Business Plan Basics for Startup Owners
Writing a business plan for your business is critical in order to build a strong foundation for success, stay ahead of your competition, and attract hungry investors.
There are seven main sections that you need to include in your business plan:
- Executive Summary
- Business Description
- Market Strategies
- Competitive Analysis
- Development Plan
1. Executive Summary
The executive summary is basically a one or two-page summary of your business plan. This is the only part that 75% of people will read, so it needs to be as clear and concise as possible.
Your executive summary should begin with a brief summary of what your business does, your target market, and the opportunity that inspired you to create it in the first place. Talk about what sets your business apart from other ones already operating in your market.
In addition, it’s a good idea to include financial information like your projected revenues, whether or not you need funding, and what it will be used for. Just include the most important figures in this section; don’t go into too much detail about your finances just yet.
2. Business Description
This section should include a detailed description of your company, including what kinds of products and services you will sell, who your target customers are, your operating structure (for example, are you a wholesaler, a reseller, a manufacturer?), the legal details of your company (for example, is it incorporated?), and your distribution and delivery methods.
3. Market Strategies
This section is essentially your marketing plan. This is where you should go into detail about your target niche market and how you plan to reach them. Talk about things you discovered while doing market research, like how big your market is, who it includes, how fast it’s growing, and how big you expect your market share to be.
You should also talk about how you plan on marketing your product or service to your potential customers. For example, will you use paid advertising? Organic search engine results? Affiliate marketing? In addition, discuss how much you plan to spend on advertising and what kind of return you expect to get on your investment.
4. Competitive Analysis
In the competitive analysis section of your business plan, go into detail about the strengths and weaknesses of your biggest competitors. That way, you can realistically figure out where in your niche market you should position your business in relation to your competitors.
You should start with an analysis of exactly who your direct competition is. In addition, talk about the other major players in your market, even if they aren’t in direct competition with you. Find out how your competitors promote their products and identify their weak spots so you can take customers away from them and add them to your own customer base.
5. Development Plan
The development plan section of your business plan is where you can go into detail about how you are going to bring your company to the marketplace. One good way to write this section is in the form of a development timeline, including estimated completion dates for milestones your company needs to reach before you start making a profit.
You need to plan to profit in this section. You can’t just go into business without planning on how you are going to make money. If you’ve already started your business but aren’t making a profit yet (which means your income is not enough to cover your expenses), then this section is where you need to figure out how you are going to get by until your business becomes profitable.
In this section, you should introduce your management team. If you are the only person involved in your business, then you need to explain why you are qualified to run it, including your strengths, experience at previous jobs, accomplishments, etc. Describe in detail how all of these things can be beneficial to your business.
If you plan to use your business plan to secure financing, then your management section is especially important. An investor or bank will proceed directly to your management section after they read your executive summary when they are considering whether or not to lend you the money. They will want to know who your company is, because a company is only as good as the people who make it up.
For your Financials section, you should create a 12-month cash flow forecast. Your best bet is to compose a 12-month cash flow forecast. Begin by estimating how much your business will earn per month. Be sure to include your sales, cash you’ll be taking from your savings, and money you have been loaned. This makes up you “Total Cash In.”
Next, determine your monthly expenses, including advertising costs, office expenses, inventory costs, equipment buys, loan payments, and whatever cash you will take out of the business for your personal living expenses. This makes up your “Total Cash Out.” Then, subtract your “Total Cash Out” from your “Total Cash In” to get your monthly “Net Cash Flow.” If this is a negative number, then that means you are losing money. If that number stays negative for 12 consecutive months, then you need to seriously reevaluate your business plan and find a way to either increase your sales or decrease your expenses.