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Blog Business How to Write a Business Plan Outline [Examples + Templates] 

How to Write a Business Plan Outline [Examples + Templates] 

Written by: Letícia Fonseca Aug 11, 2023

business plan outline

When venturing into crafting a business plan, the initial hurdle often lies in taking that first step.

So, how can you evade those prolonged hours of staring at a blank page? Initiate your journey with the aid of a business plan outline.

As with any endeavor, an outline serves as the beacon of clarity, illuminating the path to confront even the most formidable tasks. This holds particularly true when composing pivotal documents vital to your triumph, much like a business plan.

Nonetheless, I understand the enormity of a business plan’s scope, which might make the task of outlining it seem daunting. This is precisely why I’ve compiled all the requisite information to facilitate the creation of a business plan outline. No need to break a sweat!

And if you’re seeking further assistance, a business plan maker and readily available business plan templates can offer valuable support in shaping your comprehensive plan.

Read on for answers to all your business plan outline questions or jump ahead for some handy templates. 

Click to jump ahead:

What is a business plan outline (and why do you need one), what format should you choose for your business plan outline, what are the key components of a business plan outline.

  • Business plan template examples
  • Writing tips to ace your outline 

A business plan outline is the backbone of your business plan. It contains all the most important information you’ll want to expand on in your full-length plan. 

Think of it this way: your outline is a frame for your plan. It provides a high-level idea of what the final plan should look like, what it will include and how all the information will be organized. 

Why would you do this extra step? Beyond saving you from blank page syndrome, an outline ensures you don’t leave any essential information out of your plan — you can see all the most important points at a glance and quickly identify any content gaps. 

It also serves as a writing guide. Once you know all the sections you want in your plan, you just need to expand on them. Suddenly, you’re “filling in the blanks” as opposed to writing a plan from scratch!

Incidentally, using a business plan template like this one gives you a running head start, too: 

business plan outline

Perhaps most importantly, a business plan outline keeps you focused on the essential parts of your document. (Not to mention what matters most to stakeholders and investors.)  With an outline, you’ll spend less time worrying about structure or organization and more time perfecting the actual content of your document. 

If you’re looking for more general advice, you can read about  how to create a business plan here . But if you’re working on outlining your plan, stick with me.

Return to Table of Contents

Most business plans fit into one of two formats. 

The format you choose largely depends on three factors: (1) the stage of your business, (2) if you’re presenting the plan to investors and (3) what you want to achieve with your business plan. 

Let’s have a closer look at these two formats and why you might choose one over the other.

Traditional format

Traditional business plans  are typically long, detailed documents. In many cases, they take up to 50-60 pages, but it’s not uncommon to see plans spanning 100+ pages. 

Traditional plans are long because they cover  every aspect  of your business. They leave nothing out. You’ll find a traditional business plan template with sections like executive summary, company description, target market, market analysis, marketing plan, financial plan, and more. Basically: the more information the merrier.

This business plan template isn’t of a traditional format, but you could expand it into one by duplicating pages:

business plan outline

Due to their high level of detail, traditional formats are the best way to sell your business. They show you’re reliable and have a clear vision for your business’s future. 

If you’re planning on presenting your plan to investors and stakeholders, you’ll want to go with a traditional plan format. The more information you include, the fewer doubts and questions you’ll get when you present your plan, so don’t hold back. 

Traditional business plans require more detailed outlines before drafting since there’s a lot of information to cover. You’ll want to list all the sections and include bullet points describing what each section should cover. 

It’s also a good idea to include all external resources and visuals in your outline, so you don’t have to gather them later. 

Lean format

Lean business plan formats are high level and quick to write. They’re often only one or two pages. Similar to a  business plan infographic , they’re scannable and quick to digest, like this template: 

business plan outline

This format is often referred to as a “startup” format due to (you guessed it!) many startups using it. 

Lean business plans require less detailed outlines. You can include high-level sections and a few lines in each section covering the basics. Since the final plan will only be a page or two, you don’t need to over prepare. Nor will you need a ton of external resources. 

Lean plans don’t answer all the questions investors and stakeholders may ask, so if you go this route, make sure it’s the right choice for your business . Companies not yet ready to present to investors will typically use a lean/startup business plan format to get their rough plan on paper and share it internally with their management team. 

Here’s another example of a lean business plan format in the form of a financial plan: 

business plan outline

Your business plan outline should include all the following sections. The level of detail you choose to go into will depend on your intentions for your plan (sharing with stakeholders vs. internal use), but you’ll want every section to be clear and to the point. 

1. Executive summary

The executive summary gives a high-level description of your company, product or service. This section should include a mission statement, your company description, your business’s primary goal, and the problem it aims to solve. You’ll want to state how your business can solve the problem and briefly explain what makes you stand out (your competitive advantage).

Having an executive summary is essential to selling your business to stakeholders , so it should be as clear and concise as possible. Summarize your business in a few sentences in a way that will hook the reader (or audience) and get them invested in what you have to say next. In other words, this is your elevator pitch.

business plan outline

2. Product and services description

This is where you should go into more detail about your product or service. Your product is the heart of your business, so it’s essential this section is easy to grasp. After all, if people don’t know what you’re selling, you’ll have a hard time keeping them engaged!

Expand on your description in the executive summary, going into detail about the problem your customers face and how your product/service will solve it. If you have various products or services, go through all of them in equal detail. 

business plan outline

3. Target market and/or Market analysis

A market analysis is crucial for placing your business in a larger context and showing investors you know your industry. This section should include market research on your prospective customer demographic including location, age range, goals and motivations. 

You can even  include detailed customer personas  as a visual aid — these are especially useful if you have several target demographics. You want to showcase your knowledge of your customer, who exactly you’re selling to and how you can fulfill their needs.

Be sure to include information on the overall target market for your product, including direct and indirect competitors and how your industry is performing. If your competitors have strengths you want to mimic or weaknesses you want to exploit, this is the place to record that information. 

business plan outline

4. Organization and management

You can think of this as a “meet the team” section — this is where you should go into depth on your business’s structure from management to legal and HR. If there are people bringing unique skills or experience to the table (I’m sure there are!), you should highlight them in this section. 

The goal here is to showcase why your team is the best to run your business. Investors want to know you’re unified, organized and reliable. This is also a potential opportunity to bring more humanity to your business plan and showcase the faces behind the ideas and product. 

business plan outline

5. Marketing and sales

Now that you’ve introduced your product and team, you need to explain how you’re going to sell it. Give a detailed explanation of your sales and marketing strategy, including pricing, timelines for launching your product and advertising.

This is a major section of your plan and can even live as a separate document for your marketing and sales teams. Here are some  marketing plan templates to help you get started .

Make sure you have research or analysis to back up your decisions — if you want to do paid ads on LinkedIn to advertise your product, include a brief explanation as to why that is the best channel for your business. 

business plan outline

6. Financial projections and funding request

The end of your plan is where you’ll look to the future and how you think your business will perform financially. Your financial plan should include results from your income statement, balance sheet and cash flow projections. 

State your funding requirements and what you need to realize the business. Be extremely clear about how you plan to use the funding and when you expect investors will see returns.

If you aren’t presenting to potential investors, you can skip this part, but it’s something to keep in mind should you seek funding in the future. Covering financial projections and the previous five components is essential at the stage of business formation to ensure everything goes smoothly moving forward.

business plan outline

7. Appendix

Any extra visual aids, receipts, paperwork or charts will live here. Anything that may be relevant to your plan should be included as reference e.g. your cash flow statement (or other financial statements). You can format your appendix in whatever way you think is best — as long as it’s easy for readers to find what they’re looking for, you’ve done your job!

Typically, the best way to start your outline is to list all these high-level sections. Then, you can add bullet points outlining what will go in each section and the resources you’ll need to write them. This should give you a solid starting point for your full-length plan.

Business plan outline templates

Looking for a shortcut? Our  business plan templates  are basically outlines in a box! 

While your outline likely won’t go into as much detail, these templates are great examples of how to organize your sections.

Traditional format templates

A strong template can turn your long, dense business plan into an engaging, easy-to-read document. There are lots to choose from, but here are just a few ideas to inspire you… 

You can duplicate pages and use these styles for a traditional outline, or start with a lean outline as you build your business plan out over time:

business plan outline

Lean format templates

For lean format outlines, a simpler ‘ mind map ’ style is a good bet. With this style, you can get ideas down fast and quickly turn them into one or two-page plans. Plus, because they’re shorter, they’re easy to share with your team.

business plan outline

Writing tips to ace your business plan outline

Business plans are complex documents, so if you’re still not sure how to write your outline, don’t worry! Here are some helpful tips to keep in mind when drafting your business plan outline:

  • Ask yourself why you’re writing an outline. Having a clear goal for your outline can help keep you on track as you write. Everything you include in your plan should contribute to your goal. If it doesn’t, it probably doesn’t need to be in there.
  • Keep it clear and concise. Whether you’re writing a traditional or lean format business plan, your outline should be easy to understand. Choose your words wisely and avoid unnecessary preambles or padding language. The faster you get to the point, the easier your plan will be to read.
  • Add visual aids. No one likes reading huge walls of text! Make room in your outline for visuals, data and charts. This keeps your audience engaged and helps those who are more visual learners. Psst,  infographics  are great for this.
  • Make it collaborative. Have someone (or several someones) look it over before finalizing your outline. If you have an established marketing / sales / finance team, have them look it over too. Getting feedback at the outline stage can help you avoid rewrites and wasted time down the line.

If this is your first time writing a business plan outline, don’t be too hard on yourself. You might not get it 100% right on the first try, but with these tips and the key components listed above, you’ll have a strong foundation. Remember, done is better than perfect. 

Create a winning business plan by starting with a detailed, actionable outline

The best way to learn is by doing. So go ahead, get started on your business plan outline. As you develop your plan, you’ll no doubt learn more about your business and what’s important for success along the way. 

A clean, compelling template is a great way to get a head start on your outline. After all, the sections are already separated and defined for you! 

Explore Venngage’s business plan templates  for one that suits your needs. Many are free to use and there are premium templates available for a small monthly fee. Happy outlining!

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Use This Simple Business Plan Outline to Organize Your Plan

Male and female entrepreneur sitting at a table with two other team members. Reviewing a business plan outline to discuss the main components they need to cover.

12 min. read

Updated April 10, 2024

When starting a business, having a well-thought-out business plan prepared is necessary for success . It helps guide your strategy and prepares you to overcome the obstacles and risks associated with entrepreneurship. In short, a business plan makes you more likely to succeed.

However, like everything in business, starting is often the hardest part. What information do you need? How in-depth should each section be? How should the plan be structured?

All good questions that you can answer by following this business plan outline. 

  • What is a business plan outline?

A business plan outline is similar to most business plan templates . It lists the common sections that all business plans should include.

A traditional business plan typically includes an executive summary, an overview of your products and services, thorough market research, a competitive analysis, a marketing and sales strategy, operational and company details, financial projections, and an appendix. 

  • Why is a business plan outline important?

Starting with a business plan outline helps ensure that you’re including all of the necessary information for a complete business plan. 

But, depending on what you intend to do with your plan, you may not need all of this information right away. If you’re going to speak with investors or pursue funding, then yes, you’ll need to include everything from this outline.

But, if you’re using your plan to test an idea or help run your business, you may want to opt for a one-page plan . This is a simpler and faster method that is designed to be updated and used day-to-day. 

If you’re unsure of which plan is right for you, check out our guide explaining the differences and use cases for each plan type . 

  • 10 key sections in a standard business plan outline

No matter the type of business plan you create, these are the ten basic sections you should include. Be sure to download your free business plan template to start drafting your own plan as you work through this outline.

Business Plan Outline Example Graphic with 10 unique components. A standard business plan outline will include the executive summary, products and services, market analysis, competition, marketing and sales, operations, milestones and metrics, company overview, financial plan, and appendix sections.

1. Executive summary

While it may appear first, it’s best to write your executive summary last. It’s a brief section that highlights the high-level points you’ve made elsewhere in your business plan.

Summarize the problem you are solving for customers, your solution, the target market, your team that’s building the business, and financial forecast highlights. Keep things as brief as possible and entice your audience to learn more about your company. 

Keep in mind, this is the first impression your plan and business will make. After looking over your executive summary, your reader is either going to throw your business plan away or keep reading. So make sure you spend the time to get it just right.

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2. Products and services

Start the products and services section of your business plan by describing the problem you are solving for your customer. Next, describe how you solve that problem with your product or service. 

If you’ve already made some headway selling your solution, detail that progress here—this is called “traction”. You can also describe any intellectual property or patents that you have if that’s an important part of your business.

3. Market analysis 

You need to know your target market —the types of customers you are looking for—and how it’s changing.

Use the market analysis section of your business plan to discuss the size of your market—how many potential customers exist for your business—and if your potential customers can be segmented into different groups, such as age groups or some other demographic.

4. Competition

Describe your competition in this section. If you don’t have any direct competitors, describe what your customers currently do to solve the problem that your product fixes. 

If you have direct competition, detail what your strengths and weaknesses are in comparison, and how you’ll differentiate from what is already available. 

5. Marketing and sales

Use this business plan section to outline your marketing and sales plan —how you’ll reach your target customers and what the process will be for selling to them.

You’ll want to cover your market position, marketing activities, sales channels, and your pricing strategy. This will likely evolve over time, but it’s best to include anything that clearly details how you will sell and promote your products and services. 

6. Operations

What’s included in the operations section really depends on the type of business you are planning for. If your business has a physical location or other facilities, you’ll want to describe them here. If your business relies heavily on technology or specific equipment or tools, you should describe that technology or equipment here.

You can also use this section to describe your supply chain if that’s an important aspect of your business. 

7. Milestones and metrics

In a business, milestones are important goals that you are setting for your business. They may be important launch dates, or a timeline of when you’ll get regulatory approval—if that’s something you need for your business. Use this section of your plan to describe those milestones and the roadmap you are planning to follow.

You can also describe important metrics for your business, such as the number of sales leads you expect to get each month or the percentage of leads that will become customers.

8. Company overview and team

The company and team section of your plan is an overview of who you are.

It should describe the organization of your business, and the key members of the management team. It should also provide any historical background about your business. For example, you’ll describe when your company was founded, who the owners are, what state your company is registered in and where you do business, and when/if your company was incorporated.

Be sure to include summaries of your key team members’ backgrounds and experience—these should act like brief resumes—and describe their functions with the company. You should also include any professional gaps you intend to fill with new employees.

9. Financial plan and forecasts

Your financial plan should include a sales forecast, profit and loss, cash flow projections, and balance sheet, along with a brief description of the assumptions you’re making with your projections.

If you are raising money or taking out loans, you should highlight the money you need to launch the business. This part should also include a use of funds report—basically an overview of how the funding will be used in business operations. 

And while it’s not required, it may be wise to briefly mention your exit strategy . This doesn’t need to be overly detailed, just a general idea of how you may eventually want to exit your business. 

10. Appendix

The end of your business plan should include any additional information to back up specific elements of your plan. More detailed financial statements, resumes for your management team, patent documentation, credit histories, marketing examples, etc. 

  • Detailed business plan outline

If you’re looking for greater insight into what goes into specific planning sections, check out the following outline for a business plan. It can help you develop a detailed business plan or provide guidance as to what may be missing from your current plan. 

Keep in mind that every business plan will look a bit different because every business is unique. After all, business planning is to help you be more successful, so focus on the sections that are most beneficial to your business and skip the sections that aren’t useful or don’t apply. 

To help, we’ve marked sections that are truly optional with an *.

Executive summary

Company purpose / mission statement.

A very brief description of what your business does and/or what its mission is.

Problem We Solve

A summary of the problem you are solving and an identifiable need in the market you are filling.

Our Solution

A description of the product or service you will provide to solve the problem.

Target Market

A defined customer base who will most likely purchase the product or service.

Briefly describe who is behind the business.

Financial Summary

A short overview of revenue goals and profitability timeline.

If you’ve already started selling your product or service, highlight important initial details here.

Funding Needed*

If you are raising money for your business, describe how much capital you need.

Products & Services

Problem worth solving.

A thorough description of the problem or pain points you intend to solve for your customer base. 

A thorough description of your proposed product or service that alleviates the problem for your customer base.

Describe any initial evidence that your customers are excited to spend money on your solution. Initial sales or signed contracts are good signs.

Intellectual Property/Patents*

If this is important for your business, outline it here.

Regulatory Requirements*

If government approval is required for your business, explain the details and timeline.

Future Products and Services*

What products and services might you offer in the future once your initial products and services are successful?

Market Size & Segments

How many potential customers do you have and what potential groups of customers are separated by specific characteristics?

Market Trends*

How consumers in your target market tend to act including purchasing habits, financial trends, and any other relevant factors.

Market Growth*

The perceived potential increase or decrease in the size of your target market.

Industry Analysis*

If your industry is changing or adjusting over time, describe those changes.

Key Customers*

If your business relies on certain important customers, describe who they are here.

Future Markets*

A snapshot of the potential market based on the last few sections and how your business strategy works within it.

Competition 

Current alternatives.

A list of potential competitors. Identifying the competition isn’t always obvious and it may take some digging on your part.

Our Advantages

The strategic advantage(s) that makes your target market more likely to choose you over the competition. 

Barriers to Entry*

If there’s anything that makes it more difficult for other people to start competing with you, describe those barriers.

Marketing & Sales

Market positioning.

Where do your products or services fit into the market? Are you the low-price leader or the premium option?

Unique value proposition*

What’s special about your offering that makes your customers want to choose it over the competition.

Marketing Plan

An outline of your marketing and advertising strategy including costs, advertising channels, and goals.

How do you sell your product or service? Self-serve or with a team of sales representatives?

Pricing Strategy*

Describe your pricing and how it compares to alternatives in the market.

Distribution*

Describe how your product gets in front of customers. Are you selling in stores and online? Which retailers?

SWOT Analysis*

Strengths, weaknesses, opportunities, and threats.

Location & Facilities

If you have a physical presence, describe where and what it is.

What technology is crucial for your business success?

Equipment & Tools

If special equipment or tools are needed for your business, describe them here.

Sourcing and fulfillment*

If you purchase your products or parts for your products from somewhere else, describe that sourcing and supply chain.

Partners and Resources*

If you have key partners that you work with to make your business a success, describe who they are and what services or products they provide.

Milestones and metrics

A detailed roadmap of specific goals and objectives you plan to achieve will help you manage and steer your business.

Key metrics

Performance measurements that help you gauge the overall performance and health of your business.

Company overview and team

Organizational structure.

An overview of the legal structure of your business. 

Company history and ownership

A summary of your company’s history and how it relates to planning your business.

Management team

The team that is starting or running your business and why they are uniquely qualified to make the business a success.

Management team gaps

Key positions that your business will need to fill to make it successful.

Financial plan and forecast

Projected profit and loss.

How much money you will bring in by selling products and/or services and how much profit you will make or lose after accounting for costs and expenses.

Projected cash flow

How and when cash moves in and out of your business. This also includes your overall cash position.

Projected balance sheet

Expected balances for business assets, liabilities, and equity.

Use of funds

If you are raising money either through loans or investment, explain how funds will be used. This is typically meant to be shared with investors or lenders.

Exit strategy

A brief explanation of how you intend to eventually exit from your business. This could include selling the business, going public, transitioning the business to a family member/employee, etc.

A repository for any additional information, including charts and graphs, to support your business plan.

Business plan outline FAQ

How do you organize your business plan?

There’s no real established order to business plans, aside from keeping the Executive Summary at the top. As long as you have all of the main business plan components, then the order should reflect your goals. 

If this is meant solely for your personal use, lay it out as a roadmap with similar sections grouped together for easy reference. If you’re pitching this to potential investors, lead with the stronger sections to emphasize the pitch. Then if you’re unsure of what order makes sense, then just stick to the outline in this article.

Should you include tables and charts in your business plan?

Every business plan should include bar charts and pie charts to illustrate the numbers. It’s a simple way for you, your team, and investors to visualize and digest complex financial information.

Cash flow is the single most important numerical analysis in a business plan, and a standard cash flow statement or table should never be missing. Most standard business plans also include a sales forecast and income statement (also called profit and loss), and a balance sheet.

How long should your business plan be?

There’s no perfect length for a business plan. A traditional business plan can be anywhere from 10 to 50 pages long depending on how much detail you include in each section. However, as we said before unless you intend to pursue funding, you likely don’t need a lengthy business plan at first.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Content Author: Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Start your business plan with the #1 plan writing software. Create your plan with Liveplan today.

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5.6 The Business Plan

Learning objective.

  • Discuss the importance of planning for your business, and identify the key sections of a business plan.

If you want to start a business, you must prepare a business plan. This essential document should tell the story of your business concept, provide an overview of the industry in which you will operate, describe the goods or services you will provide, identify your customers and proposed marketing activities, explain the qualifications of your management team, and state your projected income and borrowing needs.

Purpose of a Business Plan

The business plan is a plan or blueprint for the company, and it’s an indispensable tool in attracting investors, obtaining loans, or both. Remember, too, that the value of your business plan isn’t limited to the planning stages of your business and the process of finding start-up money. Once you’ve acquired start-up capital, don’t just stuff your plan in a drawer. Treat it as an ongoing guide to your business and its operations, as well as a yardstick by which you can measure your performance. Keep it handy, update it periodically, and use it to assess your progress.

In developing and writing your business plan, you must make strategic decisions in the areas of management, operations, marketing, accounting, and finance—in short, in all the functional areas of business that we described in Chapter 1 “The Foundations of Business” . Granted, preparing a business plan takes a lot of time and work, but it’s well worth the effort. A business plan forces you to think critically about your proposed business and reduces your risk of failure. It forces you to analyze your business concept and the industry in which you’ll be operating, and it helps you determine how you can grab a percentage of sales in that industry.

The most common use of a business plan is persuading investors, lenders, or both, to provide financing. These two groups look for different things. Investors are particularly interested in the quality of your business concept and the ability of management to make your venture successful. Bankers and other lenders are primarily concerned with your company’s ability to generate cash to repay loans. To persuade investors and lenders to support your business, you need a professional, well-written business plan that paints a clear picture of your proposed business.

Sections of the Business Plan

Though formats can vary, a business plan generally includes the following sections: executive summary, description of proposed business, industry analysis, mission statement and core values, management plan, goods or services and (if applicable) production processes, marketing, global issues, and financial plan. Let’s explore each of these sections in more detail. ( Note : More detailed documents and an Excel template are available for those classes in which the optional business plan project is assigned.)

Executive Summary

The executive summary is a one- to three-page overview of the business plan. It’s actually the most important part of the business plan: it’s what the reader looks at first, and if it doesn’t capture the reader’s attention, it might be the only thing that he or she looks at. It should therefore emphasize the key points of the plan and get the reader excited about the prospects of the business.

Even though the executive summary is the first thing read, it’s written after the other sections of the plan are completed. An effective approach in writing the executive summary is to paraphrase key sentences from each section of the business plan. This process will ensure that the key information of each section is included in the executive summary.

Description of Proposed Business

Here, you present a brief description of the company and tell the reader why you’re starting your business, what benefits it provides, and why it will be successful. Some of the questions to answer in this section include the following:

  • What will your proposed company do? Will it be a manufacturer, a retailer, or a service provider?
  • What goods or services will it provide?
  • Why are your goods or services unique?
  • Who will be your main customers?
  • How will your goods or services be sold?
  • Where will your business be located?

Because later parts of the plan will provide more detailed discussions of many of these issues, this section should provide only an overview of these topics.

Industry Analysis

This section provides a brief introduction to the industry in which you propose to operate. It describes both the current situation and the future possibilities, and it addresses such questions as the following:

  • How large is the industry? What are total sales for the industry, in volume and dollars?
  • Is the industry mature or are new companies successfully entering it?
  • What opportunities exist in the industry? What threats exist?
  • What factors will influence future expansion or contraction of the industry?
  • What is the overall outlook for the industry?
  • Who are your major competitors in the industry?
  • How does your product differ from those of your competitors?

