Writing a business plan is vital for small business owners. A business plan shows investors and suppliers that the owner understands the industry and market. It demonstrates that the business can generate revenue and profits and survive difficult times. It also helps the owners themselves judge whether their idea is worthwhile and sustainable. The owners need to know where they are going and how to get there.
Highlight each section of the plan, concisely. Potential investors need to know why they should read on. Explain what your business is, who owns it, who is on its management team, what you will accomplish immediately and what you will achieve in two, three and five years or more. Explain why your business model will succeed and why investors should back you. What needs are you trying to fill? Who are the major players in the business? What are the industry trends, the demographics, what competition are you up against? What is your marketing plan? What about the people you’ll be hiring and the culture you’ll be creating within your company? The executive summary should be no longer than a page.
If preparing the plan for a specific purpose, such as a loan request, state that purpose clearly.
“Write all of the other elements first, have them locked in your brain, then come back and write the executive summary last,” says Susan Cranston, Assistant Vice-President of Group Small Business Marketing and Advisor Services for Manulife Financial.
Industry trends/market analysis
No business is an island. Explain your understanding of your industry sector to show that you know the business you are getting into. What are the strengths and weaknesses of the competition? Who are the major players? Describe the economic environment in which the industry operates. What are the threats? What are the opportunities? Is the industry affected by seasonal factors?
“This is where the aspiring business owner needs to go out and do the research,” says Ms. Cranston. “A hunch, a feeling, or a hope and a prayer won’t be good enough. It’s vital for the owner to validate her understanding of the business, the market, the economy and the opportunity that she sees. By forcing herself to dig deep into these areas, she’ll be better prepared to demonstrate the viability of her vision – both for herself and her investors.”
Explain how your company is different and why people will buy from you and not from your competition. Who is your audience? What needs are you targeting? What gap are you trying to fill?
“It’s a litmus test. This is where investors are going to look very closely,” says Ms. Cranston. “If you’re just going to be starting something in the ocean of competition, it’s going to be hard to create that value proposition, unless you can clearly articulate what you’re doing differently and why people are going to stand up and pay attention to you.”
Provide a complete description of your company. Document how many employees you will have, what skills you will need, how you will find them, how much you will pay, and how you will retain your employees.
“Products can be duplicated, services in some respects can be duplicated, but your human capital, your culture is unique to every small business. And that can’t be duplicated,” says Ms. Cranston. “What culture do you want to create and how will that be a competitive advantage for you?”
List your hours of operation and describe your production processes. Explain the tools and equipment you will use, and whether you will buy or lease, and how you will maintain or replace them. Describe your customer service – delivery, service calls and handling of complaints. Who and where are the suppliers, and do you offer warranties? What technology will you need? What sort of insurance will you, your employees and your business have? What banking products does your business have?
The four Ps: product, price, place and promotion
Explain how the product meets the needs of your target market. Describe your strategy around pricing. Where are you located and how will you get your product or service to the people who want to buy it? What are your marketing and advertising plans and budgets?
Set out your expectations for expenses and cash flow and what your funding requirements will be in the critical first year or two. What salaries will you pay? What sales do you anticipate? How will you acquire your inventory? What is your break-even point? Do you need external funding? What security can you offer to lenders and how will you repay any borrowings? “I would suggest working with an accountant, banker or financial advisor to really go through this and have it locked down so you know what your funding requirements are,” says Ms. Cranston.
Explain how you will use information technology to manage your business. Technology may fit into each element of the business plan. Will you promote your business on a website? What are your hardware and software requirements? How does it affect the people you hire? Will your employees work remotely?
Personal and professional goals
Explain your goals in increasing the value of your company and your investment. Describe the steps you’ve taken to protect your business in the event of an accident or injury to yourself, your managers or your employees. Have you allowed for personal retirement savings? Will your family be protected if you are unable to run the company? How will you wind the business down, sell it or pass it on to loved ones?
“A business plan is like a blueprint for building a house,” says Ms. Cranston. “You wouldn’t just start framing the house without that blueprint. If you were a sailor, it would be the map that would chart out your course. You need that to get to your destination.”