To understand what should be included in a business plan, you have to understand who the plan is for and what stage of your business you’re in. If you’ll be taking a business plan to a financial institution as part of a loan application, you’re going to want a more traditional plan. These tend to be on the longer side and should be as detailed as possible, without getting too technical.
If you’re in the early planning stages of your business or just want something to show to a few angel investors, you might consider a startup business plan format, which will be more of a summary of key points. That might only be one page long but should still hit on all the major highlights and goals of the business.
According to the Small Business Administration, the length of your business plan should be long enough to accomplish three goals: (1) excite the financing source, (2) prove that you truly understand the market, and (3) fully detail the execution strategy.
Regardless of length, your business plan must get across why you are passionate about your company and why you think it will succeed. You should have a command of your market, your subject area and be authoritative. You should include market data and financial projections, but not come across overly dry. You want the readers of your business proposal—even bank loan officers—to see your commitment to your goals and the emotional connection you have formed to your business idea. At the same time, you want your plan to appear factual and professional.
Startup business plan requirements
If you’re writing a business plan for a bank or lending institution, consider including the following major components in your plan. Keep your plan in a binder with numbered pages and provide a table of contents to make it easy to follow.
Executive summary. This is a brief (1-2 page) explanation of what your company is, what it does and why it will be successful. Although this summary will come first in the plan, you should write it last so that you have all the information to draw from. Not succinctly summarizing your business idea is one of the biggest mistakes that can be made in a business plan. If you don’t hook your reader with your executive summary, that person is not going to want to keep reading. Here are some of the pieces to include:
- The mission statement — a short statement summing up your business and explaining your product or services
- A brief overview of the structure of your company and the leadership team
- Some basic financial information, such as banking relationships and any investors
- A summary of your company growth and any financial highlights
- Company facts like number of employees, date founded and location
Mission statement. Although this is a part of the executive summary section, the mission statement deserves a separate callout because you’ll need to carefully craft your message. The statement needs to pack a punch, but remain a tight and coherent thought. Mission statements should be written in the present tense, and answer questions like who your customers are, what values are important to your business and what marker you’ll use to decide if your company is successful.
Market analysis. In your company description you started to explain why your company is a good idea. Your market analysis is where you’ll back up those statements with an authoritative understanding of your industry and target market. Address why your competitors are successful and prove that you know why what they’re doing is working. You also need to establish why your idea is better or will be more successful. The market analysis section should be between 9 and 22 pages long. In this section, include information like:
- Trends and themes in your industry
- A description and size of your target market
- Your pricing and gross margin targets
- Industry risks
- Key personnel
- Five-year projected revenues
If you need help with market research there are several free tools available. The U.S. Census is obviously data rich and can help you answer questions about the size of specific industries and businesses and which products in your industry are growing. The U.S. Census also offers Economic Indicator data that can help you digest what’s going on in different industrial sectors.
The SBA offers a tool called Sizeup that helps you process data points to get details on your competition, figure out where your competitors are located and where there might be gaps in the market. It’s important to remember that having a similar business plan as a competitor doesn’t necessarily mean you won’t be successful. It’s possible that two similar businesses can thrive, but you should be able to explain why the market you are entering is conducive to that.
Your business plan must get across why you are passionate about your company and why you think it will succeed.
You should also be able to prove that you know the customers to whom your business caters and be able define and research their habits. Know when they buy, how often they buy or how often they will need your service.
Company description. A good way to describe your company is by answering this question: What problem does your company solve? That can help determine who your customers are and what advantages your company has over your competitors. The question will also lead you to explain and highlight the expertise of your team and the benefits of your physical location. A company description is an easy place to show your commitment and passion for the company as well as boast your company’s strengths.
Organization and management. Here’s another place to show your team’s competence and explain the passion behind your business. This is where you’ll outline who is running your company, how it’s structured and what you all bring to the table. The main components to include are:
- An organizational chart
- The name of all owners and percentages they own
- Resumes of some of your key staff/leaders
- The legal structure of your business (i.e., an LLC, a partnership, etc.)
Marketing and sales. It’s not enough to simply say you have a great product. In a traditional business plan, you have to explain how you intend to get this great product or service to the right customers. You should convey how your strategy is going to evolve once you have more (or any) customer data. Still, you should lay out a roadmap for how to start and potential opportunities to attract and retain customers. Consider including the following:
- An explanation of your business model and how your product leads to revenue
- How and when you will introduce new products or services
- Potential new territories for your company to enter
- The plan to boost sales on a particular product
- Potential long-term relationships with other companies or clients
- The possibility of price increases
- Improvements to your product or your processes for manufacturing or delivery
- Ideas for advertising and social media strategy
Service or product line. In this section you will need to again answer what your company does and what you’re selling. You can go into more detail about what sets your product and company apart from your competitors, as well as how you target customer benefits. Some items to include are:
- The life cycle of your product
- Information on any copyrights, patents and any other ways you protect your intellectual property
- Any non-disclosure or non-compete agreements
- Any research and development you’ve done
Funding request. If the goal of your business plan is to secure an investment or a loan, then this is where you’ll explain how much funding you need and why. In addition, you want to explain how you will pay off your debt. Also include any information that would majorly impact your future financial situation, like plans to take the company public or sell the company.
Financial information. It might seem obvious, but in your financial projections you want to show that your business is strong. If you have an established business, this is where you’ll include cash flow statements, income statements and balance sheets as well as collateral that you could put up against a loan. You should also discuss how the business is being funded and your current costs. Also, make sure that the projections clearly match up to your funding requests, avoiding overreaching. This section of your business plan should also have some heft, possibly as long as 12 to 25 pages.
Some of the documents you should provide include:
- Current financial data of all owners
- Financial data from the past three years, such as balance sheets and profit and loss statements
- A list of all your debt, including what you owe and to whom
- A five-year forecast of income and expenses
- A certification or review letter from a financial advisor saying that your information meets generally accepted accounting principles
Appendix. This section is for any supporting documents that can be used to support your plan statements. Consider including credit histories, the resumes of your staff or key leaders, product pictures, permits, patents or other relevant contracts.
Startup business plan template
For a startup business, it might be worthwhile to look at a less involved version of a traditional business plan. A popular one is the Business Model Canvas developed by Alex Osterwalder. The idea of the canvas is to explain your business model in a simple way to relevant parties, such as partners and potential investors.
Here are the main components of the Canvas model:
Key partnerships. Discuss the other businesses or services required to run your new business. This can include suppliers, contractors, manufacturers or other partners that are necessary for your company to operate.
Key activities. Format a list of how your business will gain an advantage in your industry through your chosen business model. You should highlight what makes your company more effective at reaching your target customer than your competitors.
Key resources. List your important business assets which may include staff, capital or intellectual property. These are the things that will make your chosen business model successful and help you deliver to your customer.
Value proposition. This is a good place to showcase your passion as well as your understanding of your market. You should make a compelling case for why a customer would choose you over the competition.
Customer relationships. Describe a customer’s experience working and interacting with your business. Address both customer acquisition and customer retention.
Customer segments. Explain who your customers are. You’ll want to give a clear sense of your target market and who is being served by your business. Be specific.
Channels. Describe how you will communicate with your customers and why those methods are effective. Most businesses use a mix of channels and optimize them over time.
Cost structure. Address how your company will reduce cost, maximize value and make money on your product or service. Be honest about the most significant costs that you anticipate facing.
Revenue streams. List all the revenue opportunities in your plan, including the product or service you’re selling, advertising space for sale and membership fees.
See Also: Business Plan Mistakes to Avoid
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Published February 27, 2019