Mission Statement and Core Values

This portion of the business plan states the company’s mission statement and core values . The mission statement describes the purpose or mission of your organization—its reason for existence. It tells the reader what the organization is committed to doing. For example, one mission statement reads, “The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit” (Southwest Airline’s, 2011).

Core values are fundamental beliefs about what’s important and what is (and isn’t) appropriate in conducting company activities. Core values are not about profits, but rather about ideals. They should help guide the behavior of individuals in the organization. Coca-Cola, for example, intends that its core values—leadership, passion, integrity, collaboration, diversity, quality, and accountability—will let employees know what behaviors are (and aren’t) acceptable (The Coca-Cola Company, 2011).

Management Plan

Management makes the key decisions for the business, such as its legal form and organizational structure. This section of the business plan should outline these decisions and provide information about the qualifications of the key management personnel.

A. Legal Form of Organization

This section dentifies the chosen legal form of business ownership: sole proprietorship (personal ownership), partnership (ownership shared with one or more partners), or corporation (ownership through shares of stock).

B. Qualifications of Management Team and Compensation Package

It isn’t enough merely to have a good business idea: you need a talented management team that can turn your concept into a profitable venture. This part of the management plan section provides information about the qualifications of each member of the management team. Its purpose is to convince the reader that the company will be run by experienced, well-qualified managers. It describes each individual’s education, experience, and expertise, as well as each person’s responsibilities. It also indicates the estimated annual salary to be paid to each member of the management team.

C. Organizational Structure

This section of the management plan describes the relationships among individuals within the company, listing the major responsibilities of each member of the management team.

Goods, Services, and the Production Process

To succeed in attracting investors and lenders, you must be able to describe your goods or services clearly (and enthusiastically). Here, you describe all the goods and services that you will provide the marketplace. This section explains why your proposed offerings are better than those of competitors and indicates what market needs will be met by your goods or services. In other words, it addresses a key question: What competitive advantage will the company’s goods and services have over similar products on the market?

This section also indicates how you plan to obtain or make your products. Naturally, the write-up will vary, depending on whether you’re proposing a service company, a retailer, or a manufacturer. If it’s a service company, describe the process by which you’ll deliver your services. If it’s a retail company, tell the reader where you’ll purchase products for resale.

If you’re going to be a manufacturer, you must furnish information on product design, development, and production processes. You must address questions such as the following:

  • How will products be designed?
  • What technology will be needed to design and manufacture products?
  • Will the company run its own production facilities, or will its products be manufactured by someone else?
  • Where will production facilities be located?
  • What type of equipment will be used?
  • What are the design and layout of the facilities?
  • How many workers will be employed in the production process?
  • How many units will be produced?
  • How will the company ensure that products are of high quality?

This critical section focuses on four marketing-related areas—target market, pricing, distribution, and promotion:

  • Target market . Describe future customers and profile them according to age, gender, income, interests, and so forth. If your company will sell to other companies, describe your typical business customer.
  • Pricing . State the proposed price for each product. Compare your pricing strategy to that of competitors.
  • Distribution . Explain how your goods or services will be distributed to customers. Indicate whether they’ll be sold directly to customers or through retail outlets.
  • Promotion . Explain your promotion strategy, indicating what types of advertising you’ll be using.

In addition, if you intend to use the Internet to promote or sell your products, also provide answers to these questions:

  • Will your company have a Web site? Who will visit the site?
  • What will the site look like? What information will it supply?
  • Will you sell products over the Internet?
  • How will you attract customers to your site and entice them to buy from your company?

Global Issues

In this section, indicate whether you’ll be involved in international markets, by either buying or selling in other countries. If you’re going to operate across borders, identify the challenges that you’ll face in your global environment, and explain how you’ll meet them. If you don’t plan initially to be involved in international markets, state what strategies, if any, you’ll use to move into international markets when the time comes.

Financial Plan

In preparing the financial section of your business plan, specify the company’s cash needs and explain how you’ll be able to repay debt. This information is vital in obtaining financing. It reports the amount of cash needed by the company for start-up and initial operations and provides an overview of proposed funding sources. It presents financial projections, including expected sales, costs, and profits (or losses). It refers to a set of financial statements included in an appendix to the business plan.

Here, you furnish supplemental information that may be of interest to the reader. In addition to a set of financial statements, for example, you might attach the résumés of your management team.

Key Takeaways

  • A business plan tells the story of your business concept, provides an overview of the industry in which you will operate, describes the goods or services you will provide, identifies your customers and proposed marketing activities, explains the qualifications of your management team, and states your projected income and borrowing needs.
  • In your business plan, you make strategic decisions in the areas of management, operations, marketing, accounting, and finance. Developing your business plan forces you to analyze your business concept and the industry in which you’ll be operating. Its most common use is persuading investors and lenders to provide financing.

A business plan generally includes the following sections:

  • Executive summary . One- to three-page overview.
  • Description of proposed business . Brief description of the company that answers such questions as what your proposed company will do, what goods or services it will provide, and who its main customers will be.
  • Industry analysis . Short introduction to the industry in which you propose to operate.
  • Mission statement and core values . Declaration of your mission statement , which are fundamental beliefs about what’s important and what is (and isn’t) appropriate in conducting company activities.
  • Management plan . Information about management team qualifications and responsibilities, and designation of your proposed legal form of organization.
  • Goods, services, and the production process . Description of the goods and services that you’ll provide in the marketplace; explanation of how you plan to obtain or make your products or of the process by which you’ll deliver your services.
  • Marketing . Description of your plans in four marketing-related areas: target market, pricing, distribution, and promotion.
  • Global issues . Description of your involvement, if any, in international markets.
  • Financial plan . Report on the cash you’ll need for start-up and initial operations, proposed funding sources, and means of repaying your debt.
  • Appendices . Supplemental information that may be of interest to the reader.

(AACSB) Analysis

Let’s start with three givens: (1) college students love chocolate chip cookies, (2) you have a special talent for baking cookies, and (3) you’re always broke. Given these three conditions, you’ve come up with the idea of starting an on-campus business—selling chocolate chip cookies to fellow students. As a business major, you want to do things right by preparing a business plan. First, you identified a number of specifics about your proposed business. Now, you need to put these various pieces of information into the relevant section of your business plan. Using the business plan format described in this chapter, indicate the section of the business plan into which you’d put each of the following:

  • You’ll bake the cookies in the kitchen of a friend’s apartment.
  • You’ll charge $1 each or $10 a dozen.
  • Your purpose is to make the best cookies on campus and deliver them fresh. You value integrity, consideration of others, and quality.
  • Each cookie will have ten chocolate chips and will be superior to those sold in nearby bakeries and other stores.
  • You expect sales of $6,000 for the first year.
  • Chocolate chip cookies are irresistible to college students. There’s a lot of competition from local bakeries, but your cookies will be superior and popular with college students. You’ll make them close to campus using only fresh ingredients and sell them for $1 each. Your management team is excellent. You expect first-year sales of $6,000 and net income of $1,500. You estimate start-up costs at $600.
  • You’ll place ads for your product in the college newspaper.
  • You’ll hire a vice president at a salary of $100 a week.
  • You can ship cookies anywhere in the United States and in Canada.
  • You need $600 in cash to start the business.
  • There are six bakeries within walking distance of the college.
  • You’ll bake nothing but cookies and sell them to college students. You’ll make them in an apartment near campus and deliver them fresh.

The Coca-Cola Company, “Workplace Culture,” The Coca-Cola Company, http://www.thecoca-colacompany.com/citizenship/workplace_culture.html (accessed August 31, 2011).

Southwest Airline’s company Web site, about SWA section, http://www.southwest.com/about_swa/mission.html (accessed August 31, 2011).

Exploring Business Copyright © 2016 by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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Written by Jesse Sumrak | May 14, 2023

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Business plans might seem like an old-school stiff-collared practice, but they deserve a place in the startup realm, too. It’s probably not going to be the frame-worthy document you hang in the office—yet, it may one day be deserving of the privilege.

Whether you’re looking to win the heart of an angel investor or convince a bank to lend you money, you’ll need a business plan. And not just any ol’ notes and scribble on the back of a pizza box or napkin—you’ll need a professional, standardized report.

Bah. Sounds like homework, right?

Yes. Yes, it does.

However, just like bookkeeping, loan applications, and 404 redirects, business plans are an essential step in cementing your business foundation.

Don’t worry. We’ll show you how to write a business plan without boring you to tears. We’ve jam-packed this article with all the business plan examples, templates, and tips you need to take your non-existent proposal from concept to completion.

Table of Contents

What Is a Business Plan?

Tips to Make Your Small Business Plan Ironclad

How to Write a Business Plan in 6 Steps

Startup Business Plan Template

Business Plan Examples

Work on Making Your Business Plan

How to Write a Business Plan FAQs

What is a business plan why do you desperately need one.

A business plan is a roadmap that outlines:

  • Who your business is, what it does, and who it serves
  • Where your business is now
  • Where you want it to go
  • How you’re going to make it happen
  • What might stop you from taking your business from Point A to Point B
  • How you’ll overcome the predicted obstacles

While it’s not required when starting a business, having a business plan is helpful for a few reasons:

  • Secure a Bank Loan: Before approving you for a business loan, banks will want to see that your business is legitimate and can repay the loan. They want to know how you’re going to use the loan and how you’ll make monthly payments on your debt. Lenders want to see a sound business strategy that doesn’t end in loan default.
  • Win Over Investors: Like lenders, investors want to know they’re going to make a return on their investment. They need to see your business plan to have the confidence to hand you money.
  • Stay Focused: It’s easy to get lost chasing the next big thing. Your business plan keeps you on track and focused on the big picture. Your business plan can prevent you from wasting time and resources on something that isn’t aligned with your business goals.

Beyond the reasoning, let’s look at what the data says:

  • Simply writing a business plan can boost your average annual growth by 30%
  • Entrepreneurs who create a formal business plan are 16% more likely to succeed than those who don’t
  • A study looking at 65 fast-growth companies found that 71% had small business plans
  • The process and output of creating a business plan have shown to improve business performance

Convinced yet? If those numbers and reasons don’t have you scrambling for pen and paper, who knows what will.

Don’t Skip: Business Startup Costs Checklist

Before we get into the nitty-gritty steps of how to write a business plan, let’s look at some high-level tips to get you started in the right direction:

Be Professional and Legit

You might be tempted to get cutesy or revolutionary with your business plan—resist the urge. While you should let your brand and creativity shine with everything you produce, business plans fall more into the realm of professional documents.

Think of your business plan the same way as your terms and conditions, employee contracts, or financial statements. You want your plan to be as uniform as possible so investors, lenders, partners, and prospective employees can find the information they need to make important decisions.

If you want to create a fun summary business plan for internal consumption, then, by all means, go right ahead. However, for the purpose of writing this external-facing document, keep it legit.

Know Your Audience

Your official business plan document is for lenders, investors, partners, and big-time prospective employees. Keep these names and faces in your mind as you draft your plan.

Think about what they might be interested in seeing, what questions they’ll ask, and what might convince (or scare) them. Cut the jargon and tailor your language so these individuals can understand.

Remember, these are busy people. They’re likely looking at hundreds of applicants and startup investments every month. Keep your business plan succinct and to the point. Include the most pertinent information and omit the sections that won’t impact their decision-making.

Invest Time Researching

You might not have answers to all the sections you should include in your business plan. Don’t skip over these!

Your audience will want:

  • Detailed information about your customers
  • Numbers and solid math to back up your financial claims and estimates
  • Deep insights about your competitors and potential threats
  • Data to support market opportunities and strategy

Your answers can’t be hypothetical or opinionated. You need research to back up your claims. If you don’t have that data yet, then invest time and money in collecting it. That information isn’t just critical for your business plan—it’s essential for owning, operating, and growing your company.

Stay Realistic

Your business may be ambitious, but reign in the enthusiasm just a teeny-tiny bit. The last thing you want to do is have an angel investor call BS and say “I’m out” before even giving you a chance.

The folks looking at your business and evaluating your plan have been around the block—they know a thing or two about fact and fiction. Your plan should be a blueprint for success. It should be the step-by-step roadmap for how you’re going from Point A to Point B.

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How to Write a Business Plan—6 Essential Elements

Not every business plan looks the same, but most share a few common elements. Here’s what they typically include:

  • Executive Summary
  • Business Overview
  • Products and Services
  • Market Analysis
  • Competitive Analysis
  • Financial Strategy

Below, we’ll break down each of these sections in more detail.

1. Executive Summary

While your executive summary is the first page of your business plan, it’s the section you’ll write last. That’s because it summarizes your entire business plan into a succinct one-pager.

Begin with an executive summary that introduces the reader to your business and gives them an overview of what’s inside the business plan.

Your executive summary highlights key points of your plan. Consider this your elevator pitch. You want to put all your juiciest strengths and opportunities strategically in this section.

2. Business Overview

In this section, you can dive deeper into the elements of your business, including answering:

  • What’s your business structure? Sole proprietorship, LLC, corporation, etc.
  • Where is it located?
  • Who owns the business? Does it have employees?
  • What problem does it solve, and how?
  • What’s your mission statement? Your mission statement briefly describes why you are in business. To write a proper mission statement, brainstorm your business’s core values and who you serve.

Don’t overlook your mission statement. This powerful sentence or paragraph could be the inspiration that drives an investor to take an interest in your business. Here are a few examples of powerful mission statements that just might give you the goosebumps:

  • Patagonia: Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.
  • Tesla: To accelerate the world’s transition to sustainable energy.
  • InvisionApp : Question Assumptions. Think Deeply. Iterate as a Lifestyle. Details, Details. Design is Everywhere. Integrity.
  • TED : Spread ideas.
  • Warby Parker : To offer designer eyewear at a revolutionary price while leading the way for socially conscious businesses.

3. Products and Services

As the owner, you know your business and the industry inside and out. However, whoever’s reading your document might not. You’re going to need to break down your products and services in minute detail.

For example, if you own a SaaS business, you’re going to need to explain how this business model works and what you’re selling.

You’ll need to include:

  • What services you sell: Describe the services you provide and how these will help your target audience.
  • What products you sell: Describe your products (and types if applicable) and how they will solve a need for your target and provide value.
  • How much you charge: If you’re selling services, will you charge hourly, per project, retainer, or a mixture of all of these? If you’re selling products, what are the price ranges?

4. Market Analysis

Your market analysis essentially explains how your products and services address customer concerns and pain points. This section will include research and data on the state and direction of your industry and target market.

This research should reveal lucrative opportunities and how your business is uniquely positioned to seize the advantage. You’ll also want to touch on your marketing strategy and how it will (or does) work for your audience.

Include a detailed analysis of your target customers. This describes the people you serve and sell your product to. Be careful not to go too broad here—you don’t want to fall into the common entrepreneurial trap of trying to sell to everyone and thereby not differentiating yourself enough to survive the competition.

The market analysis section will include your unique value proposition. Your unique value proposition (UVP) is the thing that makes you stand out from your competitors. This is your key to success.

If you don’t have a UVP, you don’t have a way to take on competitors who are already in this space. Here’s an example of an ecommerce internet business plan outlining their competitive edge:

FireStarters’ competitive advantage is offering product lines that make a statement but won’t leave you broke. The major brands are expensive and not distinctive enough to satisfy the changing taste of our target customers. FireStarters offers products that are just ahead of the curve and so affordable that our customers will return to the website often to check out what’s new.

5. Competitive Analysis

Your competitive analysis examines the strengths and weaknesses of competing businesses in your market or industry. This will include direct and indirect competitors. It can also include threats and opportunities, like economic concerns or legal restraints.

The best way to sum up this section is with a classic SWOT analysis. This will explain your company’s position in relation to your competitors.

6. Financial Strategy

Your financial strategy will sum up your revenue, expenses, profit (or loss), and financial plan for the future. It’ll explain how you make money, where your cash flow goes, and how you’ll become profitable or stay profitable.

This is one of the most important sections for lenders and investors. Have you ever watched Shark Tank? They always ask about the company’s financial situation. How has it performed in the past? What’s the ongoing outlook moving forward? How does the business plan to make it happen?

Answer all of these questions in your financial strategy so that your audience doesn’t have to ask. Go ahead and include forecasts and graphs in your plan, too:

  • Balance sheet: This includes your assets, liabilities, and equity.
  • Profit & Loss (P&L) statement: This details your income and expenses over a given period.
  • Cash flow statement: Similar to the P&L, this one will show all cash flowing into and out of the business each month.

It takes cash to change the world—lenders and investors get it. If you’re short on funding, explain how much money you’ll need and how you’ll use the capital. Where are you looking for financing? Are you looking to take out a business loan, or would you rather trade equity for capital instead?

Read More: 16 Financial Concepts Every Entrepreneur Needs to Know

Startup Business Plan Template (Copy/Paste Outline)

Ready to write your own business plan? Copy/paste the startup business plan template below and fill in the blanks.

Executive Summary Remember, do this last. Summarize who you are and your business plan in one page.

Business Overview Describe your business. What’s it do? Who owns it? How’s it structured? What’s the mission statement?

Products and Services Detail the products and services you offer. How do they work? What do you charge?

Market Analysis Write about the state of the market and opportunities. Use date. Describe your customers. Include your UVP.

Competitive Analysis Outline the competitors in your market and industry. Include threats and opportunities. Add a SWOT analysis of your business.

Financial Strategy Sum up your revenue, expenses, profit (or loss), and financial plan for the future. If you’re applying for a loan, include how you’ll use the funding to progress the business.

What’s the Best Business Plan to Succeed as a Consultant?

5 Frame-Worthy Business Plan Examples

Want to explore other templates and examples? We got you covered. Check out these 5 business plan examples you can use as inspiration when writing your plan:

  • SBA Wooden Grain Toy Company
  • SBA We Can Do It Consulting
  • OrcaSmart Business Plan Sample
  • Plum Business Plan Template
  • PandaDoc Free Business Plan Templates

Get to Work on Making Your Business Plan

If you find you’re getting stuck on perfecting your document, opt for a simple one-page business plan —and then get to work. You can always polish up your official plan later as you learn more about your business and the industry.

Remember, business plans are not a requirement for starting a business—they’re only truly essential if a bank or investor is asking for it.

Ask others to review your business plan. Get feedback from other startups and successful business owners. They’ll likely be able to see holes in your planning or undetected opportunities—just make sure these individuals aren’t your competitors (or potential competitors).

Your business plan isn’t a one-and-done report—it’s a living, breathing document. You’ll make changes to it as you grow and evolve. When the market or your customers change, your plan will need to change to adapt.

That means when you’re finished with this exercise, it’s not time to print your plan out and stuff it in a file cabinet somewhere. No, it should sit on your desk as a day-to-day reference. Use it (and update it) as you make decisions about your product, customers, and financial plan.

Review your business plan frequently, update it routinely, and follow the path you’ve developed to the future you’re building.

Keep Learning: New Product Development Process in 8 Easy Steps

What financial information should be included in a business plan?

Be as detailed as you can without assuming too much. For example, include your expected revenue, expenses, profit, and growth for the future.

What are some common mistakes to avoid when writing a business plan?

The most common mistake is turning your business plan into a textbook. A business plan is an internal guide and an external pitching tool. Cut the fat and only include the most relevant information to start and run your business.

Who should review my business plan before I submit it?

Co-founders, investors, or a board of advisors. Otherwise, reach out to a trusted mentor, your local chamber of commerce, or someone you know that runs a business.

Ready to Write Your Business Plan?

Don’t let creating a business plan hold you back from starting your business. Writing documents might not be your thing—that doesn’t mean your business is a bad idea.

Let us help you get started.

Join our free training to learn how to start an online side hustle in 30 days or less. We’ll provide you with a proven roadmap for how to find, validate, and pursue a profitable business idea (even if you have zero entrepreneurial experience).

Stuck on the ideas part? No problem. When you attend the masterclass, we’ll send you a free ebook with 100 of the hottest side hustle trends right now. It’s chock full of brilliant business ideas to get you up and running in the right direction.

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About Jesse Sumrak

Jesse Sumrak is a writing zealot focused on creating killer content. He’s spent almost a decade writing about startup, marketing, and entrepreneurship topics, having built and sold his own post-apocalyptic fitness bootstrapped business. A writer by day and a peak bagger by night (and early early morning), you can usually find Jesse preparing for the apocalypse on a precipitous peak somewhere in the Rocky Mountains of Colorado.

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given the outline of a business plan which part ought to be given priority

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How to Write a Business Plan (Plus Examples & Templates)

May 24, 2021

How to Write a Business Plan (Plus Examples & Templates)

Have you ever wondered how to write a business plan step by step? Mike Andes, told us: 

This guide will help you write a business plan to impress investors.

Throughout this process, we’ll get information from Mike Andes, who started Augusta Lawn Care Services when he was 12 and turned it into a franchise with over 90 locations. He has gone on to help others learn how to write business plans and start businesses.  He knows a thing or two about writing  business plans!

We’ll start by discussing the definition of a business plan. Then we’ll discuss how to come up with the idea, how to do the market research, and then the important elements in the business plan format. Keep reading to start your journey!

What Is a Business Plan?

A business plan is simply a road map of what you are trying to achieve with your business and how you will go about achieving it. It should cover all elements of your business including: 

  • Finding customers
  • Plans for developing a team
  •  Competition
  • Legal structures
  • Key milestones you are pursuing

If you aren’t quite ready to create a business plan, consider starting by reading our business startup guide .

Get a Business Idea

Before you can write a business plan, you have to have a business idea. You may see a problem that needs to be solved and have an idea how to solve it, or you might start by evaluating your interests and skills. 

Mike told us, “The three things I suggest asking yourself when thinking about starting a business are:

  • What am I good at?
  • What would I enjoy doing?
  • What can I get paid for?”

Three adjoining circles about business opportunity

If all three of these questions don’t lead to at least one common answer, it will probably be a much harder road to success. Either there is not much market for it, you won’t be good at it, or you won’t enjoy doing it. 

As Mike told us, “There’s enough stress starting and running a business that if you don’t like it or aren’t good at it, it’s hard to succeed.”

If you’d like to hear more about Mike’s approach to starting a business, check out our YouTube video

Conduct Market Analysis

Market analysis is focused on establishing if there is a target market for your products and services, how large the target market is, and identifying the demographics of people or businesses that would be interested in the product or service. The goal here is to establish how much money your business concept can make.

Product and Service Demand

An image showing product service and demand

A search engine is your best friend when trying to figure out if there is demand for your products and services. Personally, I love using presearch.org because it lets you directly search on a ton of different platforms including Google, Youtube, Twitter, and more. Check out the screenshot for the full list of search options.

With quick web searches, you can find out how many competitors you have, look through their reviews, and see if there are common complaints about the competitors. Bad reviews are a great place to find opportunities to offer better products or services. 

If there are no similar products or services, you may have stumbled upon something new, or there may just be no demand for it. To find out, go talk to your most honest friend about the idea and see what they think. If they tell you it’s dumb or stare at you vacantly, there’s probably no market for it.

You can also conduct a survey through social media to get public opinion on your idea. Using Facebook Business Manager , you could get a feel for who would be interested in your product or service.

 I ran a quick test of how many people between 18-65  you could reach in the U.S. during a week. It returned an estimated 700-2,000 for the total number of leads, which is enough to do a fairly accurate statistical analysis.

Identify Demographics of Target Market

Depending on what type of business you want to run, your target market will be different. The narrower the demographic, the fewer potential customers you’ll have. If you did a survey, you’ll be able to use that data to help define your target audience. Some considerations you’ll want to consider are:

  • Other Interests
  • Marital Status
  • Do they have kids?

Once you have this information, it can help you narrow down your options for location and help define your marketing further. One resource that Mike recommended using is the Census Bureau’s Quick Facts Map . He told us,  

“It helps you quickly evaluate what the best areas are for your business to be located.”

How to Write a Business Plan

Business plan development

Now that you’ve developed your idea a little and established there is a market for it, you can begin writing a business plan. Getting started is easier with the business plan template we created for you to download. I strongly recommend using it as it is updated to make it easier to create an action plan. 

