc.
Objectives: This section is to recap the long-term and short-term objectives of the company. A long-term goal might be described as, “We want to be considered by our peers to be the market leader in sales as evidenced by trade industry awards, high-end financial goals, a major market share increase, etc.” The short-term goals might explain the goals by the end of each of the next three years.
Competitors: This section is to include the name, city and state of each key competitor, including their current market share and their strengths and weaknesses as a competitor to your company. A strength might be, “The low-cost producer in our market and is known for their aggressive pricing policy,” A weakness might be explained as, “Their machinery is slowly approaching obsolescence, which will cause increased production costs in the future if the current machinery is not replaced within the next few months.”
Competitive advantage: Be as verbose and as detailed as you wish in this section. The section might include experience in the market, advantages in purchasing power, methods of keeping overhead lower than industry standards, sophistication in management and finance, etc.
Innovation: Give a historical reap of any innovation created by your company, such as patents, trademarks, increased levels of service, increased customer service, intellectual property created, etc.
Markets: Provide a history of the market you serve, including how it originated, what made it attractive, how it has changed since your company began serving the market, whether the market is retail, wholesale or a combination of both, your predictions on the future of the market, etc.
Growth strategy: The strategy might include changes to the company’s products or services, expanding into new markets to attain growth, changes to the sales process to attain new customers, etc.
Market size and share: The description might be, “According to industry experts, the U.S. market for our products (or services) is estimated to be $1.2B in annual sales. Our company’s market share is presently at 5% and our long-term goal is to capture 10% of the market, which would mean $XXX in increased sales volume to our company.”
Research and development: Caution – this may be an area where the company needs to make a high-level description of R&D, especially if there are any trade secrets or intellectual property that might be involved in the current R&D project. The company may need to talk with an attorney to decide if a Non-Disclosure Agreement (NDA) needs to be signed before the business plan is presented to outsiders.
Historical financial data: It is customary to provide three years of financial information, including the balance sheets, income statements, etc. It might be prudent to disclose the KPIs (Key Performance Indicators) of the company along with an explanation of whether or not the financial statements presented conform to industry KPIs. It is imperative that the company’s financial statements are accurate and timely.