How to Write a Business Plan for a Small Business

Preparing To Write Your Business Plan

Determine the type of business plan you will use. While all business plans share the common objective of describing a businesses purpose and structure, analyzing the marketplace, and creating cash flow projections, the types of plans differ. There are three major kinds. The mini plan. This is a shorter plan (likely 10 pages or less), and is useful for determining potential interest in your business, further exploring a concept, or starting point to a full plan. This is a great starting point. The working plan. This can be considered the full version of the miniplan, and its main purpose is to outline, without emphasis on appearance, precisely how to build and operate the business. This is the plan that the business owner would refer to regularly as the business moves towards its objectives. The presentation plan. The presentation plan is meant for individuals other than those owning and operating the business. This could include potential investors or bankers. It is essentially the working plan, but with an emphasis on sleek, marketable presentation, and proper business language and terminology. Whereas the working plan is made for reference by the owner, the presentation needs to be written with investors, bankers, and the public in mind.

Understand the basic structure of the business plan. Whether you opt for a miniplan, or a comprehensive working plan to start, it is essential to understand the basic elements of a business plan. The business concept is the first broad element of a business plan. The focus here is on the description of your business, its market, its products, and its organizational structure and management. The market analysis is the second major element of a business plan. Your business will operate within a particular marketplace, and it is important to understand customer demographics, preferences, needs, buying behavior, as well as the competition. The financial analysis is the third component of the business plan. If your business is new, this will include projected cash flows, capital expenditures, and the balance sheet. It will also include forecasts as to when the business will break-even.

Obtain appropriate help. If you lack business or financial education, it is never a bad idea to enlist the help of an accountant to assist with the financial analysis portion of the plan. The above sections are the broad components of the business plan. These sections in turn break down into the following seven sections, which we will, in order, focus on writing next: Company description, market analysis, organization structure and management, products and services, marketing and sales, and request for funding.

Writing Your Business Plan

Format your document correctly. Format section titles in Roman numeral order. For example, I, II, III, and so forth. While the first section is technically known as the "Executive Summary" (which gives an official overview of your business), it is typically written last since all the information from the business plan is required to create it.

Write your company description as the first section. To do this, describe your business and identify the marketplace needs for your product or service. Briefly describe your key customers and how you intend to succeed. For example, if your business is a small coffee shop, your description may read something like, "Joe's coffee shop is a small, downtown-based establishment focused on serving premium brewed coffee and fresh baking in a relaxed, contemporary environment. Joe's coffee is located one block from the local University, and aims to provide a comfortable environment for students, professors, and downtown employees to study, socialize, or simply relax between classes or meetings. By focusing on excellent ambiance, close location, premium products, and superb customer service, Joe's coffee will differentiate itself from its peers."

Write your market analysis. The purpose of this section is explore and demonstrate knowledge of the market your business is operating within. Include information about your target market. You should be able to answer questions like, who is your target market? What are their needs and preferences? How old are they, and where are they located? Make sure to include a competitive analysis that provides research and information on immediate competitors. List your main competitors strengths and weaknesses and the potential impact on your business. This section is extremely important, as it outlines how your business will gain market share by capitalizing on competitor's weaknesses.

Describe your company's organizational structure and management. This section of the business plan focuses on key personnel. Include details about the business owners and its management team. Talk about your team's expertise and how decisions will be made. If the owners and managers and have extensive backgrounds in the industry or a track record of success, highlight it. If you have an organizational chart, include it.

Describe your product or service. What are you selling? What's so great about your product or service? How will customers benefit? How is it better than your competitors products or services? Address any questions about your product's life cycle. Do you currently have or anticipate developing a prototype, or filing for a patent or copyright? Note all planned activities. For example, if you are writing a plan for a coffee shop, you would include a detailed menu that would outline all your products. Before writing the menu, you would include a short summary indicating why your particular menu sets your business apart from others. You may state, for example, "Our coffee shop will provide five different types of beverages, including coffee, teas, smoothies, soda's, and hot chocolates. Our wide variety will be a key competitive advantage as we can provide a diversity of product offerings that our main competitors are currently not offering".

Write your marketing and sales strategy. In this section, explain how you intend to penetrate the market, manage growth, communicate with customers, and distribute your products or services. Be clear in defining your sales strategy. Will you use sales representatives, billboard advertising, pamphlet distribution, social media marketing, or all of the above?

Make a funding request. If you will use your business plan to secure funding, include a funding request. Explain how much money you need to start and maintain your small business. Provide an itemized summary of how start-up capital will be used. Give a timeline for your funding request. Gather financial statements to support your funding request. To accurately complete this step, in some cases it might be necessary to hire an accountant, lawyer, or other professional. Financial statements should include all historical (if you are an existing business) or projected financial data, including forecast statements, balance sheets, cash-flow statements, profit and loss statements, and expenditure budgets. For one full year, provide monthly and quarterly statements. Each year after that, yearly statements. These documents will be placed in the Appendix Section of your business plan. Include projected cash flows for at least 6 years or until stable growth rates are achieved and if possible, a valuation calculation based on discounted cash flows.

Write the executive summary. Your executive summary will serve as an introduction to your business plan. It will include your company's mission statement and provide readers with an overview of your products or services, target market, and goals and objectives. Remember to place this section at the beginning of your document. Existing businesses should include historical information about the company. When was the business first conceptualized? What are some notable growth benchmarks? Start-ups will focus more on industry analysis and their funding goal. Mention the company's corporate structure, its funding requirement, and if you will provide equity to investors. Existing businesses and start-ups should highlight any major achievements, contracts, current or potential clients and summarize future plans.

Finalizing Your Business Plan

Include an Appendix. This is the very last section and it's meant to provide additional information. Potential investors might want to see this information before making a decision. The documents you include here should support claims made in other sections of the business plan. This should include financial statements, credit reports, business licenses or permits, legal documents and contracts (to demonstrate to investors that revenue forecasts are secured by concrete business relationships), and bios/resumes for key personnel. Elaborate risk factors. There should be a section clearly outlining the risk factors affecting your venture and your mitigation plans. This also indicates to the reader how well prepared you are for contingencies.

Revise and edit. Review your business plan for spelling and grammatical errors. Do this several times before deciding on the final version. Rework or completely rewrite content to ensure it works from the perspective of the reader. This is especially true if you are creating a "presentation plan". Read your document aloud. This allows you to detect if any sentences do not flow together well, and it also makes any grammatical mistakes more obvious. Make a copy and give it to a trusted friend or colleague to proofread and provide feedback. You can go online and print a Non-Disclosure Agreement (NDA) for them to sign to help protect your business idea.

Create a cover page. The cover page identifies your document and gives it aesthetic appeal and professionalism. It also helps your document to stand out. Your cover page should include: The words "Business Plan" centered in large bold font, along with your company name, company logo, and contact information. Simplicity is key.