Each of the following should be a section of your business plan:

  • Business Plan Cover Page
  • Table of Contents
  • Executive Summary
  • Company Description
  • Description of Products and Services

SWOT Analysis

  • Competitor Data
  • Competitive Analysis
  • Marketing Expenses Strategy 

Pricing Strategy

  • Distribution Channel Assessment
  • Operational Plan
  • Management and Organizational Strategy
  • Financial Statements and/or Financial Projections

We’ll look into each of these. Don’t forget to download our free business plan template (mentioned just above) so you can follow along as we go. 

How to Write a Business Plan Step 1. Create a Cover Page

The first thing investors will see is the cover page for your business plan. Make sure it looks professional. A great cover page shows that you think about first impressions.

A good business plan should have the following elements on a cover page:

  • Professionally designed logo
  • Company name
  • Mission or Vision Statement
  • Contact Info

Basically, think of a cover page for your business plan like a giant business card. It is meant to capture people’s attention but be quickly processed.

How to Write a Business Plan Step 2. Create a Table of Contents

Most people are busy enough that they don’t have a lot of time. Providing a table of contents makes it easy for them to find the pages of your plan that are meaningful to them.

A table of contents will be immediately after the cover page, but you can include it after the executive summary. Including the table of contents immediately after the executive summary will help investors know what section of your business plan they want to review more thoroughly.

Check out Canva’s article about creating a  table of contents . It has a ton of great information about creating easy access to each section of your business plan. Just remember that you’ll want to use different strategies for digital and hard copy business plans.

How to Write a Business Plan Step 3. Write an Executive Summary

A notepad with a written executive summary for business plan writing

An executive summary is where your business plan should catch the readers interest.  It doesn’t need to be long, but should be quick and easy to read.

Mike told us,

How long should an executive summary bein an informal business plan?

For casual use, an executive summary should be similar to an elevator pitch, no more than 150-160 words, just enough to get them interested and wanting more. Indeed has a great article on elevator pitches .  This can also be used for the content of emails to get readers’ attention.

It consists of three basic parts:

  • An introduction to you and your business.
  • What your business is about.
  • A call to action

Example of an informal executive summary 

One of the best elevator pitches I’ve used is:

So far that pitch has achieved a 100% success rate in getting partnerships for the business.

What should I include in an executive summary for investors?

Investors are going to need a more detailed executive summary if you want to secure financing or sell equity. The executive summary should be a brief overview of your entire business plan and include:

  • Introduction of yourself and company.
  • An origin story (Recognition of a problem and how you came to solution)
  • An introduction to your products or services.
  • Your unique value proposition. Make sure to include intellectual property.
  • Where you are in the business life cycle
  • Request and why you need it.

Successful business plan examples

The owner of Urbanity told us he spent 2 months writing a 75-page business plan and received a $250,000 loan from the bank when he was 23. Make your business plan as detailed as possible when looking for financing. We’ve provided a template to help you prepare the portions of a business plan that banks expect.

Here’s the interview with the owner of Urbanity:

When to write an executive summary?

Even though the summary is near the beginning of a business plan, you should write it after you complete the rest of a business plan. You can’t talk about revenue, profits, and expected expenditures if you haven’t done the market research and created a financial plan.

What mistakes do people make when writing an executive summary?

Business owners commonly go into too much detail about the following items in an executive summary:

  • Marketing and sales processes
  • Financial statements
  • Organizational structure
  • Market analysis

These are things that people will want to know later, but they don’t hook the reader. They won’t spark interest in your small business, but they’ll close the deal.

How to Write a Business Plan Step 4. Company Description

Every business plan should include a company description. A great business plan will include the following elements while describing the company:

  • Mission statement
  • Philosophy and vision
  • Company goals

Target market

  • Legal structure

Let’s take a look at what each section includes in a good business plan.

Mission Statement

A mission statement is a brief explanation of why you started the company and what the company’s main focus is. It should be no more than one or two sentences. Check out HubSpot’s article 27 Inspiring Mission Statement for a great read on informative and inspiring mission and vision statements. 

Company Philosophy and Vision

Writing the company philosophy and vision

The company philosophy is what drives your company. You’ll normally hear them called core values.  These are the building blocks that make your company different. You want to communicate your values to customers, business owners, and investors as often as possible to build a company culture, but make sure to back them up.

What makes your company different?

Each company is different. Your new business should rise above the standard company lines of honesty, integrity, fun, innovation, and community when communicating your business values. The standard answers are corporate jargon and lack authenticity. 

Examples of core values

One of my clients decided to add a core values page to their website. As a tech company they emphasized the values:

  •  Prioritize communication.
  •  Never stop learning.
  •  Be transparent.
  •  Start small and grow incrementally.

These values communicate how the owner and the rest of the company operate. They also show a value proposition and competitive advantage because they specifically focus on delivering business value from the start. These values also genuinely show what the company is about and customers recognize the sincerity. Indeed has a great blog about how to identify your core values .

What is a vision statement?

A vision statement communicate the long lasting change a business pursues. The vision helps investors and customers understand what your company is trying to accomplish. The vision statement goes beyond a mission statement to provide something meaningful to the community, customer’s lives, or even the world.

Example vision statements

The Alzheimer’s Association is a great example of a vision statement:

A world without Alzheimer’s Disease and other dementia.

It clearly tells how they want to change the world. A world without Alzheimers might be unachievable, but that means they always have room for improvement.

Business Goals

You have to measure success against goals for a business plan to be meaningful. A business plan helps guide a company similar to how your GPS provides a road map to your favorite travel destination. A goal to make as much money as possible is not inspirational and sounds greedy.

Sure, business owners want to increase their profits and improve customer service, but they need to present an overview of what they consider success. The goals should help everyone prioritize their work.

How far in advance should a business plan?

Business planning should be done at least one year in advance, but many banks and investors prefer three to five year business plans. Longer plans show investors that the management team  understands the market and knows the business is operating in a constantly shifting market. In addition, a plan helps businesses to adjust to changes because they have already considered how to handle them.

Example of great business goals

My all time-favorite long-term company goals are included in Tesla’s Master Plan, Part Deux . These goals were written in 2016 and drive the company’s decisions through 2026. They are the reason that investors are so forgiving when Elon Musk continually fails to meet his quarterly and annual goals.

If the progress aligns with the business plan investors are likely to continue to believe in the company. Just make sure the goals are reasonable or you’ll be discredited (unless you’re Elon Musk).

A man holding an iPad with a cup of coffee on his desk

You did target market research before creating a business plan. Now it’s time to add it to the plan so others understand what your ideal customer looks like. As a new business owner, you may not be considered an expert in your field yet, so document everything. Make sure the references you use are from respectable sources. 

Use information from the specific lender when you are applying for lending. Most lenders provide industry research reports and using their data can strengthen the position of your business plan.

A small business plan should include a section on the external environment. Understanding the industry is crucial because we don’t plan a business in a vacuum. Make sure to research the industry trends, competitors, and forecasts. I personally prefer IBIS World for my business research. Make sure to answer questions like:

  • What is the industry outlook long-term and short-term?
  • How will your business take advantage of projected industry changes and trends?
  • What might happen to your competitors and how will your business successfully compete?

Industry resources

Some helpful resources to help you establish more about your industry are:

  • Trade Associations
  • Federal Reserve
  • Bureau of Labor Statistics

Legal Structure

There are five basic types of legal structures that most people will utilize:

  • Sole proprietorships
  • Limited Liability Companies (LLC)

Partnerships

Corporations.

  • Franchises.

Each business structure has their pros and cons. An LLC is the most common legal structure due to its protection of personal assets and ease of setting up. Make sure to specify how ownership is divided and what roles each owner plays when you have more than one business owner.

You’ll have to decide which structure is best for you, but we’ve gathered information on each to make it easier.

Sole Proprietorship

A sole proprietorship is the easiest legal structure to set up but doesn’t protect the owner’s personal assets from legal issues. That means if something goes wrong, you could lose both your company and your home.

To start a sole proprietorship, fill out a special tax form called a  Schedule C . Sole proprietors can also join the American Independent Business Alliance .

Limited Liability Company (LLC)

An LLC is the most common business structure used in the United States because an LLC protects the owner’s personal assets. It’s similar to partnerships and corporations, but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.

Each state has different requirements. Here’s a link to find your state’s requirements . Delaware and Nevada are common states to file an LLC because they are really business-friendly. Here’s a blog on the top 10 states to get an LLC.

Partnerships are typically for legal firms. If you choose to use a partnership choose a Limited Liability Partnership. Alternatively, you can just use an LLC.

Corporations are typically for massive organizations. Corporations have taxes on both corporate and income tax so unless you plan on selling stock, you are better off considering an LLC with S-Corp status . Investopedia has good information corporations here .

An iPad with colored pens on a desk

There are several opportunities to purchase successful franchises. TopFranchise.com has a list of companies in a variety of industries that offer franchise opportunities. This makes it where an entrepreneur can benefit from the reputation of an established business that has already worked out many of the kinks of starting from scratch.

How to Write a Business Plan Step 5. Products and Services

This section of the business plan should focus on what you sell, how you source it, and how you sell it. You should include:

  • Unique features that differentiate your business products from competitors
  • Intellectual property
  • Your supply chain
  • Cost and pricing structure 

Questions to answer about your products and services

Mike gave us a list  of the most important questions to answer about your product and services:

  • How will you be selling the product? (in person, ecommerce, wholesale, direct to consumer)?
  • How do you let them know they need a product?
  • How do you communicate the message?
  • How will you do transactions?
  • How much will you be selling it for?
  • How many do you think you’ll sell and why?

Make sure to use the worksheet on our business plan template .

How to Write a Business Plan Step 6. Sales and Marketing Plan

The marketing and sales plan is focused on the strategy to bring awareness to your company and guides how you will get the product to the consumer.  It should contain the following sections:

SWOT Analysis stands for strengths, weaknesses, opportunities, and threats. Not only do you want to identify them, but you also want to document how the business plans to deal with them.

Business owners need to do a thorough job documenting how their service or product stacks up against the competition.

If proper research isn’t done, investors will be able to tell that the owner hasn’t researched the competition and is less likely to believe that the team can protect its service from threats by the more well-established competition. This is one of the most common parts of a presentation that trips up business owners presenting on Shark Tank .

SWOT Examples

Business plan SWOT analysis

Examples of strengths and weaknesses could be things like the lack of cash flow, intellectual property ownership, high costs of suppliers, and customers’ expectations on shipping times.

Opportunities could be ways to capitalize on your strengths or improve your weaknesses, but may also be gaps in the industry. This includes:

  • Adding offerings that fit with your current small business
  • Increase sales to current customers
  • Reducing costs through bulk ordering
  • Finding ways to reduce inventory
  •  And other areas you can improve

Threats will normally come from outside of the company but could also be things like losing a key member of the team. Threats normally come from competition, regulations, taxes, and unforeseen events.

The management team should use the SWOT analysis to guide other areas of business planning, but it absolutely has to be done before a business owner starts marketing. 

Include Competitor Data in Your Business Plan

When you plan a business, taking into consideration the strengths and weaknesses of the competition is key to navigating the field. Providing an overview of your competition and where they are headed shows that you are invested in understanding the industry.

For smaller businesses, you’ll want to search both the company and the owners names to see what they are working on. For publicly held corporations, you can find their quarterly and annual reports on the SEC website .

What another business plans to do can impact your business. Make sure to include things that might make it attractive for bigger companies to outsource to a small business.

Marketing Strategy

The marketing and sales part of business plans should be focused on how you are going to make potential customers aware of your business and then sell to them.

If you haven’t already included it, Mike recommends:

“They’ll want to know about Demographics, ages, and wealth of your target market.”

Make sure to include the Total addressable market .  The term refers to the value if you captured 100% of the market.

Advertising Strategy

You’ll explain what formats of advertising you’ll be using. Some possibilities are:

  • Online: Facebook and Google are the big names to work with here.
  • Print : Print can be used to reach broad groups or targeted markets. Check out this for tips .
  • Radio : iHeartMedia is one of the best ways to advertise on the radio
  • Cable television : High priced, hard to measure ROI, but here’s an explanation of the process
  • Billboards: Attracting customers with billboards can be beneficial in high traffic areas.

You’ll want to define how you’ll be using each including frequency, duration, and cost. If you have the materials already created, including pictures or links to the marketing to show creative assets.

Mike told us “Most businesses are marketing digitally now due to Covid, but that’s not always the right answer.”

Make sure the marketing strategy will help team members or external marketing agencies stay within the brand guidelines .

An iPad with graph about pricing strategy

This section of a business plan should be focused on pricing. There are a ton of pricing strategies that may work for different business plans. Which one will work for you depends on what kind of a business you run.

Some common pricing strategies are:

  • Value-based pricing – Commonly used with home buying and selling or other products that are status symbols.
  • Skimming pricing – Commonly seen in video game consoles, price starts off high to recoup expenses quickly, then reduces over time.
  • Competition-based pricing – Pricing based on competitors’ pricing is commonly seen at gas stations.
  • Freemium services –  Commonly used for software, where there is a free plan, then purchase options for more functionality.

HubSpot has a great calculator and blog on pricing strategies.

Beyond explaining what strategy your business plans to use, you should include references for how you came to this pricing strategy and how it will impact your cash flow.

Distribution Plan

This part of a business plan is focused on how the product or service is going to go through the supply chain. These may include multiple divisions or multiple companies. Make sure to include any parts of the workflow that are automated so investors can see where cost savings are expected and when.

Supply Chain Examples

For instance, lawn care companies  would need to cover aspects such as:

  • Suppliers for lawn care equipment and tools
  • Any chemicals or treatments needed
  • Repair parts for sprinkler systems
  • Vehicles to transport equipment and employees
  • Insurance to protect the company vehicles and people.

Examples of Supply Chains

These are fairly flat supply chains compared to something like a clothing designer where the clothes would go through multiple vendors. A clothing company might have the following supply chain:

  • Raw materials
  • Shipping of raw materials
  • Converting of raw materials to thread
  • Shipping thread to produce garments
  • Garment producer
  • Shipping to company
  • Company storage
  • Shipping to retail stores

There have been advances such as print on demand that eliminate many of these steps. If you are designing completely custom clothing, all of this would need to be planned to keep from having business disruptions.

The main thing to include in the business plan is the list of suppliers, the path the supply chain follows, the time from order to the customer’s home, and the costs associated with each step of the process.

According to BizPlanReview , a business plan without this information is likely to get rejected because they have failed to research the key elements necessary to make sales to the customer.

How to Write a Business Plan Step 7. Company Organization and Operational Plan

This part of the business plan is focused on how the business model will function while serving customers.  The business plan should provide an overview of  how the team will manage the following aspects:

Quality Control

  • Legal environment

Let’s look at each for some insight.

Production has already been discussed in previous sections so I won’t go into it much. When writing a business plan for investors, try to avoid repetition as it creates a more simple business plan.

If the organizational plan will be used by the team as an overview of how to perform the best services for the customer, then redundancy makes more sense as it communicates what is important to the business.

A wooden stamp with the words "quality control"

Quality control policies help to keep the team focused on how to verify that the company adheres to the business plan and meets or exceeds customer expectations.

Quality control can be anything from a standard that says “all labels on shirts can be no more than 1/16″ off center” to a defined checklist of steps that should be performed and filled out for every customer.

There are a variety of organizations that help define quality control including:

  • International Organization for Standardization – Quality standards for energy, technology, food, production environments, and cybersecurity
  • AICPA – Standard defined for accounting.
  • The Joint Commission – Healthcare
  • ASHRAE – HVAC best practices

You can find lists of the organizations that contribute most to the government regulation of industries on Open Secrets . Research what the leaders in your field are doing. Follow their example and implement it in your quality control plan.

For location, you should use information from the market research to establish where the location will be. Make sure to include the following in the location documentation.

  • The size of your location
  • The type of building (retail, industrial, commercial, etc.)
  • Zoning restrictions – Urban Wire has a good map on how zoning works in each state
  • Accessibility – Does it meet ADA requirements?
  • Costs including rent, maintenance, utilities, insurance and any buildout or remodeling costs
  • Utilities – b.e.f. has a good energy calculator .

Legal Environment

The legal requirement section is focused on defining how to meet the legal requirements for your industry. A good business plan should include all of the following:

  • Any licenses and/or permits that are needed and whether you’ve obtained them
  • Any trademarks, copyrights, or patents that you have or are in the process of applying for
  • The insurance coverage your business requires and how much it costs
  • Any environmental, health, or workplace regulations affecting your business
  • Any special regulations affecting your industry
  • Bonding requirements, if applicable

Your local SBA office can help you establish requirements in your area. I strongly recommend using them. They are a great resource.

Your business plan should include a plan for company organization and hiring. While you may be the only person with the company right now, down the road you’ll need more people. Make sure to consider and document the answers to the following questions:

  • What is the current leadership structure and what will it look like in the future?
  • What types of employees will you have? Are there any licensing or educational requirements?
  • How many employees will you need?
  • Will you ever hire freelancers or independent contractors?
  • What is each position’s job description?
  • What is the pay structure (hourly, salaried, base plus commission, etc.)?
  • How do you plan to find qualified employees and contractors?

One of the most crucial parts of a business plan is the organizational chart. This simply shows the positions the company will need, who is in charge of them and the relationship of each of them. It will look similar to this:

Organization chart

Our small business plan template has a much more in-depth organizational chart you can edit to include when you include the organizational chart in your business plan.

How to Write a Business Plan Step 8. Financial Statements 

No business plan is complete without financial statements or financial projections. The business plan format will be different based on whether you are writing a business plan to expand a business or a startup business plan. Let’s dig deeper into each.

Provide All Financial Income from an Existing Business

An existing business should use their past financial documents including the income statement, balance sheet, and cash flow statement to find trends to estimate the next 3-5 years.

You can create easy trendlines in excel to predict future revenue, profit and loss, cash flow, and other changes in year-over-year performance. This will show your expected performance assuming business continues as normal.

If you are seeking an investment, then the business is probably not going to continue as normal. Depending on the financial plan and the purpose of getting financing, adjustments may be needed to the following:

  • Higher Revenue if expanding business
  • Lower Cost of Goods Sold if purchasing inventory with bulk discounts
  • Adding interest if utilizing financing (not equity deal)
  • Changes in expenses
  • Addition of financing information to the cash flow statement
  • Changes in Earnings per Share on the balance sheet

Financial modeling is a challenging subject, but there are plenty of low-cost courses on the subject. If you need help planning your business financial documentation take some time to watch some of them.

Make it a point to document how you calculated all the changes to the income statement, balance sheet, and cash flow statement in your business plan so that key team members or investors can verify your research.

Financial Projections For A Startup Business Plan

Unlike an existing business, a startup doesn’t have previous success to model its future performance. In this scenario, you need to focus on how to make a business plan realistic through the use of industry research and averages.

Mike gave the following advice in his interview:

Financial Forecasting Mistakes

One of the things a lot of inexperienced people use is the argument, “If I get one percent of the market, it is worth $100 million.” If you use this, investors are likely to file the document under bad business plan examples.

Let’s use custom t-shirts as an example.

Credence Research estimated in 2018 there were 11,334,800,000 custom t-shirts sold for a total of $206.12 Billion, with a 6% compound annual growth rate.

With that data,  you can calculate that the industry will grow to $270 Billion in 2023 and that the average shirt sold creates $18.18 in revenue.

Combine that with an IBIS World estimate of 11,094 custom screen printers and that means even if you become an average seller, you’ll get .009% of the market.

Here’s a table for easier viewing of that information.

A table showing yearly revenue of a business

The point here is to make sure your business proposal examples make sense.

You’ll need to know industry averages such as cost of customer acquisition, revenue per customer, the average cost of goods sold, and admin costs to be able to create accurate estimates.

Our simple business plan templates walk you through most of these processes. If you follow them you’ll have a good idea of how to write a business proposal.

How to Write a Business Plan Step 9. Business Plan Example of Funding Requests

What is a business plan without a plan on how to obtain funding?

The Small Business Administration has an example for a pizza restaurant that theoretically needed nearly $20k to make it through their first month.

In our video, How to Start a $500K/Year T-Shirt Business (Pt. 1 ), Sanford Booth told us he needed about $200,000 to start his franchise and broke even after 4 months.

Freshbooks estimates it takes on average 2-3 years for a business to be profitable, which means the fictitious pizza company from the SBA could need up to $330k to make it through that time and still pay their bills for their home and pizza shop.

Not every business needs that much to start, but realistically it’s a good idea to assume that you need a fairly large cushion.

Ways to get funding for a small business

There are a variety of ways to cover this. the most common are:

  • Bootstrapping – Using your savings without external funding.
  • Taking out debt – loans, credit cards
  • Equity, Seed Funding – Ownership of a percentage of the company in exchange for current funds
  • Crowdsourcing – Promising a good for funding to create the product

Keep reading for more tips on how to write a business plan.

How funding will be used

When asking for business financing make sure to include:

  • How much to get started?
  • What is the minimum viable product and how soon can you make money?
  • How will the money be spent?

Mike emphasized two aspects that should be included in every plan, 

How to Write a Business Plan Resources

Here are some links to a business plan sample and business plan outline. 

  • Sample plan

It’s also helpful to follow some of the leading influencers in the business plan writing community. Here’s a list:

  • Wise Plans –  Shares a lot of information on starting businesses and is a business plan writing company.
  • Optimus Business Plans –  Another business plan writing company.
  • Venture Capital – A venture capital thread that can help give you ideas.

How to Write a Business Plan: What’s Next?

We hope this guide about how to write a simple business plan step by step has been helpful. We’ve covered:

  • The definition of a business plan
  • Coming up with a business idea
  • Performing market research
  • The critical components of a business plan
  • An example business plan

In addition, we provided you with a simple business plan template to assist you in the process of writing your startup business plan. The startup business plan template also includes a business model template that will be the key to your success.

Don’t forget to check out the rest of our business hub .

Have you written a business plan before? How did it impact your ability to achieve your goals?

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given the outline of a business plan which part ought to be given priority

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Extendable duster.

  • Budget : The SetSail 110” extendable duster has a removable duster that can be bent to fit in hard-to-reach space. It’s low cost and you can order replacement heads. You might also want the blind duster and window kit .
  • Dusting Kit : The 6 piece dusting kit includes an extendable pole, 3 styles of microfiber covers to go over the bendable head, a hand duster, and a carrying bag. This one is the best option for your house supplies list.
  • Swiffer Dusting Kit : Like the Swiffer Sweeper, the Swiffer Dusting Kit is something that many will want with their cleaning supplies for home. It comes with a handle and 12 Swiffer Heavy Duty Dusters. The dusters are disposable, so you’d need to replace them after each house. In addition, the handle is only three feet long. This is the best choice on a list of cleaning supplies for apartment tenants.

Wood Cleaner

Fabric refresher, pet stain remover, fireplace cleaner, what cleaning products do you love.

How to Start a $100K/Month Window Cleaning Business

If you're considering getting into the field, you'll want to hear what Martin Skarra has to say about how to start a window cleaning business.

Martin decided he wanted to buy a window cleaning business for around $400K, and a year later, he doubled the company’s revenue. In this helpful how-to, he shares his business, marketing, and communication strategies for running a successful window cleaning business.

[su_note note_color="#dbeafc"] We'll share the industry outlook and business planning tips, as well as tips for registering a window cleaning company, buying cleaning supplies, marketing, and more. It’s all aimed at helping you save money while you start your business.

Case Study: Seattle Window Cleaning

Learn how to start a cleaning company, learn about the window cleaning industry, step 1. write a window cleaning business plan, step 2. register the window cleaning business, step 3. get a window cleaning business license, step 4. get business insurance, step 5. open a business bank account, step 6. create a pricing guide, step 7. buy window cleaning supplies, step 8. market your window cleaning business, step 9. provide window cleaning services.

  • Conclusion [/su_note]

Window cleaner on a lift working on high rise windows with a search bar that reads "Seattle Window Cleaning" hovering in the foreground

Martin Skarra graduated from business school and wanted to buy a business. He started looking for a service company that was already successful but provided opportunities to improve.

