The Purpose of a Business Plan
A business plan is a written document created to detail all aspects of a business on a comprehensive level. Many banks and investors require a written business plan before lending to, or investing in, a business.
The executive summary is a summary of the entire plan. It should be written when all other sections of a business plan are complete and should be less than one page in length. The executive summary should include enough detail to allow a user to read the summary and gain a basic understanding of the business.
Mission, Vison, and Description
- Mission statement. The mission statement should be less than 30 words and describe why a business exists, as well as its fundamental purpose at present.
- Vision. The vision statement de nes the intended future state of an organization. It sets a high, long-term goal which is used to guide decisions of management and ownership.
- Description. The description section defines goals and objectives, business philosophy, target market, industry, and the legal entity under which the business will operate.
Products and Services
Provide a detailed description of the products and services the business will offer. Include pricing, unique features, and the required level of quality. Create an appendix for any photos, technical specifications, drawings, or brochures.
The marketing plan is developed by conducting (or having conducted) market research to define the clientele of a business and how to best market products and services.
Sales forecast. The sales forecast is the nal element in a marketing plan. It forecasts over a 12-month period the quantities of each product or service expected to be sold. It is the base from which the nancial plan will develop.
The operational plan details the day-to-day operations of a business. Items discussed in an operational plan should include issues such as location, licensing, personnel, inventory, suppliers, credit policies, and managing payables.
Management and Organization
Key employees. The term key employee refers to a person or persons who will manage the business on a daily basis. Include in the list the key employees’ talent, experience, and distinctive competencies brought to the business. Incorporate job descriptions of key employees, as well as resumes of the owners and key employees if using a business plan to seek financing.
Management continuation plan. Management continuation planning involves determining how a business will continue should one or more of the key employees be lost or become unable to ful ll his or her duties. The plan should specify the exact procedures for transferring duties when required, including arrangements with vendors, banks, employees, and owners.
Personal Financial Statement
A personal nancial statement (PFS) is a balance sheet for each owner on an individual basis. It includes values and detail of all assets owned, as well as amounts and terms for all debt obligations.
Capitalization. Capitalization is the source of cash used for start-up costs, including professional consulting, asset acquisition, and buying or leasing business property. Information about any debt or equity financing should be included in this section.
Forecasting cash flow. For new businesses, cash ow, more than profit, is the best indicator of whether a business will survive. It determines whether a business will be able to pay its expenses and debts as they come due. A business plan should contain a statement of projected cash flow for the first 12 months of the business. Lenders or investors may require customized reports indicating cash flow and profit projections