If you’ve been asked by a potential investor or your business lender to come up with a business plan, first off, don’t panic!
This happened to me years ago and like many I thought the best to do was either hire someone or buy a software program like Business Plan Pro to help me write the plan—until a friend of mine led me in the right direction. Enter the Small Business Administration (SBA)!
With the economic crisis still affecting lending requirements, you may not be able to find a lender willing to fund a SBA loan; however, the SBA website is full of free tools to guide you. They also offer a business plan template. (Note: this template is in a .pdf file format but you can convert it to Microsoft Word for free using the .PDF Online Converter, found here.)
Now that you have the template, before we jump into the basic elements of a business plan, another tool the SBA offers are a few online training courses you can complete at your own pace and I highly recommend signing up for their “How to Write a Business Plan” course. It only takes about 30 minutes of your time and they provide you with a neat completion certificate you can add as an appendix to your business plan.
The Elements of the Plan
Believe it or not, your business plan doesn’t need to be a novel although some business plan writers for hire will tell you it does. According to the SBA, the small business owner experts, the must-have elements of a business plan include:
Executive Summary – Here you’ll need to write a summary describing your business, its vision and mission, goals and company owner information. It’s recommended you write this last even though it comes first in the plan. Why? The information from other sections will help you keep this summary to a minimum of 300 words or less as its intention is to grab the reader’s interest, not a lengthy outline of your entire plan.
Market Analysis – Again, this doesn’t have to be lengthy but should offer information about your specific industry, competitors and your plans on what you will do better than them to achieve success. When I wrote this section, I went from department to department and asked each manager to come up with five ideas where we could outperform the competition.
Company Description – This expands somewhat on your market analysis by defining your company. Include items about what product and services you offer and where. Be clear on the where. If you are a brick and mortar store include all cities, towns and counties you’ll serve. If your business in an online venue, discuss your market—are you selling to women only, men, families, etc.
Organization and Management – Here is where you’ll reveal the owners/officers of the company along with the type of entity you’ve formed (LLC, S-Corp). You’ll also need to offer bios of each owner/officer and key personnel or management team—even if the management team is you! Also include here if your business will create jobs in the area and how many—business plan readers love this!
Marketing and Sales – Here you will need a definite marketing plan and strategy but the SBA also offers an example of a marketing plan on their website and in the online course described above. You’ll also discuss your sales strategy. How will you gain customers? If your business is online, how will you get them to your website? An example for a brick and mortar store might be, “We will offer professional discount day, where discounts are offered for those in the teaching, law enforcement, firefighter and emergency medical technician areas. You’ll also want to include a SWOT Analysis (strength, weaknesses, opportunities and threats).
Products and Services – This part is easy! All you do in this section of the business plan is to describe the products or services you sell. Be specific!
Funding Request – Tell the reader exactly how much money you need and what you’ll be using it for. Again, be specific. If you plan to use so many dollars on startup costs, branding and marketiing your business and the rest on expanding your business or purchasing essential equipment, list the costs for each of these and make sure you have estimates (you’ll attach these in the appendix section).
Financial Projections – I’ve found there are essential financials you must include here and can skip others and leave them for the appendix section. If your business is new, you will need an opening day balance sheet showing all your assets and liabilities and a cash flow forecast for three years. SCORE, a division of the SBA offers both of these templates for free along with a standard balance sheet template.
Appendix – Although the SBA states the appendix is “optional” this is the place for three years of personal and business tax returns, licenses obtained, permits, federal and state tax identification numbers and other financial attachments you feel are necessary.
Pulling It Together
Once completed, have a friend or family member read your plan and ask them to make notes on items they don’t understand or point out typos. It’s always a good idea to have two to three people read your plan!
Next, obtain a binder where you can slide in a cover sheet on the front and dividers that identify each section.
These are the basic elements of a business plan and as said above, writing one is not as hard as you think. After all, who knows your business better than you?