He spent 18 months looking for a small business opportunity that had opportunities to improve branding, adopt technology, and increase profitability. That’s when he found Mercer Island Window Cleaners. He bought it for $400K and started making changes.

First, Martin changed the business name from Mercer Island Window Cleaners, among other brands the company operated under, to Seattle Window Cleaning. This single change helped improve the company’s rank on search engines, jumping to the top three with more than 1,000 searches per month.

He updated the website, automated the business, improved the marketing, and hired more people. These changes helped him double the revenue in less than a year.

Watch his story below:

Does Martin’s story inspire you to be your own boss and start a window-washing company?

Starting a window washing business or any cleaning business can be a high-paying endeavor, but most business owners spend a lot of time and energy learning on the job.

What if you could skip all the guesswork and get straight to making money?

We partnered with Cristobal Mondragon to create a cleaning business course that gives you everything you need to start cleaning business operations. We’re so confident you’ll love the full course that we provide a 90-day refund policy.

Check out our FREE cleaning business course to get a preview of what you’ll learn.

How much do window cleaners make?

According to the Bureau of Labor Statistics , window cleaners typically get paid between $12 and $29 hourly, or a salary of $25,950 to $58,780 per year.

You might pay your window washing employees by the job, by the hour, or commission. In 2022, Martin told us:

[su_quote] The guys make $12 base pay, and then they get 15% commission above that. So if they do a $100 job, they get $15. The guys are making between $35 and $40. [/su_quote]

If you want to know how much you can make by starting a window cleaning business, keep reading.

How much do window washing business owners make?

Most window washing business owners pay themselves a salary, which is approximately $100K per year, according to the Bureau of Labor Statistics . You can pay yourself less if you make less, but the IRS likes going after business owners who don’t pay themselves a competitive wage.

While many local window cleaners don’t make that much, starting a window-washing business can be pretty profitable. Martin told us:

[su_quote] I have about 20% to 25% profit margins but am reinvesting for growth. [/su_quote]

That means he could be making as much as $22,500 per month. Sound good? Learn more about starting your own window cleaning business.

How much does it cost to start a window cleaning business?

Cleaning business owner holding a sponge in one hand and a bucket of cash in the other

As long as you have the vehicle, starting a window cleaning company costs under $1K. All you need to start a window cleaning business is:

  • Window cleaner
  • Extension pole
  • Business license
  • Limited liability company (LLC) or other business structure

If you have to buy a vehicle, you can still do it for under $5K. Martin took a different route and found a great window cleaning business opportunity. He told us:

[su_quote] I paid around $400K for the business, but the beauty of the U.S., you have something called SBA loans, which are loans from a commercial bank guaranteed by the Small Business Administration. And they let you buy a business with up to 90% leverage. [/su_quote]

His down payment was around $40K.

Now that you understand the financials, let’s look at how to start a window washing business.

How to Start a Window Cleaning Business

You will need to follow a seven-step process to start your own window cleaning business.

According to Harvard Business Review , taking the time to write a business plan increases the probability of success by 16%. A business plan is normally required to take out SBA loans, too.

To write a window cleaning business plan, you'll want to:

  • Brainstorm cleaning business ideas.
  • Establish goals for your business.
  • Create a budget.
  • Create your pricing strategy.
  • Write your marketing plan.

Check out our interview with Mike Andes, a successful business owner and franchisor, about writing a business plan.

Let's start by discussing business ideas.

Brainstorm Cleaning Business Ideas

Window cleaning businesses typically have three types of window washing clients they accept:

  • Residential clients: Residential window cleaning services focus on a target market, typically homeowners in zip codes with high median wages.
  • Commercial clients: Small business owners and building owners often look to commercial window cleaning services. You may focus on buildings like offices, shopping malls, hotels, and apartment complexes.
  • High-rise clients: A high-rise window cleaning company operates on skyscrapers and has more safety and insurance requirements than other types of window washers.

Since residential and commercial window cleaners have fairly similar requirements, many businesses will accept both commercial and residential clients. Check out our blog about more cleaning business ideas here .

Once you decide what your business is going to focus on, you need to establish your goals.

Establish Goals for Your Cleaning Business

Seattle Window Cleaning owner Martin Skarra standing on a residential street in front of one of his vans holding and pointing to a chalkboard sign that reads "Unique Business Goals"

Every business owner has different goals for their window washing business. The average revenue per employee across the industry is only around $67K, so you probably aren't going to make $1M per year as a single-person business.

You should consider:

  • How much do you want to earn?
  • Do you want to be a home-based office or rent office space?
  • How wide of a service area do you want to serve?
  • When you're ready to retire, do you want to be able to sell the business or pass it on to your kids?
  • Do you want the business to be in a single location, or would you like to expand through corporate-owned stores or franchising?
  • Do you want to hire employees?

You'll want to document all this early because they will impact your pricing guide, insurance, software requirements, marketing, business licenses, and practically every decision you make when opening your own business.

Create a Budget for the Window Washing Business

You'll need a budget to run your window cleaning business successfully. Martin told us:

[su_quote] I'm hoping long term, [margins] are gonna be in the 20% to 25% range. So that's roughly a third, 35%, 40% is gonna be your technicians, and then there's another, roughly 30% in the overhead and insurance. [/su_quote]

The breakdown would look something like the table below for a solo entrepreneur. Just multiply the highlighted cells by the number of employees to alter projections when you hire employees.

Create Your Pricing Strategy

You’ll need to figure out how much to charge for window cleaning. You can quote bids for potential customers using the following business models:

  • Per Pane: This business model uses the number of window panes to establish how much to charge. The window cleaning cost will normally be $4 to $15 per window.
  • Square Footage: Some residential window cleaning companies charge based on the square footage of the windows or the home. These are good for tract homes where cleaning windows doesn’t require a lot of guesswork.
  • Time and Materials: This business model is good for commercial properties and custom homes because you can estimate based on factors like ladders, screens, and other features. Companies normally charge $80 to $150 per hour.

Most small businesses call around to figure out what the local market normally charges.

Seattle Window Washing uses a tool called ResponsiBid that makes it easier to provide instant quotes, but BookingKoala ’s layout is better (in my opinion) and the cost is less. Chris discusses it in our blog about how to start a cleaning company

Write Your Marketing Plan

Martin Skarra standing in front of a large residence with a lime green hose over his shoulder pointing to a smart phone showing UpFlip’s How to Get Clients for a Cleaning Business blog post

Now it's time to establish how you're going to market your business. You should establish:

  • Marketing channels you want to use: Digital, print, radio, and TV are all options. Most opt for digital and limited print.
  • Monthly marketing budget: How much do you want to spend on marketing, including blogs, ads, and print media?
  • Physical products to market your business: You'll want vehicle signs, business cards, and door hangers. Some people also use mailers.

Martin told us:

[su_quote] When we're at a house, the neighbors get a card in the mail afterwards and it says, ‘Hey, we're just cleaning the neighbor's windows, we'd love to do some work for you too! [/su_quote]

Learn more about finding cleaning customers here .

You’ll need to choose a business name and register the business. Check that the name is available as a web domain, social media handle (on all platforms), trademark, and as an actual business name.

Two common business structures are LLCs and corporations. Both have their benefits, which you can read about in our business structure guide . Make sure to talk to a business attorney before you register.

You'll also need to get tax permits and an Employer Identification Number (EIN) from the Internal Revenue Service.

You'll need to look up your local county clerk or business license department to verify what business licenses you’ll need. Licensing requirements vary by location, but common requirements are:

  • General liability insurance
  • Workers compensation insurance
  • Security bonds
  • A licensing fee

The window cleaning license cost will normally be between $100 and $500 , but I have seen some locations where a business license costs a percentage of the previous year’s or quarter’s revenue.

If your location requires insurance, you'll need to get it before the license.

Check out our blog on how to get a cleaning business license . We even walk you through how to get your EIN from the IRS.

Business owner at a minimalist desk space using a tablet to search for business insurance options from Simply Business

You may need to get insurance before you offer window cleaning services. Even if insurance for window cleaners is not required, you should protect your business assets. I normally suggest Simply Business because they are quick, easy, and affordable. They compare window cleaning insurance for most types of business insurance, including:

  • Professional liability
  • Business owner policies
  • Auto insurance
  • Workers’ compensation

Make sure you get insurance that will protect your personal and business assets.

You'll want to keep your business and personal assets separate. Business expenses are tax-deductible, but personal expenses are not. A business bank account makes it easy to keep personal assets separate from your business expenses. Apply online or at your local credit union.

Small banks tend to have better approval rates than major banks when you apply for a business loan, so start building a relationship early.

Most window cleaners will also want a business credit card to pay for overhead costs like gas and cleaning solutions. If the bank approves you at the same time you open your bank account, you'll be able to use it for start-up costs.

You'll need to make it easy to provide price quotes to potential clients. Customer service representatives and your window cleaning team will benefit from having an easy way of providing estimates.

This is especially critical if you provide other services to existing customers. Martin told us:

[su_quote] Window cleaning is super seasonal. We do that in the summer and then trailing into September. Late August, it starts to quiet down quite a bit. [/su_quote]

They also offer gutter cleaning, roof cleaning, power washing, and Christmas light installation to provide year-round services for their target audience.

You might want to consider a similar approach to build relationships with existing and potential clients. It will help cover overhead costs during slow months. Check out our cleaners pricing guide for inspiration.

As mentioned previously, you should consider Responsibid or BookingKoala, but you can also use an Excel spreadsheet and script to provide window cleaning job quotes.

Check out our 7-Figure Cleaning Business Blueprint course to get the business skills, systems, and processes you need to run a profitable cleaning company. It will make day-to-day operations way easier.

You can buy window cleaning supplies on Amazon. You'll want to get:

  • Cleaning solution

Window cleaning equipment might also include a pressure washing setup .

Check out our window cleaning business start-up kit on Kit . Combine it with the pressure washing kit for diversified revenue streams and power window washing capabilities.

UpFlip masterclass landing page on a desktop computer at a workstation overlooking a cityscape

Martin told us he attempted every type of marketing and found three that work well.

  • Referral programs
  • Send a mailer to five neighbors of each customer

He explained:

[su_quote] I spend about $3,000 per month [on marketing]. We just use regular Google Ads. And then we also do a five-round automated with the cards that go out and to all the neighbors. When we're at a house, the neighbors get a card in the mail afterwards. [/su_quote]

Check out our cleaning course to get templates for mailers, automations, and ad platforms.

You might also want to create social media accounts and join local business directories, like Angi (formerly Angie's List), Yelp, and Thumbtack. These provide leads and add to your authority.

You've started a window cleaning business, but now it's time to serve customers. If you offer other services like pressure washing, offer this to your customers to increase the revenue per trip. You already use similar cleaning solutions and towels—cleaning tools are pretty interchangeable.

Be careful when cleaning window panes. If you accidentally break a window pane, immediately pay for someone to come out and fix it. Accidents happen, but a quick, honest response can help build a good reputation even when you have accidents.

Now you know how to open a window cleaning business. We discussed how Martin runs his home window cleaning company and what to expect when you enter the industry.

Local service businesses, like window cleaners, can serve both residential and business customers to make a great living. To make a window cleaning business profitable, don’t offer $99 window cleaning unless you are in a place with a low cost of living. Window cleaning jobs require time and money, and you need to make money to stay afloat.

How much is window cleaning in your area?

The Break-Even Point Formula: Calculating the BEP

Definitions

What is a break-even point (bep), what is the sales price, what are total fixed costs.

Man sitting behind the desk and calculating total cost

  • Monthly rent
  • Property taxes
  • Business licensing
  • Electric bill (portion not impacted by production volume)
  • Website and other software
  • Executive salaries
  • Benefits (if offered)

What are Variable Costs?

  • Cost of the t-shirt or other items
  • Costs of the screens and ink
  • Labor to perform the t-shirt printing
  • Product packaging
  • Shipping charges
  • Sales commissions
  • Transaction fees
  • Advertisement charged by Cost Per Action (CPA) ads
  • Electricity that is directly attributable to the printing.

Fixed and Variable Costs Equal Total Costs

Break even point total cost and revenue

What is the Contribution Margin?

Contribution margin formula

What is the Break-Even Point Formula?

  • Break-Even Point in Units = Fixed Costs / (Sales Price - Variable Costs)
  • Break-Even Point in Dollars = Break-Even Point (Units) x Sales Price[/su_note]

Example: How to Calculate Units Using the Break-Even Quantity Formula

Break-even-point-analysis

Example: How to Calculate Total Revenue to Break Even

Example: break-even analysis to earn $200k a year, how to use the break-even formula with multiple products, adjusting sales price based on multiple products.

Best price concept

  • Formula 1 : When you’ve already made sales
  • Formula 2 : When you are forecasting using industry averages
  • L: 30 percent
  • M: 28 percent
  • XL: 20 percent
  • XXL: 12 percent
  • S: 7 percent
  • XXXL: 2 percent
  • XS: 1 percent.

Variable Costs

Price calculation table

Contribution Margin

  • Only carry similarly priced products.
  • Choose a contribution margin strategy based on a specific dollar or % profit.
  • Choose the highest-cost product. In our example above, it was the 3XL at $24.95.
  • Establish how much you want to make on it. I use $10 for hoodies.
  • Using the Etsy Pricing Calculator provided earlier, $56.60 would be the sales price.
  • Make all your products the same $56.60
  • Now you have both sales dollars and contribution margins that are easy to calculate.

given the outline of a business plan which part ought to be given priority

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given the outline of a business plan which part ought to be given priority

My Name is PRETTY NGOMANE. A south African female. Aspiring to do farming. And finding a home away from home for the differently abled persons in their daily needs.

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given the outline of a business plan which part ought to be given priority

Home > Business > Business Startup

How To Write a Business Plan

Stephanie Coleman

We are committed to sharing unbiased reviews. Some of the links on our site are from our partners who compensate us. Read our editorial guidelines and advertising disclosure .

How-to-write-a-business-plan

Starting a business is a wild ride, and a solid business plan can be the key to keeping you on track. A business plan is essentially a roadmap for your business — outlining your goals, strategies, market analysis and financial projections. Not only will it guide your decision-making, a business plan can help you secure funding with a loan or from investors .

Writing a business plan can seem like a huge task, but taking it one step at a time can break the plan down into manageable milestones. Here is our step-by-step guide on how to write a business plan.

Table of contents

  • Write your executive summary
  • Do your market research homework
  • Set your business goals and objectives
  • Plan your business strategy
  • Describe your product or service
  • Crunch the numbers
  • Finalize your business plan

given the outline of a business plan which part ought to be given priority

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Step 1: Write your executive summary

Though this will be the first page of your business plan , we recommend you actually write the executive summary last. That’s because an executive summary highlights what’s to come in the business plan but in a more condensed fashion.

An executive summary gives stakeholders who are reading your business plan the key points quickly without having to comb through pages and pages. Be sure to cover each successive point in a concise manner, and include as much data as necessary to support your claims.

You’ll cover other things too, but answer these basic questions in your executive summary:

  • Idea: What’s your business concept? What problem does your business solve? What are your business goals?
  • Product: What’s your product/service and how is it different?
  • Market: Who’s your audience? How will you reach customers?
  • Finance: How much will your idea cost? And if you’re seeking funding, how much money do you need? How much do you expect to earn? If you’ve already started, where is your revenue at now?

given the outline of a business plan which part ought to be given priority

Step 2: Do your market research homework

The next step in writing a business plan is to conduct market research . This involves gathering information about your target market (or customer persona), your competition, and the industry as a whole. You can use a variety of research methods such as surveys, focus groups, and online research to gather this information. Your method may be formal or more casual, just make sure that you’re getting good data back.

This research will help you to understand the needs of your target market and the potential demand for your product or service—essential aspects of starting and growing a successful business.

Step 3: Set your business goals and objectives

Once you’ve completed your market research, you can begin to define your business goals and objectives. What is the problem you want to solve? What’s your vision for the future? Where do you want to be in a year from now?

Use this step to decide what you want to achieve with your business, both in the short and long term. Try to set SMART goals—specific, measurable, achievable, relevant, and time-bound benchmarks—that will help you to stay focused and motivated as you build your business.

Step 4: Plan your business strategy

Your business strategy is how you plan to reach your goals and objectives. This includes details on positioning your product or service, marketing and sales strategies, operational plans, and the organizational structure of your small business.

Make sure to include key roles and responsibilities for each team member if you’re in a business entity with multiple people.

Step 5: Describe your product or service

In this section, get into the nitty-gritty of your product or service. Go into depth regarding the features, benefits, target market, and any patents or proprietary tech you have. Make sure to paint a clear picture of what sets your product apart from the competition—and don’t forget to highlight any customer benefits.

Step 6: Crunch the numbers

Financial analysis is an essential part of your business plan. If you’re already in business that includes your profit and loss statement , cash flow statement and balance sheet .

These financial projections will give investors and lenders an understanding of the financial health of your business and the potential return on investment.

You may want to work with a financial professional to ensure your financial projections are realistic and accurate.

Step 7: Finalize your business plan

Once you’ve completed everything, it's time to finalize your business plan. This involves reviewing and editing your plan to ensure that it is clear, concise, and easy to understand.

You should also have someone else review your plan to get a fresh perspective and identify any areas that may need improvement. You could even work with a free SCORE mentor on your business plan or use a SCORE business plan template for more detailed guidance.

Compare the Top Small-Business Banks

Data effective 1/10/23. At publishing time, rates, fees, and requirements are current but are subject to change. Offers may not be available in all areas.

The takeaway

Writing a business plan is an essential process for any forward-thinking entrepreneur or business owner. A business plan requires a lot of up-front research, planning, and attention to detail, but it’s worthwhile. Creating a comprehensive business plan can help you achieve your business goals and secure the funding you need.

Related content

  • 5 Best Business Plan Software and Tools in 2023 for Your Small Business
  • How to Get a Business License: What You Need to Know
  • What Is a Cash Flow Statement?

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1.1: Chapter 1 – Developing a Business Plan

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  • Page ID 21274

  • Lee A. Swanson
  • University of Saskatchewan

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Learning Objectives

After completing this chapter, you will be able to

  • Describe the purposes for business planning
  • Describe common business planning principles
  • Explain common business plan development guidelines and tools
  • List and explain the elements of the business plan development process
  • Explain the purposes of each element of the business plan development process
  • Explain how applying the business plan development process can aid in developing a business plan that will meet entrepreneurs’ goals

This chapter describes the purposes, principles, and the general concepts and tools for business planning, and the process for developing a business plan.

Purposes for Developing Business Plans

Business plans are developed for both internal and external purposes. Internally, entrepreneurs develop business plans to help put the pieces of their business together. Externally, the most common purpose is to raise capital.

Internal Purposes

As the road map for a business’s development, the business plan

  • Defines the vision for the company
  • Establishes the company’s strategy
  • Describes how the strategy will be implemented
  • Provides a framework for analysis of key issues
  • Provides a plan for the development of the business
  • Helps the entrepreneur develop and measure critical success factors
  • Helps the entrepreneur to be realistic and test theories

External Purposes

The business plan provides the most complete source of information for valuation of the business. Thus, it is often the main method of describing a company to external audiences such as potential sources for financing and key personnel being recruited. It should assist outside parties to understand the current status of the company, its opportunities, and its needs for resources such as capital and personnel.

Business Plan Development Principles

Hindle and Mainprize (2006) suggested that business plan writers must strive to effectively communicate their expectations about the nature of an uncertain future and to project credibility. The liabilities of newness make communicating the expected future of new ventures much more difficult than for existing businesses. Consequently, business plan writers should adhere to five specific communication principles .

First, business plans must be written to meet the expectations of targeted readers in terms of what they need to know to support the proposed business. They should also lay out the milestones that investors or other targeted readers need to know. Finally, writers must clearly outline the opportunity , the context within the proposed venture will operate (internal and external environment), and the business model (Hindle & Mainprize, 2006).

There are also five business plan credibility principles that writers should consider. Business plan writers should build and establish their credibility by highlighting important and relevant information about the venture team . Writers need to elaborate on the plans they outline in their document so that targeted readers have the information they need to assess the plan’s credibility. To build and establish credibility, they must integrate scenarios to show that the entrepreneur has made realistic assumptions and has effectively anticipated what the future holds for their proposed venture. Writers need to provide comprehensive and realistic financial links between all relevant components of the plan. Finally, they must outline the deal , or the value that targeted readers should expect to derive from their involvement with the venture (Hindle & Mainprize, 2006).

General Guidelines for Developing Business Plans

Many businesses must have a business plan to achieve their goals. Using a standard format helps the reader understand that the you have thought everything through, and that the returns justify the risk. The following are some basic guidelines for business plan development.

As You Write Your Business Plan

1. If appropriate, include nice, catchy, professional graphics on your title page to make it appealing to targeted readers, but don’t go overboard.

2. Bind your document so readers can go through it easily without it falling apart. You might use a three-ring binder, coil binding, or a similar method. Make sure the binding method you use does not obscure the information next to where it is bound.

3. Make certain all of your pages are ordered and numbered correctly.

4. The usual business plan convention is to number all major sections and subsections within your plan using the format as follows:

1. First main heading

1.1 First subheading under the first main heading

1.1.1. First sub-subheading under the first subheading

2. Second main heading

2.1 First subheading under the second main heading

Use the styles and references features in Word to automatically number and format your section titles and to generate your table of contents. Be sure that the last thing you do before printing your document is update your automatic numbering and automatically generated tables. If you fail to do this, your numbering may be incorrect.

5. Prior to submitting your plan, be 100% certain each of the following requirements are met:

  • Everything must be completely integrated. The written part must say exactly the same thing as the financial part.
  • All financial statements must be completely linked and valid. Make sure all of your balance sheets balance.
  • Everything must be correct. There should be NO spelling, grammar, sentence structure, referencing, or calculation errors.
  • Your document must be well organized and formatted. The layout you choose should make the document easy to read and comprehend. All of your diagrams, charts, statements, and other additions should be easy to find and be located in the parts of the plan best suited to them.
  • In some cases it can strengthen your business plan to show some information in both text and table or figure formats. You should avoid unnecessary repetition , however, as it is usually unnecessary—and even damaging—to state the same thing more than once.
  • You should include all the information necessary for readers to understand everything in your document.
  • The terms you use in your plan should be clear and consistent. For example, the following statement in a business plan would leave a reader completely confused: “There is a shortage of 100,000 units with competitors currently producing 25,000. We can help fill this huge gap in demand with our capacity to produce 5,000 units.”

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The Perfect Business Plan Layout & Outline

Written by Dave Lavinsky

Business plan layout

The layout of a business plan is not an area where great imagination and creativity is needed or recommended. It should be a more or less straightforward task to layout or outline your plan, using industry standard practices which funders have become familiar with through thousands of business plans. Use the following steps to implement this standard layout and save creativity for your business venture within the plan.

Download our Ultimate Business Plan Template here >

Start by getting your hands on a business plan template. This will speed your time to completing your plan. Business plans generally start with an executive summary and company overview, move through background research and market analysis, customers, and competition, describe the company’s intended methods in the marketing plan and operation plan, show who’s on the management team, and conclude with the financial plan and appendices featuring full financial statements.

Use the business plan template to guide your understanding of each section and to see how they relate to each other. Don’t assume that any one example should dominate your understanding unless it comes from an extremely trusted source with a reputation for business plan expertise and success.

Business Page Layout Tips

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Sample Outline For Your Business Plan

1. executive summary.

Your executive summary is the most important part of your plan. It comes at the beginning and is the first thing potential investors or lenders will read. If they aren’t excited by what they see, they’ll unfortunately stop reading. So make sure your executive summary gives a quick overview of what your company does and explains, in an exciting tone, why your company will be successful.

In your Company Description, provide background on your company. When did you incorporate? What have you accomplished to date? Here you will let readers know the history of your business.

In the Market Analysis section of your business plan provide background on the industry in which you operate. Conduct market research to make this section concrete and compelling. Answer questions such as: how big is your industry? what trends are affecting it?

Here you will document your target market. How are they? How many are there? What are their likes and dislikes? Ideally you can provide comprehensive demographic and psychographic profiles of your target customers and show how your company’s product or service are ideally suited to their needs.

