The length of your business plan is strictly dependent on what you want to accomplish, how thoroughly you analyze your markets, and the number of financial projections you include. As stated previously, business plans range from verbal statements, to paper napkin drawings, to documents that are in excess of 50 pages. From the following section you might estimate that your plan will require a single page for every one of the business plan elements recommended by the SBA.
Elements of a business plan
The following elements of a business plan are published on the SBA Web site, and provide a good starting place for your business plan outline.
- Cover sheet
- Statement of purpose
- Table of contents
- The Business
- Description of business
- Operating procedures
- Business insurance
- Financial data
- Financial Data
- Loan applications
- Capital equipment and supply list
- Balance sheet
- Breakeven analysis
- Pro-forma income projections (profit & loss statements)
- Three-year summary
- Detail by month, first year
- Detail by quarters, second and third years
- Assumptions upon which projections were based
- Pro-forma cash flow
- Supporting Documents
- Tax returns of principals for last three years
- Personal financial statement (all banks have these forms)
- For franchises, a copy of franchise contract and all supporting documents provided by the franchiser
- Copy of proposed lease or purchase agreement for building space
- Copy of licenses and other legal documents
- Copy of resumes of all principals
- Copies of letters of intent from suppliers, etc.
The first three or four pages of your business plan
Imagine that you have less than ten minutes to interest your boss, a potential investor, or someone you want to hire with your business plan. What key aspects of your business will you describe to keep them from moving on to their next opportunity? After all, these are busy people who may be presented with multiple business plans and new business opportunities every day.
Much like a television commercial or magazine advertisement, the first three or four pages of your business plan are written to gain someone’s attention, and get them to ask for more information. After you get them hooked, then you can negotiate the terms of a loan, a potential investment, or whether they might be interested in working for your company. The first pages of your business plan include the following:
- Cover sheet
- Executive summary
- Statement of purpose
- Table of contents
Although you cannot prepare these pages until you have finished the rest of your business plan, look at them now, and note some of the key points that you should be able to extract from the entire document.
The purpose of the cover sheet is not only to introduce your company name, but also to present a professional appearance, and make it as easy as possible for someone to find you if they have additional questions. Keep in mind that once you submit your plan to bankers, prospective investors, or venture capitalists, it may be passed around to a variety of individuals, like lawyers and accountants, for a second opinion.
Normally for financing proposals, you will want to include: your name or a contact person; the appropriate title for the contact; the name of the business; its address; a phone number; and the publication date. Other items you may want to consider are:
- Fax number
- Email id
- Company logo
- Website address
- Standard Industrial Classification (SIC) code
- The number of copies of the plan that have been distributed, e.g., copy 3 of 5
- A statement of confidentiality, if you don’t want your plan “passed around”
For a business plan that is to be used for internal purposes only, and not shared with anyone outside your company, your name, the name of the project and the date should be sufficient information.
The executive summary contains one or two of the most important pages in your business plan. You do not simply introduce your company to prospective investors, bankers, or senior management, on these pages you sell them your idea. Your executive summary must at least stimulate enough interest so that readers will turn to the table of contents in search of more information.
Remember that you do not have much time to capture someone’s attention, since they may only devote a few minutes to reading your executive summary. It must clearly state what you are trying to accomplish in as few words as possible. Each paragraph must capture the key elements of your marketing, management and financing strategy.
As you write your executive summary, keep in mind that it must be clear and concise, and touch on all of the business plan elements. It’s not necessary to cover every detail in your first four sentences, but by the end of one, and not more than two pages, readers must understand what you are trying to do in a language that they can understand.
Statement of purpose
For financing proposals, where you are seeking money from banks or investors, include a statement of purpose in your executive summary. The statement of purpose identifies the who, how much, and why of your business plan, by answering the following questions:
- How much money is required?
- What will you use the money for? Equipment? Building? Working capital?
- How will the funding lead to increased sales and/or profits?
- When and how will the money be repaid?
If you are seeking a loan from a bank, make sure that the pro-forma financial statements contained in your business plan support repayment of the loan.
Table of contents
Depending on the length of your executive summary, the table of contents will be the third or fourth page of your business plan. It follows your cover page, statement of purpose, and executive summary, and should be broken into at least three parts: the business, financial data, and appendices. If you have a very complex plan, the business part could be divided again into: business description, marketing, and management. However, the financial data should always be separated into its own part since many investors may turn there after reading your executive summary.