Before you start blasting away with your word processing and spreadsheet software, consider why you are creating a business plan. Do you need startup money? A bank loan for new equipment or inventory? Financing for expansion? Or, a “yardstick” to measure your performance against stated goals and objectives? Although most business plans cover certain “core” material, the purpose for developing your plan will determine in part some of its format and content.
According to the U.S. Small Business Administration (SBA), your business plan should cover the following four distinct sections:
- The description of the business
- The marketing plan
- The financial management plan
- The management plan
Additionally, your business plan should include an executive summary, supporting documents and financial projections.
Don’t be misled by the “small” in SBA, since these guidelines generally work very well for almost any sized business. In fact, these guidelines were probably developed by very large businesses and passed down to smaller businesses “as the correct approach.”
Questions to be answered in your business plan
The following is a list of questions that you should answer in your business plan. These are the questions that bankers, investors, or your management will want answered as they read it. You may need to modify this list, by adding or eliminating certain points, to ensure that you are only covering those items that are important for your business.
Description of the business
- What business are you in?
- What is the name of your business? When did you start it?
- Is it a proprietorship, partnership or corporation?
- Are you a manufacturer, merchandiser, or service business?
- What products and services are you selling?
- Is it a franchise business? A startup? An expansion? Or an acquisition?
- How fast is it going to grow? In sales? In profitability?
- What is your mission? What are your corresponding goals and objectives?
Products and services
- What benefits do your products and services offer customers?
- How are your products and services better than competing alternatives?
- What is your best-selling product?
- Are you expanding product lines? Or creating a whole new product line?
Industry and market analysis
- What is the structure of the industry?
- How large is your industry? How fast is it growing?
- What impact does technology have on the industry?
- What are the barriers to entering and exiting the industry?
- How large are the markets? How fast are they growing?
- What market trends are affecting the industry?
- How many potential customers are in your target market?
- What is your share of this market?
- What do they buy from your business? How much do they buy?
- What key variables can you use to separate them into groups?
- How are you going to retain existing customers?
- Who are your direct and indirect competitors?
- How large are your competitors? In sales? In profits?
- What are your competitor segments?
- How is your business better than theirs?
- What are the weaknesses of your direct competitors?
- What competitors do your prospects consider when evaluating alternatives?
- Do your prospective customers have a contract with a competitor?
- What are your customer preferences for color, styling, service levels and payment?
- Why did your prospects choose a competitor?
- How much do your competitors charge for their products and services?
- What are your product and service benefits?
- How are you pricing your products and services?
- What are your channels of distribution?
- Where is your business located?
- How large is your marketing budget?
Management and organization
- Why are you and your management team going to be successful?
- What previous experience do you have in this business?
- Are you lacking any managerial skills? How are you going to get these skills?
- What type of organizational structure does your business have?
- What are the responsibilities of each member of the management team?
- How many people work for your business?
- Are you going to hire more?
- How do you recruit and train employees?
- Is your business profitable? If not, when will it be profitable?
- How fast will your sales and profits grow in the next three years?
- What is your business worth?
- Does your business have positive or negative cash flow?
- What is your breakeven point?
Note that the preceding questions could have included sections on manufacturing, operations, and research and development. If these factors will determine your success, then make sure to include them in your business plan.