In this section of your business plan, document your key competitors. Explain their strengths and their weaknesses. Remember that investors and lenders expect you to have direct competitors. They just want to feel confident that despite them, you can still achieve lasting success.

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Your marketing strategy should primarily focus on the promotional methods you will use to attract new customers. Will you use search engine marketing? Will you employ radio ads? Document each of the promotional methods you will use.

This section of your plan should discuss the key roles that your company must expertly perform and your strategies for operational excellence. You must also outline the long-term milestones your company plans to accomplish and the key dates for each.

In your Management Team section, detail the key members of your team. Document their backgrounds and how their past experiences make them well suited to succeed in your organization.

Here you will layout the key assumptions used in creating your financial model and then provide topline results from your income statement, balance sheet and cash flow projections. If you are seeking funding, document the amount of funding you seek and the key uses for it.

Business Plan Outline financial projections

In your Appendix, you will provide supporting information such as employee or customer agreements, store layouts, etc. You must also include your full, five-year financial projections.

By following the comprehensive business plan outline, you will ensure your plan is in the format investors and lenders expect.

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Business Page Layout FAQs

How do i layout a business plan.

Laying out a well-crafted business plan is not, and should not, be complicated. You can lay out your business plan using our sample business plan outline discussed here . An organized business plan structure is key to a successful business plan.

What is a business plan outline?

A business plan outline allows you to organize your plan and present it in the format that’s most compelling to readers. Also, by starting with your outline, it’s easier to add the required information into the key elements of a comprehensive business plan.

Other Helpful Business Plan Articles & Templates

Business Plan Template & Guide for Small Businesses

given the outline of a business plan which part ought to be given priority

A Practical Guide to Prioritization for Project Managers

Project prioritization is an art form. You have to understand goals and outcomes, negotiate with different personalities, and somehow see the future. Some days you might feel like an expert, and other days you may not know where to begin. If only a Magic 8 ball really worked!

Good prioritization can lead to process efficiencies, a happy team, and project success. In this article, you’ll learn about different frameworks you can use to prioritize projects and tasks. Use these frameworks to deal with difficult stakeholders, reduce daily fires, and bring clarity to what’s important.

What is project prioritization?

Project prioritization is the process of determining the best order for completing a group of projects or tasks. It may be based on criteria like how the work impacts business or financial goals, organizational risk, staff availability, and/or potential for success.

In general, we usually see 3 levels of prioritization in project management:

  • Strategic prioritization works at the organizational level to move the company forward to reach its mission, vision, and goals.
  • Project prioritization is done either by a PMO who oversees a portfolio of projects or by individuals and/or teams who juggle multiple projects.
  • Task prioritization zooms into the work happening in a specific project, whether it’s for an internal team, external client, or personal project.

Why is prioritization important in project management?

When you don’t stop to prioritize, you tend to tackle what’s easiest, loudest, or most fun. While I’m all about doing something easy when it’s been a tough day, it’s not usually the best approach. 

Simply put, the purpose of project prioritization is to ensure you create and execute on a strategic plan. As a result, your team and organization can enjoy the following benefits:

  • Gain efficiency : By putting projects and tasks in just the right place, you can use your team’s time and resources more efficiently to meet deadlines and reduce costs.  
  • Realize goals : Prioritization ensures you meet both short- and long-term goals. A recent Gartner study identified a lack of clear priorities as one of the top 3 barriers to success, with 14% of strategies falling short as a result.
  • Reduce the load : The more you have on your plate, the more mental and physical stress it puts on you. Prioritization provides relief by delivering a clear plan and a reduced workload as you let go of projects and tasks that aren’t important. 
  • Build empathy : When you work together to understand each other's needs and challenges, you build stronger relationships, better communication, and empathy across your project team.
  • Stay focused : Having a written plan that can be shared and revisited makes it easier to maintain focus and keep on the right path.

How to prioritize projects effectively

As a project manager and leader, it’s your job to not only identify when prioritization is needed. You also have to know: 

  • Who should be invited to the process
  • How to set prioritization criteria
  • How to develop and run your team through a process
  • When to do it all over again

That might sound like a lot—and it is! However, a good prioritization process can help you feel less overwhelmed. Let’s walk through the basics of how it’s done.

1. Determine which stakeholders to include in prioritization

Not every project stakeholder needs to be part of the prioritization process. I usually consider a few factors:

  • Can they prioritize the overall goals of the process and think for the common good?
  • Do they have the authority to make final decisions?
  • Will they be greatly impacted by the choices?
  • Do they have unique thoughts to contribute that no one else can? 

Once you’ve identified which stakeholders you want to invite—and they’ve agreed to participate—you’ll need to create and share ground rules around how you’re going to interact as a group to accomplish your goals.

2. Create strategic alignment around the process

Before prioritization can begin, all your stakeholders need to align on the strategic direction of the process and/or project. Make sure everyone is clear about:

  • Why you’re setting priorities
  • What you need to accomplish
  • Any constraints you need to work within

3. Identify the scope of prioritization

Next, make a list of all the items you need to prioritize during this process. The scope might be limited to tasks of your own or within a single project—or it may include a broader list of projects to consider.

As the project manager, you can take the lead by creating a full list of needs in a document, pulling from sales documents, RFPs , conversations, and things you’ve observed. Then share it with your stakeholders, adding anything that’s missing before coming together to workshop priorities.

At this stage, your focus should be on making sure your list is clear and complete—not prioritizing or removing things from the list. It’s also a great time to get all your prioritization items into an online tool like TeamGantt so you can easily track, edit, organize, and assign them.

4. Determine your prioritization criteria

You’ll need to establish a clear set of criteria for prioritization and share it with stakeholders for feedback. Just be prepared: Not everyone will agree on which criteria to use. 

Ultimately, your team’s decision-maker should finalize the criteria before you jump into your prioritization session. That way, it doesn’t become a moving target.

Here are a few examples of criteria you might consider including:

  • Return on investment (ROI)
  • User satisfaction
  • Resource availability
  • Level of effort
  • Brand return

Criteria should align with both short- and long-term goals and be put in order of importance (just in case you need to break a tie). Make sure your prioritization criteria are specific enough to bring clarity to the process (e.g., your timeline is 4 months).

5. Choose a prioritization framework and ranking system

A prioritization framework gives structure to the conversation and provides a clear process for making decisions. This helps build team consensus and guide any future changes and discussions.

While all frameworks group and rank items, some go into more depth than others. Consider the goal of your prioritization process and whether a simple or complex framework will best support that goal.

For example, let’s say you’re thinking about using a framework based on a numerical scoring system (vs simple grouping). In that case, closely consider your stakeholder group. In my experience, numbering frameworks tend to work best with internal teams. With external clients, it’s enough to just process the scope and get on the same page.

6. Meet with your team and stakeholders to prioritize the work

Now it’s time to get to work! Schedule one or more meetings to prioritize your scope as a team. 

Start the workshop by clarifying any items that still don’t make sense. Ideally, most questions will be answered in the lead-up to the meeting since stakeholders will have time to review the scope beforehand. But there’s always something left to discuss.

Then, review the framework you’ll be using for prioritization, and give stakeholders time to process the list. Depending on the size of your scope, you might allow 10 minutes of quiet time to map priorities before working together to complete the framework. While everyone was supposed to look things over ahead of time, there’s always at least one in the bunch who didn’t.

7. Share and execute a plan

After the meeting(s), share the results with all project stakeholders (even those who weren’t part of prioritization meetings). This step is important because it:

  • Allows folks to digest the priorities and provide additional feedback
  • Creates transparency around how decisions were made
  • Builds understanding about what moving forward looks like

8. Revisit prioritizations on a regular basis

This is likely not a one-time event. After all, plans change, new projects come in, and prioritization criteria evolves. Be prepared to revisit this process—maybe even with a different framework—again. Prioritization might happen monthly, quarterly, or annually, depending on the scope you’re working with.

Easy drag and drop features with templates for faster scheduling. Plan a project in minutes, collaborate easily as a team, and switch to calendar and list views in a single click.

given the outline of a business plan which part ought to be given priority

When should you use a prioritization framework?

You might think your process is just fine or that your workload isn’t complicated enough to need a formal prioritization process. However, I’ve found the process—and the framework that guides it—always provides value, no matter the size or complexity of your scope. 

You might have already mastered this technique, and that’s great! If not, here are some signs a prioritization framework could come in handy:

  • You have a lot of “loud” stakeholders who want to drive the work based on their individual needs.
  • You feel like you’re putting out fires every day.
  • You struggle to say no.
  • You feel super-busy but aren’t able to make much progress or impact.
  • You tend to procrastinate on things that don’t have deadlines.
  • Your workload is task-heavy or complex, and you need help solving the puzzle.
  • You’re always one step behind and put must-do-now tasks first.
  • You’re unclear about your stakeholders' priorities and goals.
  • Your team has a lot of silos, and you need to focus on moving forward together and pushing for the same outcomes.
  • You don’t see the value in many of the tasks you’re working on.

Prioritization frameworks to guide your process

There are many different types of prioritization frameworks, but they all help you clarify, choose, and agree on priorities. No matter which one you choose, you'll make progress together.

You’ll likely gravitate to a process that aligns with the situations you deal with most, but some situations might call for a different approach. So let’s take a look at a few popular methods and break down how they work. We’ll focus on these 5 prioritization frameworks:

  • MoSCoW method

Eisenhower matrix

Value vs effort matrix, scoring model, the moscow method.

The MoSCoW method was created by software development expert Dai Clegg while working at Oracle. He created this framework to help his team prioritize their work during product releases.

MoSCoW is an acronym (with extra O's) that stands for:

  • Must have : These items are absolutely critical to project success. We often call them non-negotiables. If you omit them, the project will fail.
  • Should have : These items will provide a better outcome for the project, but it can still succeed if they’re missing. They’re key, but not critical.
  • Could have : These are nice-to-have items that aren’t essential to overall project success. Think of this category as your bonus list.
  • Won’t have : These items provide little to no value to the project and, in some cases, could even hurt it. Go ahead and put any items you decide to exclude in this bucket.

Here’s an example of the MoSCoW method, with each category broken into its own column. You could adapt this format to a Kanban board in TeamGantt so it’s easy to workshop priorities as a team and move right into a plan.

Example of the MoSCoW method for project prioritization

This framework is great for quickly gathering requirements from stakeholders—even those who don’t have a technical background. Just be sure you have a clear way to map your prioritization criteria to these categories, and include feedback and needs from your customers.

The MoSCoW matrix is great for:

  • Identifying a minimal viable product
  • Creating a super-clear distinction between task values

Watch out for:

  • It can be tempting to put too many items on the must-have list.
  • The method doesn’t have a way to clearly prioritize within each category.
  • While user feedback should be incorporated, this simple process can easily allow you to work without it.

The Eisenhower matrix—also known as the urgent-important matrix—is a simple decision-making framework that helps you separate projects or tasks based on their level of importance and urgency. 

The name of this framework was inspired by a speech by President Dwight Eisenhower at Northwestern University in which he quoted a former college president:

“I have two kinds of problems: the urgent and the important. The urgent are not important, and the important are never urgent. ”

Before you get started, it’s important for everyone to clearly understand the difference between urgent and important tasks. So let’s take a moment to define each term.

Now, you’re ready to create an Eisenhower matrix for your tasks or projects. In this framework, you’ll categorize items into 4 quadrants.

Example of the Eisenhower matrix for project prioritization

  • Urgent and important > Do now : These tasks or projects will have a big impact on goals and outcomes once done and also need immediate attention. They should be prioritized first and completed.
  • Important but not urgent > Schedule : These tasks don’t have pressing deadlines, but they will impact your goals and outcomes. They can be taken care of later but not ignored, so schedule them soon. Otherwise, they’ll eventually become urgent. This is the sweet spot on the matrix where you’ve identified what’s important and can be proactive in handling that work. 
  • Urgent but not important > Delegate : These tasks—which may or may not need to be completed from your perspective—are often distractions from what you’re trying to accomplish. They might help others with their goals or be perceived as needed. Delegate this work to others to complete.   
  • Not important or urgent > Delete : Tasks that are both not urgent and do not help you reach your goals are simply making extra noise and should be eliminated. 

To make sure your criteria is part of this process, prioritize the items under each category and then sub-prioritize hierarchically or with scoring.

The Eisenhower matrix is great for:

  • Separating out urgent, but not important, tasks and reevaluating if you ever need to address them
  • Dealing with stakeholders who push for their own agendas
  • People tend to confuse urgent with important.

The value vs effort matrix is another simple framework for prioritizing work. In this model, you use value and effort scores to quantify your scope of features and goals.

The matrix also has a classic view of 4 squares. Each quadrant weighs the value and effort needed to complete the tasks, as shown in the example below:

Example of the value vs effort prioritization matrix

  • Quick wins : These tasks provide lots of value with little effort. We often refer to them them as low-hanging fruit.
  • Big projects : These are high-value items that take a lot of effort. Because of that, it can be more risky but with good payoff.
  • Fill-ins : You can usually take or leave these items. While fill-ins provide some value, they might not quite fit your goals. Only add them to your schedule if time allows since they’re easy to knock out.
  • Time sinks : These tasks require a lot of time and deliver low returns. Only touch these if they move up in value.

Value should align with the criteria you’ve already established for prioritization. Effort, however, will need clarification as part of this process. Defining what effort means for your team will help you down the road as the project scope changes and grows. 

Work with stakeholders to estimate value and effort for each scope item and complete the matrix. Your goal here is to quickly organize and plan—not produce final estimates. You can go back and make more concrete estimates later. 

The scoring system is really up to you, but I often work with numerical scales. For example, I tend to stick with a range of 1 to 5 for smaller projects. For larger scopes, I like to extend the scale from 1 to 20 so we don’t end up with too many 5s.

The value vs effort matrix is great for:

  • Prioritizing products, maintenance backlogs, and company to-dos
  • Quickly assessing what’s feasible within key criteria, such as budget, timeline, or resources
  • The need for stakeholders to define their own meanings for value and effort
  • Wanting to translate effort scores into real estimates. They are two very different things. 

The Kano model

The Kano model forces you to look outside for direction, bringing customer opinions to the forefront of your discussions. Japanese researcher Dr. Noriaki Kano created this technique in 1984 to assess user satisfaction alongside a product’s functionality.

This technique requires you to conduct user research before prioritizing work. You might use tools like focus groups, individual stakeholder interviews , or surveys to collect user feedback. Just make sure your sample size is large enough to see clear trends.

Once you have the data, weigh and map it against your prioritization criteria. Then place requirements into one of 5 categories:

Example of the Kano model for prioritization

  • Must-be features : Features users expect to be automatically included
  • One-dimensional features : Optional features that boost customer satisfaction and influence purchasing decisions
  • Attractive features : Nice-to-have features that surprise or delight the user
  • Indifferent features : Features that don’t impact user satisfaction, whether they’re included in your product or not 
  • Reverse features : Features that negatively affect user experience and cause customer dissatisfaction

The Kano model is great for:

  • Focusing on end-user needs as you work to create your minimal viable product (MVP)
  • The need to allot more time to this method
  • The possibility a customer's needs won’t align with your internal criteria (e.g., budget, time, resources)
  • Difficulty outlining clear next steps when trying to reconcile your needs with those of your users

The scoring method makes it easier to see how projects you need to prioritize stack up against each other. It tends to take more time, but if you have it, you can work through value and order as a team and come to strong agreements.

Here’s a basic rundown of how this framework works:

  • Determine your scoring range for your criteria. A range of either 0-5 or 0-10 is best for this model.
  • Work through your list of projects and give each criterion a numerical score.
  • Calculate the value of each project by adding up the scores in a scorecard.

If you have the time—and the right group—I recommend using a weighted scoring model, which assigns a weight to each criterion. This will provide more accurate scoring and ensure the most important criteria influence prioritization. If you do this, determine it at the beginning so you aren’t influenced by the total scores.

Here’s an example of a weighted scoring model:

Example of a weighted scorecard for prioritizing projects

If you just need a quick and direct method for prioritization, this model works just fine without weighting. You’ll still get a lot out of the process and conversations (and frankly won’t argue about the weight of each criterion).

The scoring model is great for:

  • Internal prioritization of projects or tasks since it relies on stakeholder—and not customer—opinions
  • The need to include weighted criteria to break ties

A practical example of project prioritization

Let’s look at an example of how you might apply the scoring model framework to a project so you have a clear understanding of how it works in the real world.

First, I want to set the scene. Let’s say you work for an agency that has a larger university system as a client. This university has many projects—including college websites and pet projects—as well as tasks they’d like to complete on specific web entities. They have a nice size budget but lack internal resources to do all the work. So they’ve turned to your agency to complete it. 

Unfortunately, their backlog has been growing for quite some time, and the various stakeholders are getting restless. While your team would love to take on all this work, you can’t do it immediately. You decide to work with the key decision-makers to set priorities.

You start by creating alignment around strategic organizational goals, your process goals, and the criteria you plan to use for prioritization. It might look something like this:

With this criteria and your full scope list in hand, it’s time to prioritize!

In this example, the university already weeded out items that don’t need to be done at all in the foreseeable future, so we’ll use the scoring model as our framework for prioritization. Since both big projects and smaller tasks needed prioritization, we set a wide range for scoring using a 0-10 scale. 

After a couple of prioritization workshops with key stakeholders, we ended up with the following scorecard:

Practical example of a project prioritization scorecard for a university

Now your team can use this scorecard to determine the order of projects. Working from highest to lowest total score, you’d start by making the Campus Visit Interface project your top priority. 

Of course, you might decide the criteria you use in the process aren’t all equal and adjust your list by weighting items on the scorecard. For example, maybe your Resources criterion has a higher scoring range than Business Value since the volume of work completed is more important in this situation. This weighted scale ideally would have been set at the start, though.

Common prioritization pitfalls to avoid

Frameworks provide a great structure for prioritization. But we all know it can be challenging to execute any process once you bring people into the mix.

That’s why it’s important to watch out for the pitfalls. Here are a few that can knock your prioritization efforts off course.

Loud voices

Loud voices in the room often intimate others and take over the time. They prioritize their needs and lack empathy for the common good. Have a process that lifts all voices and gives equal(ish) time and support to everyone involved. Also, make sure everyone understands this process is about achieving global goals together.

Straying off the path

As time passes, more tasks pop up, and you drift away from the plan. Revisit the priorities each week to stay on top of your to-dos, as well as the plan the team outlined. This is especially critical when your boss (or your client’s boss) throws their pet projects into the mix.

New work pushes out old work

New tasks and projects will arise over time, but don’t push them to the front of the line. Instead, determine how they fit into your current plan using the same criteria as your guide. If that doesn’t work, bring the stakeholders back together to reprioritize.

Unengaged stakeholders

You may have team members who think they don’t have time—or a say—in prioritization. If there’s even one reason why you think they should be included, help them understand why they’re important and get them engaged in the process.

No final decision-maker

Not all projects can take the #1 spot on the priority list. Negotiation and compromise come with the process, so it’s important to designate a final decision-maker everyone will concede to when you come to an impasse.

Completed in isolation

As project managers, we often feel like we can do this on our own or believe there isn’t time in the budget to workshop priorities. I get it. And, yep, I’m completely guilty of it. There’s just so much gained, though, by bringing others into the process—whether it’s better collaboration, new scope, or all-around buy-in.

Lack of resources

At the end of the day, there are only so many humans and funds to complete the work. You have to be realistic about this and not just assume people can max their time and eventually get things in. Make sure constraints are visible and accounted for at every stage of the prioritization process so you can set reasonable expectations.

Tools for managing priorities in TeamGantt

You’ve probably noticed these frameworks are visual, and that’s critical for engaging visual learners. It also helps everyone at the table connect the dots and understand the big picture better. 

That’s why it’s important to find a tool for capturing and managing project priorities in a visual way. You might use a digital whiteboard tool for the workshops or jump right into a project planning platform (since you’ll eventually need to schedule, assign, and track tasks and resources). 

TeamGantt is a great option to do this. Here are just a few features that make it a good fit for prioritization:

Kanban board view

While there’s a warm place in my heart for a good 2x2 matrix, I also feel that way about Kanban boards. TeamGantt offers this view, and I like to add a column for each quadrant in the grid. This makes it easy to sub-prioritize items within each category too.

Here’s an example of what it would look like if you set your TeamGantt board up using the MoSCoW matrix as your framework. In this setup, we used the Points field to indicate priority rank and task labels for prioritization criteria.

Example of how to use a Kanban board in TeamGantt to prioritize projects using the MoSCoW method

And here’s how you might use a board to prioritize features with the Kano model. In this example, we used the Campus Visit Interface overhaul as our project.

Example of a TeamGantt Kanban board with columns for the Kano model of feature prioritization

You can pull cards from multiple projects into a custom board for prioritization across teams or initiatives—or prioritize tasks from a single project with a project board. Either way, every card on your board ties directly back to a task in your gantt chart, so it’s easy to schedule, assign, and track work.

Task labels

TeamGantt lets you create custom, color-coded labels and assign them to the items you’ll be prioritizing. For example, you might set up labels for your prioritization criteria so you can quickly scan your list to see which scope items fit what criteria and if any meet multiple criteria. It also makes moving items from one category super-fast as your group re-evaluates where things belong. 

Video: Using Labels to Tag & Categorize Tasks

Portfolio view

Set up priority folders for better visibility in Portfolio view . This makes it a lot easier to keep track of all your projects in a centralized hub, which is great if you’re prioritizing at the project vs task level. You can organize projects by team, department, client, project owner, quarter, and more.

Example of Priority folders in TeamGantt's Portfolio view

Star favorites

Want to keep extra tabs on your top projects or tasks? Click the star to favorite an item , and bring it to the top of your list for ultimate visibility.

Screenshot of how to star favorite projects in TeamGantt

Prioritize work quickly and easily with TeamGantt

The hardest part of the prioritization process is figuring out what’s worth your team’s time and committing to only the most valuable, urgent, and important projects. Once you’ve decided where to focus your energy, you’re ready to put together a plan and start knocking out work.

And that’s where TeamGantt can help lighten your load. With TeamGantt, you can stay nimble as priorities shift—and keep your team and stakeholders informed—so nothing falls through the cracks and everyone’s happy with the outcome.

Want to take TeamGantt for a spin? Sign up today, and try your first project free!

given the outline of a business plan which part ought to be given priority

Parts of Business Plan and Definition

The parts of business plan and definition refer to the governing document of your company and the elements it should include. 3 min read updated on February 01, 2023

The parts of business plan and definition refer to the governing document of your company and the elements it should include. The business plan thoroughly describes your company's purpose, structure, and goals for potential partners, stakeholders, and investors.

Purpose of a Business Plan

Your business plan will be informed by the specific goals for your business. The more complex your product or service, the more complex and detailed your business plan must be. If you are using the business plan to seek investors, you'll need to provide a thorough explanation of your concept and how it fits into your industry.

Once you've drafted a plan, show it to colleagues, partners, and mentors you trust. They can provide an objective view of the business plan and indicate areas where you may need to provide more thorough information.

Executive Summary

This is the first section of your business plan and provides a quick overview of what you want to accomplish with your company. This should comprise the mission statement followed by a description of the services and/or products you provide. Use this basic outline:

  • Description of the business
  • Products/services
  • Market/competition
  • Goals and objectives
  • Owner and executive qualifications
  • Funding information
  • Cash and earnings projections

Company Description

A more involved company description should follow the executive summary. This section details the business's key information and examines the market segment you want to capture. The company description is the "meat" of your business plan and should include information about:

  • The name of your business
  • The business location
  • The type of business entity (proprietorship, corporation, or limited liability company (LLC))
  • How your company is different from its competition
  • Growth and success factors
  • How the products and services you offer will solve a problem or fill a need for your desired audience

This is also where you should include operational details such as your hiring plan for the first year or two in business with job classifications and duties. You should also indicate the type of facility you will need for operations and where it will be located.

