Business Plan Outline

You don’t have to follow this outline, but finance professional are used to seeing the contents in this order, or close to it. The easier you make it for your potential funders to get what they need, the more likely they will be interested in funding your business. All of these sections will be explained in detail in the remainder of this course.

We will begin by discussing the business description in this course, and come back to the first three items at the end.

• Cover sheet

• Table of contents

• Executive Summary (1-3 pages)

• Business Description (including major business goals) (2-4 pages)

• Product/Service Description (4 pages)

• Management Team (4 pages)

• Industry Analysis (2-5 pages)

• Market Strategy and Tactics (3-5 pages)

• Financial Projections (5-10 pages, including basic spreadsheets)

• Operations (5 pages) (Manufacturing Plan, if applicable)

• Appendices (supporting documents)

A cover letter is also used to send your package to lenders (sample later in this course).

Why Plan for Your Business?

Planning increases the chances of success in a venture. If you don’t care about the outcome, you don’t need to do any planning. Studies have shown that businesses that start with a plan are more likely to succeed, and businesses that do planning regularly are more likely to grow successfully. In fact, two-third of rapid growth firms have written business plans according to a 1998 study done by Coopers & Lybrand, L.L.P.. These rapid growth firms have also increased their revenues 69% faster over the past five years than firms without a written plan. The same study also shows that companies with written plans derive a higher proportion of their revenues from their newly developed products. Most of these companies use these plans to map out future growth.

Planning allows you to find the best use for your strengths and abilities, and to focus on what you want to accomplish. Planning is also the way to make the best use of your limited resources and to set priorities to effectively compete in the marketplace.

If you plan, you maximize your chances to make your business as profitable as possible, as soon as possible, and to meet your own personal financial goals.

Planning also creates credibility for your business. If you have a business or strategic plan, it shows that you intend to be around for the long haul. Planning also gives you a starting point from which to judge your own successes and failures. And if you stay in business long enough, you will have both.

Writing a business plan allows you to be sure you know everything you can about your business so you can most realistically assess you opportunities and risks in changing your operation or opening your business.

It forces you to think through all the details that will be involved in each segment of running a business and to find answers to problems on paper before you spend scarce resources like money and time on them.

This process may be your first opportunity to think like a businessperson if you haven’t run a business before. Going through the process gives you the chance to hone your thinking and analytical and decision-making skills - all essential skills once your business is open.

This is one of the primary reasons it is important for the business owner to be very involved in the writing of the business plan him or herself. The mental discipline involved is essential to prepare you for what it will take to run the business. If you are concerned that your business plan won’t be professional or polished enough if you aren’t a natural writer, then consider having it edited or reviewed once you finish as much as you can.

What is a Business Plan?

A business plan is a written summary of everything you already know about your business or potential business and the industry it is in, the facts as well as your assessment of the possibilities, and the future you expect to create with that business.

A well-done business plan is realistic, but conveys the energy and optimism you feel about the future and your business’s part in it. A business plan that is written from the head and not the heart will probably not generate much enthusiasm among readers. Especially if you are writing a plan to get funding, you are competing for attention against many other business plans.

Mostly, it is an opportunity to convince the world (and maybe your friends and family) that your idea is worth the time, energy, and money it will take to make it a reality. Don’t ever forget that it is a sales document. You have created a theory: first, that this is a business that will be sustainably profitable, and that second, you and the team of people you choose to work with are the people to carry it off. The entire plan must be written to make a convincing answer to those arguments.

You must make your plan compelling and exciting, but believable and understandable. In all likelihood, your plan will be stronger in some areas than others. Maybe you have a terrific background in the product or service you plan to sell, but no financial background. Maybe you come from finance so you really understand how to use money, but you never had the experience of marketing or selling what you do. Writing the plan is an opportunity to work through these challenges - and there are answers to each.

A business plan shows what you have now in terms of resources like management talent and a great idea, and what it will take, step-by-step, to get you where you are going. There is a standard format for a plan, but more importantly, you must make your most compelling case, in each of the areas, it takes to run a business: finance, marketing, products and operations, and people.

Just think how different our lives would be if Microsoft and Amazon.com had not been created. How different will the world be if you plan well and create your business successfully?

A business plan or strategic plan should look ahead three years, but be updated annually. High growth firms with business plans update them at least every 6 months, and almost one-third update them quarterly (Coopers and Lybrand, L.L.P.) .Every business needs a business planning process. But there are other times of change for each business where a new plan must be created or the existing plan dramatically altered. These include:

• When you first think about starting a business and want to make sure your idea is realistic
• To attract outside investors, to send to potential lenders, and to have ready to find Board of Director candidates or key employees.
• To use as a base for more detailed tactical planning
• To use as a starting point for change as you get more information or as conditions change
• To track your progress against after you start your business