How to Write a Business Plan

What is a business plan?

A business plan is a document that outlines the "who, what, when, where, why and how" of your business. It allows the company to gather pertinent information, look ahead, prepare resources and most importantly, raise capital.

Your plan will help guide you through setting up your business and stay on a clear path.

Why do I need one?

Now granted, there are many entrepreneurs that have successfully opened up shop without the use of a plan. The funding may have come from family and friends, they took a sinking company and turned it around or they knew what their direction was and didn't need to look back. However, in most cases a plan is a viable resource for your business.

- You think you know but you don't know. In other words, you may have outlined the entire business in your head but when you put pen to paper you realize there are things you've missed, items that haven't been accounted for, or worse, you didn't even have an initial plan of action.

- You wouldn't go in to an investing office without it. If you are looking to raise capital for your business you are going to need a solid business plan to present to an investor. They will use this along with many other factors to determine whether your proposal is viable. Their main goal is not to lose money, so they won't gamble. Having a strong business plan will help you secure the funding needed to start your business.

- It's your roadmap. Briefly discussed above, your business plan will be your roadmap to success. It will help guide you through the start-up stages and even further in preventing the least number of hiccups possible. You should keep your business plan handy so you can look back at it and keep on the right path.

What makes a great plan?

Before writing your business plan, you might want to take a look at some of the key factors of a great business plan. Understanding these key elements will save you time and effort in the end. You can focus on these during your writing instead of having to go back and edit in the end.

- What is the basic concept? Write it down.
- Gather all of the information possible prior to writing your business plan.
- Review sample plans. Read them. Understand them. Why do you think they include the information they do?
- Don't overdo it. Keep things simple and straightforward. Your business plan isn't a tool to showcase your knowledge of the business.

What are the do's and don'ts of a business plan?

Okay. We are almost there. But first lets address some of the more common do's and don'ts of business plans. Again, keeping these in mind will save time and effort in the long run.

Do answer the who, what, when, where, why and how in your business plan.
Do understand that planning is a critical step in a successful business.
Do keep the business plan clear, straightforward and to the point.
Do explain your experience and how it will benefit the company.
Do consider your competition.
Do address the strengths and weaknesses of your business.
Do spell-check.

Don't be general.
Don't guess on factors such as financial needs and projections.
Don't take a business plan you found online into a bank.
Don't assume everyone is an expert on your niche.
Don't exhaust your business plan with information that is not relevant and meaningful.

What are the parts of a business plan?

Your business plan will need to include a few important elements. Truthfully, it doesn't have a great impact if one comes before another but be logical about it's order. Here is a suggestion:

Cover: Now as unimportant as it may sound, your business plan does need a cover. Keep it simple and clean. Just like visiting a website, a store or even meeting someone at a networking event, first impressions are everything.

Executive Summary: This is where you will gain the investor's interest. Briefly describe the reason for the investment and highlight any key factors that may persuade them to commit. And make sure to include your contact information. You may want to write this last as you will be outlining in more detail in other sections.

Table of Contents: Would you want to flip through a book, even a small book trying to find a particular paragraph? I wouldn't. Make it easy for people to go back and find information.

The Company: This is where the importance lies. You need to be able to present your company in the best of light. Being as specific and precise as possible will help you gain the trust of the investor. Include such things as:

The Business: Provide insight that will help the reader gain knowledge on the overall market your business is in and the trends it will experience.

Profile: Explain in detail the purpose of your company and how it will benefit a group of people in the market place. Define the organization structure of the business, market influences, contracts and procedures.

Target Market: You need to be able to outline the company's target market. This is the group of people based on demographics you will focus on in your marketing efforts.

Challenges: Be able to explain how you will overcome downturns in the economy that might affect the performance of your business.

Marketing: You need to be able to address your marketing strategy, prepare a growth timetable, budget, packaging and presentation, policies and cost. This could be the most important section of "The Company." Address your marketing plan shows that you have a plan for bringing in business.

Financial: As boring as a section as this is, you MUST be able to outline your financial outlook. You need to be able to prepare Cash Flow Statements for the next three to five years, prepare a Balance Sheet and Profit and Loss Statements. When you head to speak with an investor you need to be aware of where you are walking into. Probably a bank. And what do banks care about? Money! They will likely spend a good amount of time in this section so be clear, precise and realistic.

Needed Capital: Lastly, you need to address the capital you need. Be aware that most banks will not provide "operating costs" for a start-up. They will supply capital for most tangible items. This way they can make some of their money back by selling these items if you default on the loan or if the business does not take off.

The Appendix: The appendix acts as more of a support for the business plan. You can include anything from supporting documents, biographies, footnotes even a glossary of terms.

What do I do after a create a business plan?

Practice, practice, practice. Pitch your business plan to your family and friends. Gather their input and edit your business plan accordingly. Then, you're off to the bank.