Market Analysis

This section will demonstrate your understanding of your specific market as well as your industry as a whole. Include the following information:

  • Description of your target market
  • Overview of industry projection
  • List of all competitors with business analysis of each

Product and Service Information

Describe the products and services your business will offer, providing enough detail for those who may be unfamiliar with your industry. Indicate whether you will need to patent your product idea and/or whether a patent application is pending. You should also indicate other steps you've taken to protect intellectual property such as your business name, product names, logo, and branding identity.

If you are manufacturing a product, include information about the materials you'll need and your suppliers for those materials as well as the production process.

Financial Projections

This section demonstrates your plan to make a profit using realistic numbers with a basis in research. Although your ideas are important, you'll also need to show that you will generate enough cash flow to capture a significant market share. Elements this section of your business plan should address include:

  • Initial operating costs
  • First-year cash flow and sales projects
  • Personal expenses
  • Start-up and growth financing
  • Business bank accounts and/or credit lines
  • Projected timeline to a positive cash flow

Management Information

A strong management team will inspire confidence in potential lenders, investors, and partners. The purpose of this section is to make your people shine by highlighting their unique strengths. This part of your business plan should include answers to these questions:

  • Who are your company-level and department-level managers?
  • What are their qualifications?
  • How many full-time and part-time managers do you need?
  • How many employees will each manage and what are their responsibilities?
  • How will you fund wages and benefits?
  • What are your plans for employee training and mentorship?

Additional Information

Complete your business plan with supplemental information that will strengthen your case. Finish with a summary that restates the highlights of your plan and indicates your determination to succeed as a business owner. Attach supporting documents such as licenses, permits, patents, product diagrams, building blueprints, and letters of support from consultants and/or your accountant and attorney.

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The following is a general outline of the Order that should be followed in constructing your business plan. With the exception of the Executive Summary and the Marketing Summary, all other summaries should be no more than one [1] paragraph in length.

The purpose of each summary is to give the reader an overview of the upcoming segments. This is helpful to your reader when reviewing your business plan since almost all readers of your business plan will be looking to read specific details and will use only those segments of interest to them. Any time you help the reader find what they are looking for, then you increase your favor with that person and increase your opportunities for funding or for a successful business presentation.

  • EXECUTIVE SUMMARY
  • Company Profile
  • PRODUCTS and SERVICES SUMMARY
  • Products and Services Description Details
  • MARKETING SUMMARY
  • Marketing Plan and Marketing Strategy
  • Target Market or Customers
  • Competition
  • Advertising and Promotions
  • Sales and Distribution
  • OPERATIONS SUMMARY
  • Operations & Operational Plan
  • Client Account Management and Credit and Policies
  • FINANCIAL SUMMARY
  • Accounting and Management - Cash Flow Statements and Management Structure
  • Financial Planning and Projected Balance Sheet
  • SUPPORT SUMMARY

Details, interesting details , and keep it interesting!

Think of what you would tell a potential client in each of the above sections if you were working to persuade them to complete a deal with you that was worth several thousand or hundreds of thousands of dollars. This is the primary way to approach this part of writing your business plan.

Yes, it's true: some of these segments would not be the business of your average client. But stretch your thinking here just a bit, and consider what you would say if the person listening to you were a close friend or confidant and you were trying to persuade them that your business was strong, profitable, and worth taking a look at for financial support. This thought process will reveal to you what to put in and how to approach it.

WHAT TO LEAVE OUT

You will want to leave out everything personal. If it is your personal career change [unless that career change brought you to the creation of your company], leave it out. If your family suffered serious and long term setbacks, leave it out. If you filed a personal bankruptcy, definitely leave that information out of your business plan. If you are desperate for funding to help your ailing and aging mother, leave it out.

Remember the more desperate things in life that sometimes propel us to certain individuals or companies are not usually the more attractive details of our business decisions. People who read your business plan should be reading the most attractive summary of you and your business available anywhere. If you feel it is necessary to discuss any of these personal items with your reader, then wait until they ask you a specific question. Some things should remain personal unless you are asked specifically about them.

SEGMENT BY SEGMENT DETAILS

If you cover each of these details in each of the business plan's segments, then your final plan will be comprehensive and answer any banker's or investor's questions. Ultimately, this should be one of the goals of your business plan since every banker or investor will ask to see your business plan so they can judge your plans, decision making process, strategies, and the bottom line.

  • For a more in depth coverage of the details of this portion of your business plan
  • You will write this section LAST and place it in front of the entire business plan for a quick review and overview of the entire document. Two to three pages is the maximum for the Executive Summary.
  • Mission and Vision statements.
  • Product or services marketed [this is a one-liner].
  • Target market [again, a one-liner].
  • Business form [sole prop, LLC, LLP, LP, corporation, or partnership].
  • Company history [what sparked it, recent struggles, and successes, use only one paragraph].
  • Company strengths [one paragraph],
  • Long term goals [one paragraph, no more].

1. Each Summary should include the high points of the detailed section beneath it. You may want to limit it to a certain number of points in each summary, or you may choose to simply write one or two paragraphs in a summation style to accomplish this goal. Either way, most Summary sections should be less than one page unless otherwise noted.

2. Do not add anything into the Summary that does not exist in the detailed section. Do not bore your reader with the same language as your detailed section or a "copy and paste" of certain sentences, but be sure to keep the essence of the details congruent between the Summary and the detailed sections.

1. Describe your Products or Services in detail in this section. Use common sense here; if you have 300 products, you do not want to list each of them separately. But you may want to group them according to category and explain why this group of products is so important to your target market and to your business.

2. Your description details should include the range of quality (qualities) in the different products or services that your company offers. In this description is the range of pricing as well, along with which segment of the market that product or service is designed to capture.

3. Descriptions should be worded in such a way as to emphasize what it is about your product or service that sets your company apart from its competitors in the market place. Why do your clients want YOUR product or service over the apparently same product or service offered by another company?

4. The Products and Services description details should be limited to no more than one five sentence paragraph per product category for a total of no more than two pages of product descriptions.

  • Everything mentioned in the Products and Services Summary section above applies here as well.
  • Aside from the Executive Summary this is the largest Summary as it includes information from 5 detailed subsections. Allow yourself up to two (2) full pages for this Summary. Although that is the same layout size as the Executive Summary, bankers and investors will not object to a fat Summary in the section that tells them the most about profitability other than the Financial Summary.
  • Bankers and investors want to know exactly what your plan is for marketing your products or services.
  • This is a section for specifics. How are you going to reach your market? Advertising? Door to door sales? Retail sales? Direct marketing?
  • How many people do you have helping you? How are you compensating them? Is their compensation plan one that will keep them on board or create a revolving door? What do you have in their plan that sows seeds of salesman loyalty to your company?
  • What will your company do if your Marketing Plan is thwarted by competition or other circumstances? What is your secondary plan of action with regards to marketing your product or services?
  • Marketing Strategy is equally important here. Your Marketing Strategy should be detailed, lengthy, and clearly laid out. Allow up to 1 ½ pages just for this subsection.
  • Description of your target market or your clients.
  • How will you distribute your product?
  • Explain how your company is unique in what it offers. What is it that your company gives the marketplace that the marketplace is starving for, but is otherwise unavailable?
  • Will you compete in the market place by means of your pricing or your product's quality? How will you capture your market share? What will cause your clients to remain loyal to your company?
  • How will you spend advertising and marketing budgets? Will you purchase television or radio spots? Will you target a niche portion of the market?
  • A definition of the company and its market place position. Paint the company's "personality" for the reader so that they have a clear image of the company's place and image in the market.
  • Target Market and Customers

1. Demographics [gender, race, income, and education level of potential clients].

1. Name names and list web addresses.

2. Statistics about your competition.

3. Insider's reports about client relations.

4. Are they located near your business? Are they local, regional, or national? How does that directly affect your company?

5. Are they strong in advertising and promotions? Are they stable and reliable in the eyes of the customer?

6. Do they provide variety in their product availability? How is their product quality?

7. What are their sales methods and credit policies?

8. Is their pricing competitive? Or do they price because of a standard of high quality in their product?

  • What are your company's strategies for Advertising and Promotions?
  • Do you have a regular budget established for promoting your company's products or services? If so, how much?
  • Are you frugal in your approach in using staff members or do you have a larger budget for professional promotions using people to give your company a polished public image?
  • Do you have planned events strategically executed monthly or quarterly that are designed to continually keep your company and its products or services forever in the front of the minds of your target market? If so, what are those events and how do they work? What are the tangible results that your company regularly realizes from them? Do you envision any changes or needs in your Advertising and Promotions strategy?

1. What size and type of sales staff do you have promoting your company's products?

2. By what percentage has your sales staff outperformed itself over last year or over last month?

3. Are the salesmen directly involved in the distribution of the product or is the distribution handled by a separate handler or department?

4. What is the chain of distribution for your company? Once the order is placed, what route does the product or service take to get to the customer?

  • This Summary should cover the details of your day-to-day operations.
  • How does your business operate on a day-to-day basis?
  • Do you operate from an office, a retail location, a home office, a virtual office, or some other facility? Does your location meet building codes for your area?
  • Do you have staff and employees? What is the pecking order in your office? Which employees or staff answers to whom?
  • Explain your pay structures, training, and hiring policies. Do you contract or subcontract any of your help?
  • What is the management accountability in the company?
  • How are you structured legally? Do you have special permits needed to operate without regulatory violations?
  • How do you handle quality control issues and customer service?
  • What is your method for product development and cost control?
  • What are your supplier policies and your credit policies? How do you determine whether to extend credit to a client?
  • How do you manage your accounts receivables? Are they tracked internally by an accounting department or some other way?
  • Are your company's payables managed within the accounting department of your company or is that payment process outsourced?
  • Have you offset your credit risk in the structure of your product pricing? In other words, do you manage your risk or is it pure risk?
  • What are your terms for credit accounts? When is payment due? When do you send the client into collection? How do you handle collections?
  • Your company's most current annual P&L statement belongs on the Financial Summary page. If you are an upstart and do not have an annual P&L, then have your CPA or accountant prepare a monthly or quarterly version of the P&L. The presence of your P&L in the Financial Summary signals to bankers and investors that you understand what it is, what it entails, and its importance in their decision making process. If it is skeletal because you are a new upstart, do not be concerned about how that will make you look to them. It will only make you look like an upstart. If you don't include it [empty or full], then you are more likely to appear as a clueless upstart owner.
  • Are your Cash Flow statements produced monthly or quarterly?
  • Does your entire top level management review Cash Flow statements and regular P&L statements? What things do you determine from these reports and how does it affect your management? Do you hold company financial review sessions with your management team?
  • How is your management team structured?
  • What type of advisory boards or private consultants do you use for your professional advice? Do you have a board of directors, a business consultant, a mentor, or an advisor?
  • Have you prepared a personal financial statement in the event a banker or investor requests it for loan guarantee information? [Suggestion: Prepare this statement, but keep it separate and out of the business plan. Bring it out if asked for it, but do not wait until you are asked for it, to prepare it.] This belongs in your collection of Appendices and preferably not listed on anything at the end of the business plan.
  • A professionally prepared financial plan for your business [no more than 3 pages].
  • Supporting spreadsheets, at least one quarter's worth. If you can provide them, then provide up to one years' worth of balance sheets or three years if they are annual balance sheets.
  • Projected balance sheets, a two to four year set of projection balance sheets is fairly normal for financial projections. Do not do less than two year's worth of projections; it makes you look either ignorant or lazy.
  • In your financial projections, be sure to include a breakeven analysis whenever possible. The breakeven figure is the number of sales your company will have to make to break even on the expense side. In other words, breakeven is the zero point in a deal where you then sit ready to make a profit. This is vital information to investors and bankers alike since it helps them to gauge the risk of their investment with you. You can calculate your breakeven point from this equation:

1. Appendices are generally speaking documents referred to in the content of your business plan that exist outside of the business plan.

2. When you refer to any of the Appendices in the context of the business plan, you will footnote it with a sequential number. You will then number the Appendix accordingly in the context of your listing at the end of the business plan. For example : If you had 3 Appendices, you would foot note them in the appropriate context of the business plan and on the coordinating page, then number them as 1, 2, and 3. Then, at the end of the business plan, where you list these documents under the subheading "Appendices," you would assign the corresponding document the number which applied to it per the context of the business plan.

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Home Blog Business Plan Important Parts of a Business Plan Outline

Important Parts of a Business Plan Outline

Ishan Jetley

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All company plans have a tendency to follow a standard structure. This helps investors in assessing a business strategy’s quality and logic rather without having to worry about the plan’s overall construction. The next key sections ought to be addressed in each business plan:

Executive Summary : This section summarizes the entire plan and emphasizes the key points within 2 pages.

Company Analysis : This section contains the background of the business, its present status, along with the goods or services that the company will provide.

Industry Analysis : The industry analysis contains market figures and trends that can affect a company’s success, such as a summary of the industries and segments that a business will compete within.

Customer Evaluation: The customer or market evaluation should have a clear description of the consumer segments that will be targeted by a business. Different consumers have distinct needs from others. They also have varying budgets and can be reached through different forms of marketing strategies. These details about customers need to be included in the business plan.

Competitive Evaluation : This section describes the overall competitive landscape that the business will be playing in. It also contains a list of the best competitors along with their strengths and weaknesses. Further, the analysis of competition should include a company’s competitive edge over its competitors.

Marketing Plan : The marketing plan describes the branding, promotions and pricing strategies of the business. It also provides detail on the company’s marketing approaches, which clearly links to the previous customer and competitive evaluations.

Operations Plan : This section provides details regarding the internal operations of the business. It should provide details regarding the various components and functions of a business. The operations plan should also contain a company’s key milestones as well as its methods of assuring the quality of its products and services.

Management Team : The management team section contains brief biographies for a company’s management staff members, along with their key roles within the organization. This section also provides detail regarding the company’s hiring strategy as it progresses.

Financial Plan : The financial plan contains a company’s revenue and profitability model. It highlights the company’s pro forma financial statements, focusing on key sections which may be of strong value for investors. These include startup expenses, time to break-even, crucial assumptions behind earnings projections, as well as the increase in earnings and net gain.

Appendices : Appendices include the comprehensive pro forma financial statements, as well as other documents referred to in the previous sections of the business plan. These include management resumes, signed patent or trademark documents, technical drawings, client letter-of-intent, and contracts with suppliers and partners.

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11.4 The Business Plan

Learning objectives.

By the end of this section, you will be able to:

  • Describe the different purposes of a business plan
  • Describe and develop the components of a brief business plan
  • Describe and develop the components of a full business plan

Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas , which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.

Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup . 48 His version is basically an extension of a napkin sketch without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.

As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.

Business Plan Overview

Most business plans have several distinct sections ( Figure 11.16 ). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.

Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.

The full business plan is aimed at executing the vision concept, dealing with the proverbial devil in the details. Developing a full business plan will assist those of you who need a more detailed and structured roadmap, or those of you with little to no background in business. The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs.

Purposes of a Business Plan

A business plan can serve many different purposes—some internal, others external. As we discussed previously, you can use a business plan as an internal early planning device, an extension of a napkin sketch, and as a follow-up to one of the canvas tools. A business plan can be an organizational roadmap , that is, an internal planning tool and working plan that you can apply to your business in order to reach your desired goals over the course of several years. The business plan should be written by the owners of the venture, since it forces a firsthand examination of the business operations and allows them to focus on areas that need improvement.

Refer to the business venture throughout the document. Generally speaking, a business plan should not be written in the first person.

A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.

You can also use your business plan as a contingency plan by outlining some “what-if” scenarios and exploring how you might respond if these scenarios unfold. Pretty Young Professional launched in November 2010 as an online resource to guide an emerging generation of female leaders. The site focused on recent female college graduates and current students searching for professional roles and those in their first professional roles. It was founded by four friends who were coworkers at the global consultancy firm McKinsey. But after positions and equity were decided among them, fundamental differences of opinion about the direction of the business emerged between two factions, according to the cofounder and former CEO Kathryn Minshew . “I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out,” Minshew said. Minshew went on to found a different professional site, The Muse , and took much of the editorial team of Pretty Young Professional with her. 49 Whereas greater planning potentially could have prevented the early demise of Pretty Young Professional, a change in planning led to overnight success for Joshua Esnard and The Cut Buddy team. Esnard invented and patented the plastic hair template that he was selling online out of his Fort Lauderdale garage while working a full-time job at Broward College and running a side business. Esnard had hundreds of boxes of Cut Buddies sitting in his home when he changed his marketing plan to enlist companies specializing in making videos go viral. It worked so well that a promotional video for the product garnered 8 million views in hours. The Cut Buddy sold over 4,000 products in a few hours when Esnard only had hundreds remaining. Demand greatly exceeded his supply, so Esnard had to scramble to increase manufacturing and offered customers two-for-one deals to make up for delays. This led to selling 55,000 units, generating $700,000 in sales in 2017. 50 After appearing on Shark Tank and landing a deal with Daymond John that gave the “shark” a 20-percent equity stake in return for $300,000, The Cut Buddy has added new distribution channels to include retail sales along with online commerce. Changing one aspect of a business plan—the marketing plan—yielded success for The Cut Buddy.

Link to Learning

Watch this video of Cut Buddy’s founder, Joshua Esnard, telling his company’s story to learn more.

If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary “box,” but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure agreement (NDA) . The full business plan is aimed at executing the vision concept, providing supporting details, and would be required by financial institutions and others as they formally become stakeholders in the venture. Both are aimed at providing a picture and roadmap to go from conception to creation.

Types of Business Plans

The brief business plan is similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so. You can think of a brief business plan as a scene setter or—since we began this chapter with a film reference—as a trailer to the full movie. The brief business plan is the commercial equivalent to a trailer for Field of Dreams , whereas the full plan is the full-length movie equivalent.

Brief Business Plan or Executive Summary

As the name implies, the brief business plan or executive summary summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. The executive summary version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.

A typical executive summary is generally no longer than a page, but because the brief business plan is essentially an extended executive summary, the executive summary section is vital. This is the “ask” to an investor. You should begin by clearly stating what you are asking for in the summary.

In the business concept phase, you’ll describe the business, its product, and its markets. Describe the customer segment it serves and why your company will hold a competitive advantage. This section may align roughly with the customer segments and value-proposition segments of a canvas.

Next, highlight the important financial features, including sales, profits, cash flows, and return on investment. Like the financial portion of a feasibility analysis, the financial analysis component of a business plan may typically include items like a twelve-month profit and loss projection, a three- or four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a breakeven calculation. You can explore a feasibility study and financial projections in more depth in the formal business plan. Here, you want to focus on the big picture of your numbers and what they mean.

The current business position section can furnish relevant information about you and your team members and the company at large. This is your opportunity to tell the story of how you formed the company, to describe its legal status (form of operation), and to list the principal players. In one part of the extended executive summary, you can cover your reasons for starting the business: Here is an opportunity to clearly define the needs you think you can meet and perhaps get into the pains and gains of customers. You also can provide a summary of the overall strategic direction in which you intend to take the company. Describe the company’s mission, vision, goals and objectives, overall business model, and value proposition.

Rice University’s Student Business Plan Competition, one of the largest and overall best-regarded graduate school business-plan competitions (see Telling Your Entrepreneurial Story and Pitching the Idea ), requires an executive summary of up to five pages to apply. 51 , 52 Its suggested sections are shown in Table 11.2 .

Are You Ready?

Create a brief business plan.

Fill out a canvas of your choosing for a well-known startup: Uber, Netflix, Dropbox, Etsy, Airbnb, Bird/Lime, Warby Parker, or any of the companies featured throughout this chapter or one of your choice. Then create a brief business plan for that business. See if you can find a version of the company’s actual executive summary, business plan, or canvas. Compare and contrast your vision with what the company has articulated.

  • These companies are well established but is there a component of what you charted that you would advise the company to change to ensure future viability?
  • Map out a contingency plan for a “what-if” scenario if one key aspect of the company or the environment it operates in were drastically is altered?

Full Business Plan

Even full business plans can vary in length, scale, and scope. Rice University sets a ten-page cap on business plans submitted for the full competition. The IndUS Entrepreneurs , one of the largest global networks of entrepreneurs, also holds business plan competitions for students through its Tie Young Entrepreneurs program. In contrast, business plans submitted for that competition can usually be up to twenty-five pages. These are just two examples. Some components may differ slightly; common elements are typically found in a formal business plan outline. The next section will provide sample components of a full business plan for a fictional business.

Executive Summary

The executive summary should provide an overview of your business with key points and issues. Because the summary is intended to summarize the entire document, it is most helpful to write this section last, even though it comes first in sequence. The writing in this section should be especially concise. Readers should be able to understand your needs and capabilities at first glance. The section should tell the reader what you want and your “ask” should be explicitly stated in the summary.

Describe your business, its product or service, and the intended customers. Explain what will be sold, who it will be sold to, and what competitive advantages the business has. Table 11.3 shows a sample executive summary for the fictional company La Vida Lola.

Business Description

This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition. Consider including the Standard Industrial Classification/North American Industry Classification System (SIC/NAICS) code to specify the industry and insure correct identification. The industry extends beyond where the business is located and operates, and should include national and global dynamics. Table 11.4 shows a sample business description for La Vida Lola.

Industry Analysis and Market Strategies

Here you should define your market in terms of size, structure, growth prospects, trends, and sales potential. You’ll want to include your TAM and forecast the SAM . (Both these terms are discussed in Conducting a Feasibility Analysis .) This is a place to address market segmentation strategies by geography, customer attributes, or product orientation. Describe your positioning relative to your competitors’ in terms of pricing, distribution, promotion plan, and sales potential. Table 11.5 shows an example industry analysis and market strategy for La Vida Lola.

Competitive Analysis

The competitive analysis is a statement of the business strategy as it relates to the competition. You want to be able to identify who are your major competitors and assess what are their market shares, markets served, strategies employed, and expected response to entry? You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities Threats) and complete a competitive-strength grid or competitive matrix. Outline your company’s competitive strengths relative to those of the competition in regard to product, distribution, pricing, promotion, and advertising. What are your company’s competitive advantages and their likely impacts on its success? The key is to construct it properly for the relevant features/benefits (by weight, according to customers) and how the startup compares to incumbents. The competitive matrix should show clearly how and why the startup has a clear (if not currently measurable) competitive advantage. Some common features in the example include price, benefits, quality, type of features, locations, and distribution/sales. Sample templates are shown in Figure 11.17 and Figure 11.18 . A competitive analysis helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage. When creating a competitor analysis, it is important to focus on the key features and elements that matter to customers, rather than focusing too heavily on the entrepreneur’s idea and desires.

Operations and Management Plan

In this section, outline how you will manage your company. Describe its organizational structure. Here you can address the form of ownership and, if warranted, include an organizational chart/structure. Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of members of the management team. This is also the place to mention any other stakeholders, such as a board of directors or advisory board(s), and their relevant relationship to the founder, experience and value to help make the venture successful, and professional service firms providing management support, such as accounting services and legal counsel.

Table 11.6 shows a sample operations and management plan for La Vida Lola.

Marketing Plan

Here you should outline and describe an effective overall marketing strategy for your venture, providing details regarding pricing, promotion, advertising, distribution, media usage, public relations, and a digital presence. Fully describe your sales management plan and the composition of your sales force, along with a comprehensive and detailed budget for the marketing plan. Table 11.7 shows a sample marketing plan for La Vida Lola.

Financial Plan

A financial plan seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections. This section should present an accurate, realistic, and achievable financial plan for your venture (see Entrepreneurial Finance and Accounting for detailed discussions about conducting these projections). Include sales forecasts and income projections, pro forma financial statements ( Building the Entrepreneurial Dream Team , a breakeven analysis, and a capital budget. Identify your possible sources of financing (discussed in Conducting a Feasibility Analysis ). Figure 11.19 shows a template of cash-flow needs for La Vida Lola.

Entrepreneur In Action

Laughing man coffee.

Hugh Jackman ( Figure 11.20 ) may best be known for portraying a comic-book superhero who used his mutant abilities to protect the world from villains. But the Wolverine actor is also working to make the planet a better place for real, not through adamantium claws but through social entrepreneurship.

