Business Plan Essentials

Why should I prepare a business plan?

The time it takes to plan for the future is time well spent at any stage in the life of your business. A business plan is a blueprint for the future of your business. While it may be used to convince potential investors that you have a viable financing proposal, its primary purpose is to help you to manage and to build your business more effectively. A business plan is a navigational tool to use on your road to business success.

What should a business plan contain?

There are six key elements common to all business plans. These six elements will vary according to the primary purpose of the plan. For example, a plan that is being used to acquire an investor will vary in detail from one that requires financing of $100,000. Additionally, different sources of financing - banks, venture capital groups, family and so on - will dictate the extent of detail required. Target your plan to suit your audience.

Key elements of a business plan

• The nature of your business
• Management and ownership details
• The market for your products and services
• The products and services your business offers
• Operations
• Historical and projected financial information summary

The nature of your business

• How and when did you get started in business?
• What products or services do you supply?
• What is the legal structure of your business: Is it a proprietorship, partnership or corporation?

Management and ownership details

• Who are the principal owners of the business?
• What percentage of the business does each principal owner have?
• What experience does each principal owner bring to the business?
• Describe the experience, management strengths and commitment level of all the important players on your team.

The market for your products and services

• What is the size of the industry and who are its major players?
• Describe the key trends and anticipated changes in your industry.
• What are the critical success factors for your industry?
• Are there significant barriers to entry into this industry? These may include: investment, technology, key personnel, patents and trademarks, and brand recognition.

• Who buys your product or service?
• What is the size of your target market?
• What is the geographic area of your target market?
• How do you segment your customer base?
• What are the key trends and anticipated changes within your target market?

• Who are your competitors?
• What are the strengths and weaknesses of your competitors?
• What gives you a competitive edge?

• What market research have you conducted?
• How do you attract your customers?
• How will you advertise your product or service?
• How will you distribute your product or service?

The products and services your business offers

• The products and services your business offers
• What products or services will you offer?
• What are the specific benefits of your products or services?
• Are there any trademarks, copyrights, licenses or guarantees associated with your products or services?

Operations

• Where will your business operate from?
• How big is your office/factory?
• What are the terms of any leases related to your operation?
• What are the present and potential capacities of your operation?
• What are your overhead costs and how are they allocated?
• Who are your key suppliers and what payment terms have you negotiated?
• Describe your inventory costing and control methods.
• How much do your products or services cost to provide?
• Describe any regulatory requirements of your operation.
• How many people do you employ? What wages or salaries do you pay?

Historical and projected financial information summary

• Provide balance sheets from previous years of operation.
• Provide profit and loss statements from previous years of operation.
• State any important changes in your financial position.
• Provide a confirmed statement regarding the level of involvement your firm has had with an Accountant: include audits, reviews and compilations.

• Provide a profit and loss forecast based on your projected income statement.
• Provide a cash flow forecast.
• Provide a balance sheet forecast.
• Outline your projected capital expenditure budget.