A love of java jolted Jackman into action in 2009, when he traveled to Ethiopia with a Christian humanitarian group to shoot a documentary about the impact of fair-trade certification on coffee growers there. He decided to launch a business and follow in the footsteps of the late Paul Newman, another famous actor turned philanthropist via food ventures.

Jackman launched Laughing Man Coffee two years later; he sold the line to Keurig in 2015. One Laughing Man Coffee café in New York continues to operate independently, investing its proceeds into charitable programs that support better housing, health, and educational initiatives within fair-trade farming communities. 55 Although the New York location is the only café, the coffee brand is still distributed, with Keurig donating an undisclosed portion of Laughing Man proceeds to those causes (whereas Jackman donates all his profits). The company initially donated its profits to World Vision, the Christian humanitarian group Jackman accompanied in 2009. In 2017, it created the Laughing Man Foundation to be more active with its money management and distribution.

  • You be the entrepreneur. If you were Jackman, would you have sold the company to Keurig? Why or why not?
  • Would you have started the Laughing Man Foundation?
  • What else can Jackman do to aid fair-trade practices for coffee growers?

What Can You Do?

Textbooks for change.

Founded in 2014, Textbooks for Change uses a cross-compensation model, in which one customer segment pays for a product or service, and the profit from that revenue is used to provide the same product or service to another, underserved segment. Textbooks for Change partners with student organizations to collect used college textbooks, some of which are re-sold while others are donated to students in need at underserved universities across the globe. The organization has reused or recycled 250,000 textbooks, providing 220,000 students with access through seven campus partners in East Africa. This B-corp social enterprise tackles a problem and offers a solution that is directly relevant to college students like yourself. Have you observed a problem on your college campus or other campuses that is not being served properly? Could it result in a social enterprise?

Work It Out

Franchisee set out.

A franchisee of East Coast Wings, a chain with dozens of restaurants in the United States, has decided to part ways with the chain. The new store will feature the same basic sports-bar-and-restaurant concept and serve the same basic foods: chicken wings, burgers, sandwiches, and the like. The new restaurant can’t rely on the same distributors and suppliers. A new business plan is needed.

  • What steps should the new restaurant take to create a new business plan?
  • Should it attempt to serve the same customers? Why or why not?

This New York Times video, “An Unlikely Business Plan,” describes entrepreneurial resurgence in Detroit, Michigan.

  • 48 Chris Guillebeau. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future . New York: Crown Business/Random House, 2012.
  • 49 Jonathan Chan. “What These 4 Startup Case Studies Can Teach You about Failure.” Foundr.com . July 12, 2015. https://foundr.com/4-startup-case-studies-failure/
  • 50 Amy Feldman. “Inventor of the Cut Buddy Paid YouTubers to Spark Sales. He Wasn’t Ready for a Video to Go Viral.” Forbes. February 15, 2017. https://www.forbes.com/sites/forbestreptalks/2017/02/15/inventor-of-the-cut-buddy-paid-youtubers-to-spark-sales-he-wasnt-ready-for-a-video-to-go-viral/#3eb540ce798a
  • 51 Jennifer Post. “National Business Plan Competitions for Entrepreneurs.” Business News Daily . August 30, 2018. https://www.businessnewsdaily.com/6902-business-plan-competitions-entrepreneurs.html
  • 52 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition . March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf
  • 53 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition. March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf; Based on 2019 RBPC Competition Rules and Format April 4–6, 2019. https://rbpc.rice.edu/sites/g/files/bxs806/f/2019-RBPC-Competition-Rules%20-Format.pdf
  • 54 Foodstart. http://foodstart.com
  • 55 “Hugh Jackman Journey to Starting a Social Enterprise Coffee Company.” Giving Compass. April 8, 2018. https://givingcompass.org/article/hugh-jackman-journey-to-starting-a-social-enterprise-coffee-company/

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  • Authors: Michael Laverty, Chris Littel
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  • Book title: Entrepreneurship
  • Publication date: Jan 16, 2020
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5 Chapter 5 – The Business Plan

Developing your strategy.

As mentioned in Chapter 2 , it is critically important for any business organization to be able to accurately understand and identify what constitutes customer value. To do this, one must have a clear idea of who your customers are or will be. However, simply identifying customer value is insufficient. An organization must be able to provide customer value within several important constraints. One of these constraints deals with the competition—what offerings are available and at what price. Also, what additional services might a company provide? A second critically important constraint is the availability of resources to the business organization. Resources consist of factors such as money, facilities, equipment, operational capability, and personnel.

Here is an example: a restaurant identified its prime customer base as being upscale clientele in the business section of a major city. The restaurant recognized that it has numerous competitors that are interested in providing the same clientele with an upscale dining experience. Our example restaurant might provide a five-course, five-star gourmet meal to its customers. It also provides superlative service. If a comparable restaurant failed to provide a comparable meal than the example restaurant, the example restaurant would have a competitive advantage. If the example restaurant offered these sumptuous meals for a relatively low price in comparison to its competitors, it would initially seem to have even more of an advantage. However, if the price charged is significantly less than the cost of providing the meal, the service in this situation could not be maintained. In fact, the restaurant inevitably would have to go out of business. Providing excellent customer service may be a necessary condition for business survival but, in and of itself, it is not a sufficient condition.

So how does one go about balancing the need to provide customer value within the resources available while always maintaining a watchful eye on competitors’ actions? We are going to argue that what is required for that firm is to have a strategy .

The word strategy is derived from the Greek word strategos , which roughly translates into the art of the general, namely a military leader. Generals are responsible for marshaling required resources and organizing the troops and the basic plan of attack. Much in the same way, executives as owners of businesses are expected to have a general idea of the desired outcomes, acquire resources, hire and train personnel, and generate plans to achieve those outcomes. In this sense, all businesses, large and small, have strategies, whether they are clearly written out in formal business plans or reside in the mind of the owner of the business.

There are many different formal definitions of strategy with respect to business. The following is a partial listing of some of the definitions given by key experts in the field:

“A strategy is a pattern of objectives, purposes or goals and the major policies and plans for achieving these goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or to be .” [1] “The determination of the long-run goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals .” [2] “What business strategy is all about, in a word, is competitive advantage .” [3]

We define the strategy of a business as follows: A firm’s strategy is the path by which it seeks to provide its customers with value, given the competitive environment and within the constraints of the resources available to the firm.

Whatever definition of strategy is used, it is often difficult to separate it from two other terms: strategic planning and strategic management. Both terms are often perceived as being in the domain of large corporations, not necessarily small to midsize businesses. This is somewhat understandable. The origin of strategic planning as a separate discipline occurred over fifty years ago. It was mainly concerned with assisting huge multidivisional or global businesses in coordinating their activities. In the intervening half-century, strategic planning has produced a vast quantity of literature. Mintzberg, Lampel, Ahlstrand, in a highly critical review of the field, identified ten separate schools associated with strategic planning. [4] With that number of different schools, it is clear that the discipline has not arrived at a common consensus. Strategic planning has been seen as a series of techniques and tools that would enable organizations to achieve their specified goals and objectives. Strategic management was seen as the organizational mechanisms by which you would implement the strategic plan. Some of the models and approaches associated with strategic planning and strategic management became quite complex and would prove to be fairly cumbersome to implement in all but the largest businesses. Further, strategic planning often became a bureaucratic exercise where people filled out forms, attended meetings, and went through the motions to produce a document known as the strategic plan. Sometimes what is missed in this discussion was a key element—strategic thinking. Strategic thinking is the creative analysis of the competitive landscape and a deep understanding of customer value. It should be the driver (see “Strategy Troika”) of the entire process. This concept is often forgotten in large bureaucratic organizations.

Strategy Troika

Strategy Troika - Strategic management, strategic planning, and strategic thought

Strategic thinkers often break commonly understood principles to reach their goals. This is most clearly seen among military leaders, such as Alexander the Great or Hannibal. Robert E. Lee often violated basic military principles, such as dividing his forces. General Douglas MacArthur shocked the North Koreans with his bold landings behind enemy lines at Inchon. This mental flexibility also exists in great business leaders.

Solomon and Friedman recounted a prime example of true strategic thinking. [5] Wilson Harrell took a small, closely held, cleaning spray company known as Formula 409 to the point of having national distribution. In 1967, the position that Formula 409 held was threatened by the possible entry of Procter & Gamble into the same spray cleaning market. Procter & Gamble was a huge consumer products producer, noted for its marketing savvy. Procter & Gamble began a program of extensive market research to promote its comparable product they called Cinch. Clearly, the larger firm had a much greater advantage. Harrell knew that Procter & Gamble would perform test market research. He decided to do the unexpected. Rather than directly confront this much larger competitor, he began a program where he reduced advertising expenditures in Denver and stopped promoting his Formula 409. The outcome was that Procter & Gamble had spectacular results, and the company was extremely excited with the potential for Cinch. Procter & Gamble immediately begin a national sales campaign. However, before the company could begin, Harrell introduced a promotion of his own. He took the Formula 409 sixteen-ounce bottle and attached it to a half-gallon size bottle. He then sold both at a significant discount. This quantity of spray cleaner would last the average consumer six to nine months. The market for Procter & Gamble’s Cinch was significantly reduced. Procter & Gamble was confused and confounded by its poor showing after the phenomenal showing in Denver. Confused and uncertain, the company chose to withdraw Cinch from the market. Wilson Harrell’s display of brilliant strategic thinking had bested them. He leveraged his small company’s creative thinking and flexibility against the tremendous resources of an international giant. Through superior strategic thinking, Harrell was able to best Procter & Gamble.

Do You Have a Strategy and What Is It?

We have argued that all businesses have strategies, whether they are explicitly articulated or not. Perry stated that “small business leaders seem to recognize that the ability to formulate and implement an effective strategy has a major influence on the survival and success of small business.” [6]

The extent to which a strategy should be articulated in a formal manner, such as part of a business plan, is highly dependent on the type of business. One might not expect a formally drafted strategy statement for a nonemployee business funded singularly by the owner. One researcher found that formal plans are rare in businesses with fewer than five employees. [7] However, you should clearly have that expectation for any other type of small or midsize business.

Any business with employees should have an articulated strategy that can be conveyed to them so that they might better assist in implementing it. Curtis pointed out that in the absence of such communication, “employees make pragmatic short-term decisions that cumulatively form an ad-hoc strategy.” [8] These ad hoc (realized) strategies may be at odds with the planned (intended) strategies to guide a firm. [9] However, any business that seeks external funding from bankers, venture capitalists, or “angels” must be able to specify its strategy in a formal business plan.

Clearly specifying your strategy should be seen as an end in itself. Requiring a company to specify its strategy forces that company to think about its core issues, such as the following:

  • Who are your customers?
  • How are you going to provide value to those customers?
  • Who are your current and future competitors?
  • What are your resources?
  • How are you going to use these resources?

One commentator in a blog put it fairly well, “It never ceases to amaze me how many people will use GPS or Google maps for a trip somewhere but when it comes to starting a business they think that they can do it without any strategy, or without any guiding road-map.” Harry Tucci, comment posted to the following blog: [10]

Types of Strategies

In 1980, Michael Porter a professor at Harvard Business School published a major work in the field of strategic analysis— Competitive Strategy . [11] To simplify Porter’s thesis, while competition is beneficial to customers, it is not always beneficial to those who are competing. Competition may involve lowering prices, increasing research and development (R&D), and increasing advertising and other expenses and activities—all of which can lower profit margins. Porter suggested that firms should carefully examine the industry in which they are operating and apply what he calls the five forces model. These five forces are as follows: the power of suppliers, the power of buyers, the threat of substitution, the threat of new entrants, and rivalry within the industry. We do not need to cover these five forces in any great detail, other than to say that once the analysis has been conducted, a firm should look for ways to minimize the dysfunctional consequences of competition. Porter identified four generic strategies that firms may choose to implement to achieve that end. Actually, he initially identified three generic strategies, but one of them can be bifurcated. These four strategies are as follows (see “Generic Strategies”): cost leadership, differentiation, cost focus, and differentiation focus. These four generic strategies can be applied to small businesses. We will examine each strategy and then discuss what is required to successfully implement them.

Generic Strategies

Generic Strategies Diagram - Cost Leadership, Differentiation, Cost Focus, Differentiation Focus

Low-Cost Advantage

A  cost leadership strategy requires that a firm be in the position of being the lowest cost producer in its competitive environment. By being the lowest-cost producer, a firm has several strategic options open to it. It can sell its product or service at a lower price than its competitors. If price is a major driver of customer value, then the firm with the lowest price should sell more. The low-cost producer also has the option of selling its products or services at prices that are comparable to its competitors. However, this would mean that the firm would have a much higher margin than its competitors.

Obviously, following a cost leadership strategy dictates that the business be good at curtailing costs. Perhaps the clearest example of a firm that employs a cost leadership strategy is Walmart. Walmart’s investment in customer relations and inventory control systems plus its huge size enables it to secure the “best” deals from suppliers and drastically reduce costs. It might appear that cost leadership strategies are most suitable for large firms that can exploit economies of scale. This is not necessarily true. Smaller firms can compete on the basis of cost leadership. They can position themselves in low-cost areas, and they can exploit their lower overhead costs. Family businesses can use family members as employees, or they can use a web presence to market and sell their goods and services. A small family-run luncheonette that purchases used equipment and offers a limited menu of standard breakfast and lunch items while not offering dinner might be good example of a small business that has opted for a cost leadership strategy.

Differentiation

A  differentiation strategy involves providing products or services that meet customer value in some unique way. This uniqueness may be derived in several ways. A firm may try to build a particular brand image that differentiates itself from its competitors. Many clothing lines, such as Tommy Hilfiger, opt for this approach. Other firms will try to differentiate themselves on the basis of the services that they provide. Dominoes began to distinguish itself from other pizza firms by emphasizing the speed of its delivery. Differentiation also can be achieved by offering a unique design or features in the product or the service. Apple products are known for their user-friendly design features. A firm may wish to differentiate itself on the basis of the quality of its product or service. Kogi barbecue trucks operating in Los Angeles represent such an approach. They offer high-quality food from mobile food trucks.” [12] They further facilitate their differentiation by having their truck routes available on their website and on their Twitter account.

Adopting a differentiation strategy requires significantly different capabilities than those that were outlined for cost leadership. Firms that employ a differentiation strategy must have a complete understanding of what constitutes customer value. Further, they must be able to rapidly respond to changing customer needs. Often, a differentiation strategy involves offering these products and services at a premium price. A differentiation strategy may accept lower sales volumes because a firm is charging higher prices and obtaining higher profit margins. A danger in this approach is that customers may no longer place a premium value on the unique features or quality of the product or the service. This leaves the firm that offers a differentiation strategy open to competition from those that adopt a cost leadership strategy.

Focus—Low Cost or Differentiation

Porter identifies the third strategy—focus. He said that focus strategies can be segmented into a  cost focus and a differentiation focus .

In a focus strategy, a firm concentrates on one or more segments of the overall market. Focus can also be described as a niche strategy. Focus strategy entails deciding to some extent that we do not want to have everyone as a customer. There are several ways that a firm can adopt a focus perspective:

  • Product line. A firm limits its product line to specific items of only one or more product types. California Cart Builder produces only catering trucks and mobile kitchens.
  • Customer. A firm concentrates on serving the needs of a particular type of customer. Weight Watchers concentrates on customers who wish to control their weight or lose weight.
  • Geographic area. Many small firms, out of necessity, will limit themselves to a particular geographic region. Microbrewers generally serve a limited geographic region.
  • Particular distribution channel. Firms may wish to limit themselves with respect to the means by which they sell their products and services. Amazon began and remains a firm that sells only through the Internet.

Firms adopting focus strategies look for distinct groups that may have been overlooked by their competitors. This group needs to be of sufficiently sustainable size to make it an economically defensible option. One might open a specialty restaurant in a particular geographic location—a small town. However, if the demand is not sufficiently large for this particular type of food, then the restaurant will probably fail. Companies that lack the resources to compete on either a national level or an industry-wide level may adopt focus strategies. Focus strategies enable firms to marshal their limited resources to best serve their customers.

As previously stated, focus strategies can be bifurcated into two directions—cost focus or differentiation focus. IKEA sells low-priced furniture to those customers who are willing to assemble the furniture. It cuts its costs by using a warehouse rather than showroom format and not providing home delivery. Michael Dell began his business out of his college dormitory. He took orders from fellow students and custom-built computers to their specifications. This was a cost focus strategy. By building to order, it almost totally eliminated the need for any incoming, work-in-process, or finished goods inventories.

A focus differentiation strategy concentrates on providing a unique product or service to a segment of the market. This strategy may be best represented by many specialty retail outlets. The Body Shop focuses on customers who want natural ingredients in their makeup. Max and Mina is a kosher specialty ice cream store in New York City. It provides a constantly rotating menu of more than 300 exotic flavors, such as Cajun, beer, lox, corn, and pizza. The store has been written up in the New York Times and People magazine. Given its odd flavors, Max and Mina’s was voted the number one ice cream parlor in America in 2004. [13]

Evaluating Strategies

The selection of a generic strategy by a firm should not be seen as something to be done on a whim. Once a strategy is selected, all aspects of the business must be tied to implementing that strategy. As Porter stated, “Effectively implementing any of these generic strategies usually requires total commitment and supporting organizational arrangements.” [14] The successful implementation of any generic strategy requires that a firm possess particular skills and resources. Further, it must impose particular requirements on its organization (see “Summary of Generic Strategies”).

Even successful generic strategies must recognize that market and economic conditions change along with the needs of consumers. Henry Ford used a cost leadership strategy and was wildly successful until General Motors began to provide different types of automobiles to different customer segments. Likewise, those who follow a differentiation strategy must be cautious that customers may forgo “extras” in a downturn economy in favor of lower costs. This requires businesses to be vigilant, particularly with respect to customer value.

Summary of Generic Strategies

Key Takeaways

  • Any firm, regardless of size, needs to know how it will compete; this is the firm’s strategy.
  • Strategy identifies how a firm will provide value to its customers within its operational constraints.
  • Strategy can be reduced to four major approaches—cost leadership, differentiation, cost focus, and differentiation focus.
  • Once a given strategy is selected, all of a firm’s operations should be geared to implementing that strategy.
  • No strategy will be successful forever and therefore needs to be constantly evaluated.

The Necessity for a Business Plan

An intelligent plan is the first step to success. The man who plans knows where he is going, knows what progress he is making and has a pretty good idea of when he will arrive. Planning is the open road to your destination. If you don’t know where you’re going, how can you expect to get there? – Basil Walsh

In Chapter 1, we discussed the issue of failure and small businesses. Although research on small business failure has identified many factors, one reason that always appears at the top of any list is the failure to plan. Interestingly, some people argue that planning is not essential for a start-up business, but they are in a distinct minority. [15] The overwhelming consensus is that a well-developed plan is essential for the survival of any small (or large) business. [16] Perry found that firms with more than five people benefit from having a well-developed business plan. [17]

A recent study found that there was a near doubling of successful growth for those businesses that completed business plans compared to those that did not create one. It must be pointed out that this study might be viewed as being biased because the founder of the software company whose main product is a program that builds business plans conducted the study. However, the results were examined by academics from the University of Oregon who validated the overall results. They found that “except in a small number of cases, business planning appeared to be positively correlated with business success as measured by our variables. While our analysis cannot say the completing of a business plan will lead to success, it does indicate that the type of entrepreneur who completes a business plan is also more likely to produce a successful business.” [18]

Basically, there are two main reasons for developing a comprehensive business plan: (1) a plan will be extraordinarily useful in ensuring the successful operation of your business; and (2) if one is seeking to secure external funds from banks, venture capitalists, or other investors, it is essential that you be able to demonstrate to them that they will be recovering their money and making a profit. Let us examine each reason in detail.

Many small business owners operate under a mistaken belief that the only time that they need to create a business plan is at the birth of the company or when they are attempting to raise additional capital from external sources. They fail to realize that a business plan can be an important element in ensuring day-to-day success.

The initial planning process aids the operational success of a small business by allowing the owner a chance to review, in detail, the viability of the business idea. It forces one to rigorously consider some key questions:

  • Is the business strategy feasible?
  • What are the chances it will make money?
  • Do I have the operational requirements for starting and running a successful business?
  • Have I considered a well-thought-out marketing plan that clearly identifies who my customers will be?
  • Do I clearly understand what value I will provide to these customers?
  • What will be the means of distribution to provide the product or the service to my customers?
  • Have I clarified to myself the financial issues associated with starting and operating the business?
  • Do I have to reexamine these notions to ensure success?

Possessing an actual written plan enables you to have people outside the organization evaluate your business plan. Using friends, colleagues, partners, or even consultants may provide you with an unbiased evaluation of the assumptions.

It is not enough to create an initial business plan; you should anticipate making the planning process an annual activity. The Prussian military theorist von Moltke once argued that no military plan survives the first engagement with the enemy. Likewise, no company evolves in the same way as outlined in its initial business plan.

Overcoming the Reluctance to Formally Plan

By failing to prepare, you will prepare them to fail . -Benjamin Franklin

Unfortunately, it appears that many small businesses do not make any effort to build even an initial business plan, let alone maintain a planning process as an ongoing operation, even though there is clear evidence that the failure to plan may have serious consequences for the future success of such firms. This unwillingness to plan may be understandable in nonemployee businesses, but it is inexcusable as a business grows in size. Why, therefore, do some businesses fail to begin the planning process?

  • We do not need to plan. One of the prime reasons individuals fail to produce a business plan is that they believe that they do not have to plan. This may be attributable to the size of the firm; nonemployee firms that have no intention of seeking outside financing might sincerely believe that they have no need for a formal business plan. Others may believe that they so well understand the business and/or industry that they can survive and prosper without the burdensome process of a business plan. The author of Business Plan for Dummies , Paul Tiffany, once argued that if one feels lucky enough to operate a business successfully without resorting to a business plan, then he or she should forget about starting a business and head straight to Las Vegas.
  • I am too busy to plan. Anyone who has ever run a business on his or her own can understand this argument. The day-to-day demands of operating a business may make it seem that there is insufficient time to engage in any ancillary activity or prepare a business plan. Individuals who accept this argument often fail to recognize that the seemingly endless buzz of activities, such as constantly putting out fires, may be the direct result of not having thought about the future and planned for it in the first place.
  • Plans do not produce results. Small-business owners (entrepreneurs) are action- and results-oriented individuals. They want to see a tangible outcome for their efforts, and preferably they would like to see the results as soon as possible. The idea of sitting down and producing a large document based on assumptions that may not play out exactly as predicted is viewed as a futile exercise. However, those with broader experience understand that there will be no external funding for growth or the initial creation of the business without the existence of a well-thought-out plan. Although plans may not yield the specified results contained within them, the process of thinking about the plan and building it often yield results that the owner might not initially appreciate.
  • We are not familiar with the process of formal planning. This argument might initially appear to have more validity than the others. Developing a comprehensive business plan is a daunting task. It might seem difficult if not impossible for someone with no experience with the concept. Several studies have indicated that small business owners are more likely to engage in the planning process if they have had prior experience with planning models in their prior work experience. [19] Fortunately, this situation has changed rather significantly in the last decade. As we will illustrate, there are numerous tools that provide significant support for the development of business plans. We will see that software packages greatly facilitate the building of any business plan, including marketing plans and financial plans for small businesses. We also show that the Internet can provide an unbelievably rich source of data and information to assist in the building of these plans.

Although one could understand the reticence of someone new to small business (or in some cases even seasoned entrepreneurs), their arguments fall short with respect to the benefits that will be derived from conducting a structured and comprehensive business planning process.

Plans for Raising Capital

Every business plan should be written with a particular audience in mind. The annual business plan should be written with a management team and for the employees who have to implement the plan. However, one of the prime reasons for writing a business plan is to secure investment funds for the firm. Of course, funding the business could be done by an individual using his or her own personal wealth, personal loans, or extending credit cards. Individuals also can seek investments from family and friends. The focus here will be on three other possible sources of capital—banks, venture capitalists, and angel investors. It is important to understand what they look for in a business plan. Remember that these three groups are investors, so they will be anticipating, at the very least, the ability to recover their initial investment if not earn a significant return.

Bankers, like all businesspeople, are interested in earning a profit; they want to see a return on their investment. However, unlike other investors, bankers are under a legal obligation to ensure that the borrower pledge some form of collateral to secure the loan. [20] This often means that banks are unwilling to fund a start-up business unless the owner is willing to pledge some form of collateral, such as a second mortgage on his or her home. Many first-time business owners are not in a position to do that; securing money from a bank occurs most frequently for an existing business that is looking to expand or for covering a short-term cash-flow need. Banks may lend to small business owners who are opening a second business provided that they can prove a record of success and profitability.

Banks will require a business plan. It should be understood that bank loan officers will initially focus on the financial components of that client, namely, the income statement, balance sheet, and the cash-flow statement. The bank will examine your projections with respect to known industry standards. Therefore, the business plan should not project a 75 percent profit margin when the industry standard is 15 percent, unless the author of the plan can clearly document why he or she will be earning such a high return.

Some businesses may raise funds with the assistance of a Small Business Administration (SBA) loan. These loans are always arranged through a commercial bank. With these loans, the SBA will pledge up to 70 percent of the total value of the loan. This means that the owner still must provide, at the very least, 30 percent of the total collateral. The ability to secure one of these loans is clearly tied to the adequacy of the business plan.

Venture Capitalists

Another possible source of funding is venture capitalists . The first thing that one should realize about venture capitalists is that they are not in it just to make a profit; they want to make returns that are substantially above those to be found in the market. For some, this translates into the ability to secure five to ten times their initial investment and recapture their investment in a relatively short period of time—often less than five years. It has been reported that some venture capitalists are looking for returns in the order of twenty-five times their original investment. [21]

The financial statement, particularly the profit margin, is obviously important to venture capitalists, but they will also be looking at other factors. The quality of the management team identified in the business plan will be examined. They will be looking at the team’s experience and track record. Other factors needed by venture capitalists may include the projected growth rate of the market, the extent to which the product or the service being offered is unique, the overall size of the market, and the probability of producing a highly successful product or service.

Businesses that are seeking financing from banks know that they must go to loan officers who will review the plan, even though a computerized loan assessment program may make the final decision. With venture capitalists, on the other hand, you often need to have a personal introduction to have your plan considered. You should also anticipate that you will have to make a presentation to venture capitalists. This means that you have to understand your plan and be able to present it in a dynamic fashion.

Angel Investors

The third type of investor is referred to as angel investors , a term that originally came from those individuals who invested in Broadway shows and films. Many angel investors are themselves successful entrepreneurs. As with venture capitalists, they are looking for returns higher than they can normally find in the market; however, they often expect returns lower than those anticipated by venture capitalist. They may be attracted to business plans because of an innovative concept or the excitement of entering a new type of business. Being successful small business owners, many angel investors will not only provide capital to fund the business but also bring their own expertise and experience to help the business grow. It has been estimated that these angel investors provide between three and ten times as much money as venture capitalists for the development of small businesses. [22]

Angel investors will pay careful attention to all aspects of the proposed business plan. They expect a comprehensive business plan—one that clearly specifies the future direction of the firm. They also will look at the management team not only for its track record and experience but also their (the angel investor’s) ability to work with this team. Angel investors may take a much more active role in the management of the business, asking for positions on the board of directors, taking an equity position in the firm, demanding quarterly reports, or demanding that the business not take certain actions unless it has the approval of these angel investors. These investors will take a much more hands-on approach to the operations of a firm.

  • Planning is a critical and important component of ensuring the success of a small business.
  • Some form of formal planning should not only accompany the start-up of a business but also be a regular (annual) activity that guides the future direction of the business.
  • Many small business owners are reluctant to formally plan. They can produce many excuses for not planning.
  • Businesses may have to raise capital from external sources—bankers, venture capitalists, or angel investors. Each type of investor will expect a business plan. Each type of investor will be more or less interested in different parts of the plan. Business owners should be aware of what parts of the plan each type of investor will focus on.

Building a Plan

Before talking about writing a formal business plan, someone interested in starting a business might want to think about doing some personal planning before drafting the business plan. Some of the questions that he or she might want to answer before drafting a full business plan are as follows:

  • Why am I going into this business?
  • What skills and resources do I possess that will help make the business a success?
  • What passion do I bring to this business?
  • What is my risk tolerance?
  • Exactly how hard do I intend to work? How many hours per week?
  • What impact will the business have on my family life?

What do I really wish from this business?

  • Am I interested in financial independence?
  • What level of profits will be required to maintain my personal and/or family’s lifestyle?
  • Am I interested in independence of action (no boss but myself)?
  • Am I interested in personal satisfaction?
  • Will my family be working in this business?
  • What other employees might I need? [23]

Having addressed these questions, one will be in a much better position to craft a formal business plan.

Gathering Information

Building a solid business plan requires knowing the economic, market, and competitive environments. Such knowledge transcends “gut feelings” and is based on data and evidence. Fortunately, much of the required information is available through library resources, Internet sources, and government agencies and, for a fee, from commercial sources. Comprehensive business plans may draw from all these sources.

Public libraries and those at educational institutions provide a rich resource base that can be used at no cost. Some basic research sources that can be found at libraries are given in this section— be aware that the reference numbers provided may differ from library to library .

Library Sources

Background sources.

  • Berinstein, Paula. Business Statistics on the Web: Find Them Fast—At Little or No Cost (Ref HF1016 .B47 2003).
  • The Core Business Web: A Guide to Information Resources (Ref HD30.37 .C67 2003).
  • Frumkin, Norman. Guide to Economic Indicators , 4th ed. (Ref HC103 .F9 2006). This book explains the meanings and uses of the economic indicators.
  • Solie-Johnson, Kris. How to Set Up Your Own Small Business , 2 volumes (Ref HD62.7 .S85 2005). Published by the American Institute of Small Business.

Company and Industry Sources

  • North American Industry Classification System, United States (NAICS), 2007 (Ref HF1042 .N6 2007). The NAICS is a numeric industry classification system that replaced the Standard Industrial Classification (SIC) system. An electronic version is available from the US Census Bureau .
  • Standard Industrial Classification Manual (Ref HA40 .I6U63 1987). The industry classification system that preceded the NAICS.
  • Value Line Investment Survey (Ref HG4751 .V18). Concise company and industry profiles are updated every thirteen weeks.

Statistical Sources

  • Almanac of Business and Industrial Financial Ratios (Ref HF5681 .R25A45 2010).
  • Business Statistics of the United States (Ref HC101 .A13123 2009). This publication provides recent and historical information about the US economy.
  • Economic Indicators (1971–present). The Council of Economic Advisers for the Joint Economic Committee of Congress publishes this monthly periodical; recent years are in electronic format only. Ten years of data are presented. Electronic versions are available in ABI/INFORM and ProQuest from September 1994 to present and Academic OneFile from October 1, 1991.
  • Industry Norms and Key Business Ratios (Dun & Bradstreet; Ref HF5681 .R25I532 through Ref HF5681 .I572 [2000–2001 through 2008–2009]).
  • Rma Annual Statement Studies (Ref HF5681 .B2R6 2009–2010). This publication provides annual financial data and ratios by industry.
  • Statistical Abstract of the United States (Ref HA202 .S72 2010). This is the basic annual source for statistics collected by the government. Electronic version is available at www.census.gov/compendia/statstatab .
  • Survey of Current Business (1956–present). The Bureau of Economic Analysis publishes this monthly periodical; recent years are in electronic format only.

At some libraries, you may find access to the following resources online:

  • Mergent Webreports. Mergent (formerly Moody’s) corporate manuals are in digitized format. Beginning with the early 1900s, the reports include corporate history, business descriptions, and in-depth financial statements. The collection is searchable by company name, year, or manual type.
  • ProQuest Direct is a database of general, trade, and scholarly periodicals, with many articles in full text. Many business journals and other resources are available.
  • Standard and Poor’s Netadvantage is a database that includes company and industry information.

Internet Resources

In addition to government databases and other free sources, the Internet provides an unbelievably rich storehouse of information that can be incorporated into any business plan. It is not feasible to provide a truly comprehensive list of useful websites; this section provides a highly selective list of government sites and other sites that provide free information.

Government Sites

  • US Small Business Administration (SBA) . This is an excellent site to begin researching a business plan. It covers writing a plan, financing a start-up, selecting a location, managing employees, and insurance and legal issues. A follow-up page at http://www.sba.gov provides access to publications, statistics, video tutorials, podcasts, business forms, and chat rooms. Another page— http://www.sba.gov/about-offices-list/2 —provides access to localized resources.
  • SCORE Program . The SCORE program is a partner of the SBA. It provides a variety of services to small business owners, ranging from online (and in-person) mentoring, workshops, free computer templates, and advice on a wide range of small business issues.

In developing a business plan, it is necessary to anticipate the future economic environment. The government provides extensive statistics online.

  • Consumer Price Index . This index provides information on the direction of prices for industries and geographic areas.
  • Producer Price Index . Businesses that provide services or are focused on business-to-business (B2B) operations may find these data more appropriate for estimating future prices.
  • National Wage Data . This site provides information on prevailing wages and can be broken down by occupation and location down to the metropolitan area.
  • Consumer Expenditures Survey . This database provides information on expenditures and income. It allows for a remarkable level of refinement by occupation, age, or race.
  • State and Local Personal Income and Employment . These databases provide a breakdown of personal income by state and metropolitan area.
  • GDP by State and Metropolitan Region . This will provide an accurate guide to the overall economic health of a region or a city.
  • US Census . This is a huge site with databases on population, income, foreign trade, economic indicators, and business ownership.

There are nongovernment websites, either free or charging a fee, that can provide assistance in building a business plan. A simple Google search for the phrase small business plan yields more than 67 million results. Various sites will either help with writing the plan, offer to write the plan for a fee, produce reports on industries, or assist small businesses by providing a variety of support services. The Internet offers a veritable cornucopia of information and support for those working on their business plans.

Forecasting for the Plan

Prediction is very difficult, especially about the future. Nils Bohr, Nobel Prize winner

Any business plan is a future-oriented document. Business plans are required to look between three and five years into the future. To produce them and accurately forecast sales, you will need estimates of expenses and other items, such as the required number of employees, interest rates, and general economic conditions. There are many different techniques and tools that can be used to forecast these items. The type of techniques used will be influenced by many factors, such as the following:

  • The size of the business. Smaller businesses may have fewer resources to apply a wide variety of forecasting techniques.
  • The analytical sophistication of people who will be conducting the forecast. The owner of a home business may have no prior experience with forecasting techniques.
  • The type of the organization. A manufacturing concern that sells to a stable and relatively predictable environment that has been in existence for years might be able to employ a variety of standard statistical forecasting techniques; however, a small firm operating in a new or a chaotic environment might have to rely on significantly different techniques.
  • Historical records. Does the firm have historical records for sales that can be used to project into the future?

There is no universal set of forecasting techniques that can be used for all types of small and midsize businesses. Forecasting can fall into a fairly comprehensive range of techniques with respect to level of sophistication. Some forecasting can be done on an intuitive basis (e.g., back-of-the-envelope calculations); others can be done with standard computer programs (e.g., Excel) or programs that are specifically dedicated to forecasting in a variety of environments.

A brief review of basic forecasting techniques shows that they can be divided into two broad classes:  qualitative forecasting methods and quantitative forecasting methods . Actually, these terms can be somewhat misleading because qualitative forecasting methods do not imply that no numbers will be involved. The two techniques are separated by the following concept: qualitative forecasting methods assume that one either does not have historical data or that one cannot rely on past historical data. A start-up business has no past sales that can be used to project future sales. Likewise, if there is a significant change in the environment, one may feel uncomfortable using past data to project into the future. A restaurant operates in a small town that contains a large automobile factory. After the factory closes, the restaurant owner should anticipate that past sales will no longer be a useful guideline for projecting what sales might be in the next year or two because the owner has lost a number of customers who worked at the factory. Quantitative forecasting, on the other hand, consists of techniques and methods that assume you can use past data to make projections into the future.

“Overview of Forecasting Methods” provides examples of both qualitative forecasting methods and quantitative forecasting methods for sales forecasting. Each method is described, and their strengths and weaknesses are given.

Overview of Forecasting Methods

Forecasting key items such as sales is crucial in developing a good business plan. However, forecasting is a very challenging activity. The further out the forecast, the less likely it will be accurate. Everyone recognizes this fact. Therefore, it is useful to draw on a variety of forecasting techniques to develop your final forecast for the business plan. To do that, you should have a fairly solid understanding of the strengths and weaknesses of the various approaches. There are many books, websites, and articles that could assist you in understanding these techniques and when they should or should not be used. In addition, one should be open to gathering additional information to assist in building a forecast. Some possible sources of such information would be associations, trade publications, and business groups. Regardless of what technique is used or the data source employed in building a forecast for business plan, one should be prepared to justify why you are employing these forecasting models.

Web Resources for Forecasting

  • Three methods of sales forecasting ( sbinfocanada.about.com/od/cashflowmgt/a/salesforecast.htm ). This site provides three simplified approaches to sales forecasting.
  • Time-critical decision making for business administration ( home.ubalt.edu/ntsbarsh/stat-data/forecast.htm ). This site has an e-book format with several chapters devoted to analytical forecasting techniques.

Building your first business plan may seem extremely formidable. This may explain why there are so many software packages available to assist in this task. After building your first business plan, that steep learning curve should make subsequent plans for the business or other businesses significantly easier.

In preparing to build a business plan, there are some problem areas or mistakes that you should be on guard to avoid. Some may be technical in nature, while others relate to content issues. For the technical side, first and foremost, one should make sure that there are no misspellings or punctuation errors. The business plan should follow a logical structure. No ideal business plan clearly specifies the exact sections that need to be included nor is there an ideal length. Literature concerning business plans indicates that the appropriate length of the body of a business plan line should be between twenty and forty pages. This does not include appendixes that might provide critical data for the reader.

In developing a lengthy report, sometimes it is easy to fall into clichés or overused expressions. These should be avoided. Consider the visuals in the report. Data should be placed in either clearly mapped-out tables or well-designed graphs. The report should be as professional-looking as possible. Anticipate the audience that will be reading the report and write in a way that easily reaches them; avoid using too much jargon or technical terms.

The content in any business plan centers on two areas: realism and accuracy.

Components of the Plan

There is no idealized structure for a business plan or a definitive number of sections that it must contain. The following subsections discuss the outline of a plan for a business start-up and identify some of the major sections that should be part of the plan.

The cover page provides the reader with information about either the author of the plan or the person to contact concerning the business plan. It should contain all the pertinent information to enable the reader to contact the author, such as the name of the business, the business logo, and the contact person’s address, telephone number, and e-mail address.

The table of contents enables the reader to find the major sections and components of the plan. It should identify the key sections and subsections and on which pages those sections begin. This enables the reader to turn to sections that might be of particular importance.

Executive Summary

The  executive summary is a section of critical importance and is perhaps the single most important section of the entire business plan. Quite often, it is the first section that a reader will turn to, and sometimes it may be the only section of the business plan that he or she will read. Chronologically, it should probably be the last section written. [24] The executive summary should provide an accurate overview of the entire document, which cannot be done until the whole document is prepared.

If the executive summary fails to adequately describe the idea behind the business or if it fails to do so in a captivating way, some readers may discard the entire business plan. As one author put it, the purpose of the executive summary is to convince the reader to “read on.” [25] The executive summary should contain the following pieces of information:

  • What is the company’s business?
  • Who are its intended customers?
  • What will be its legal structure?
  • What has been its history (where one exists)?
  • What type of funding will be requested?
  • What is the amount of that funding?
  • What are the capabilities of the key executives?

All this must be done in an interesting and captivating way. The great challenge is that executive summaries should be relatively short—between one and three pages. For many businesspeople, this is the great challenge—being able to compress the required information in an engaging format that has significant size limitations.

Business Section

Goals. These are broad statements about what you would like to achieve some point in the near future. Your goals might focus on your human resource policies (“We wish to have productive, happy employees”), on what you see as the source of your competitive advantage (“We will be best in service”), or on financial outcomes (“We will produce above average return to our investors.”) Goals are useful, but they can mean anything to anyone. It is therefore necessary to translate the goals into objectives to bring about real meaning so that they can guide the organization. Ideally, objectives should be SMART —specific, measurable, achievable, realistic, and have a specific timeline for completion. Here is an example: one organizational goal may be a significant rise in sales and profits. When translating that goal into an objective, you might word the objectives as follows: a 15 percent increase in sales for the next three years followed by a 10 percent increase in sales for the following two years and a 12.5 percent increase in profits in each of the next five years. These objectives are quite specific and measurable. It is up to the decision-maker to determine if they are achievable and realistic. These objectives—sales and profits—clearly specify the time horizon. In developing the plan, owners are often very happy to develop goals because they are open to interpretation, but they will avoid objectives. Goals are sufficiently ambiguous, whereas objectives tie you to particular values that you will have to hit in the future. People may be concerned that they will be weighed on a scale and found wanting for failing to achieved their objectives. However, it is critical that your plan contains both goals and objectives. Objectives allow investors and your employees to clearly see where the firm intends to go. They produce targeted values to aim for and, therefore, are critical for the control of the firm’s operations.

Vision and Mission Statements. To many, there is some degree of confusion concerning the difference between a vision statement and a mission statement.  Vision statements articulate the long-term purpose and idealized notion of what a business wishes to become. In the earliest days of Microsoft, when it was a small business, its version of a vision statement was as follows: “A computer on every desk and in every home.” In the early 1980s, this was truly a revolutionary concept. Yet it gave Microsoft’s employees a clear idea (vision) that to bring that vision into being, the software being developed would have to be very “user-friendly” in comparison to the software of that day. Mission statements , which are much more common in small business plans, articulate the fundamental nature of the business. This means identifying the type of business, how it will leverage its competencies, and possibly the values that drive the business. Put simply, a mission statement should address the following questions:

  • Who are we? What business are we in?
  • Who do we see as our customers?
  • How do we provide value for those customers?

Sometimes vision and mission statements are singularly written for external audiences, such as investors or shareholders. They are not written for the audience for whom it would have the greatest meaning—the management team and the employees of the business. Unfortunately, many recognize that both statements can become exercises of stringing together a series of essentially meaningless phrases into something that appears to sound right or professional . You can find software on the web to automatically generate such vacuous and meaningless statements.

Sometimes a firm will write a mission statement that provides customers, investors, and employees with a clear sense of purpose of that company. Zappos has the following as its mission statement: “Our goal is to position Zappos as an online service leader. If we can get customers to associate Zappos as the absolute best in service, then we can expand beyond shoes.” [26] The mission statement of Ben & Jerry’s Ice Cream focuses both on defining their product and their values: “To make, distribute and sell the finest quality all-natural ice cream and euphoric concoctions with a continued commitment to incorporating wholesome, natural ingredients and promoting business practices that respect the Earth and the Environment.” [27]

Keys to Success . This section identifies those specific elements of your firm that you believe will ensure success. It is important for you to be able to define the competencies that you intend to leverage to ensure success. What makes your product or service unique? What specific set of capabilities do you bring to the competitive scene? These might include the makeup of and the experience of your management team; your operational capabilities (e.g., unique skills in design, manufacturing, or delivery); your marketing skill sets: your financial capabilities (e.g., the ability to control costs); or the personnel that make up the company.

Industry Review

In this section, you want to provide a fairly comprehensive overview of the industry. A thorough understanding of the industry that you will be operating in is essential to understand the possible returns that your company will earn within that industry. Investors want to know if they will recover their initial investment. When will they see a profit? Remember, investors often carefully track industries and are well aware of the strengths and limitations within a particular industry. Investors are looking for industries that can demonstrate growth. They also want to see if the industry is structurally attractive. This might entail conducting Porter’s five forces analysis; however, this is not required in all cases. If there appear to be some issues or problems with industry-level growth, then you might want to be able to identify some segments of the industry where growth is viable.

Products or Services

This section should be an in-depth discussion of what you are offering to customers. It should provide a complete and clear statement of the products or the services that you are offering. It should also discuss the core competencies of your business. You should highlight what is unique, such as a novel product or service concept or the possession of patents. You need to show how your product or service specifically meets particular market needs. You must identify how the product or the service will satisfy specific customers’ needs. If you are dealing with a new product or service, you need to demonstrate what previously unidentified needs it will meet and how it will do so. At its birth, Amazon had to demonstrate that an online bookstore would be preferable to the standard bookstore by offering the customer a much wider selection of books than would be available at an on-site location.

This section could include a discussion of technical issues. If the business is based on a technological innovation—such as a new type of software or an invention—then it is necessary to provide an adequate discussion of the specific nature of the technology. One should take care to always remember the audience for whom you are writing the plan. Do not make this portion too technical in nature. This section also might discuss the future direction of the product or service—namely, where will you be taking (changing) the product or the service after the end of the current planning horizon? This may require a discussion of future investment requirements or the required time to develop new products and services. This section may also include a discussion of pricing the product or the service, although a more detailed discussion of the issue of pricing might be found in the marketing plan section. If you plan to include the issue of pricing here, you should discuss how the pricing of the product or the service was determined. The more detailed you are in this description, the more realistic it will appear to the readers of the business plan. You may wish to discuss relationships that you have with vendors that might have an impact on reducing cost and therefore an impact on price. It is important to discuss how your pricing scheme will compare with competitors. Will it be higher than average or below the average price? How does the pricing fit in with the overall strategy of the firm?

This section must have a high degree of honesty. Investors will know much about the industry and its limitations. You need to identify any areas that might be possible sources of problems, such as government regulations, issues with new product development, securing distribution channels, and informing the market of your existence. Further, it is important to identify the current competitors in the industry and possible future competitors.

Marketing Plan

An introductory marketing course always introduces the four Ps: product, price, place, and promotion. The marketing section of the business plan might provide more in-depth coverage of how the product or the service better meets customer value than that of competitors. It should identify your target customers and include coverage of who your competitors are and what they provide. The comparison between your firm and its competitors should highlight differences and point to why you are providing superior value. Pricing issues, if not covered in the previous section, could be discussed or discussed in more detail.

The issue of location, particularly in retail, should be covered in detail. Perhaps one of the most important elements of the marketing plan section is to specify how you intend to attract customers, inform them of the benefits of using your product or service, and retain customers. Initially, customers are attracted through advertising. This section should delineate the advertising plan. What media will be used—flyers, newspapers, magazines, radio, television, web presence, direct marketing, and/or social media campaigns? This section should cover any promotional campaigns that might be used.

The Management Team

Physical resources are not the only determinant of business success. The human resources available to a firm will play a critical role in determining its success. Readers of your business plan and potential investors should have a clear sense of the management team that will be running a business. They should know the team with respect to the team’s knowledge of the business, their experience and capabilities, and their drive to succeed. Arthur Rock, a venture capitalist, was once quoted as saying, “I invest in people, not the idea.” [28]

This section of the business plan has several elements. It should contain an organizational chart that will delineate the responsibilities and the chain of command for the business. It should specify who will occupy each major position of the business. You might want to explain who is doing what job and why. For every member of the management team, you should have a complete résumé. This should include educational background (both formal and informal) and past work experience, including the jobs they have held, responsibilities, and accomplishments. You might want to include some other biographical data such as age, although that is not required.

If you plan to use specific advisers or consultants, you should mention the names and backgrounds of these people in this section of the plan. You should also specify why these people are being used.

An additional element of your discussion of the management team will be the intended compensation schemes. You should specify the intended salaries for the management team while also including issues of their benefits and bonuses or any stock position that they may take in the company. This section should also identify any gaps in the management team and how you intend to fill these positions.

Depending on the nature of the business, you might wish to include in this section the personnel (employees) that will be required. You should identify the number of people that are currently working for the firm or that will have to be hired; you should also identify the skills that they need to possess. Further discussion should include the pay that will be provided: whether they will be paid a flat salary or paid hourly, if and when you intend to use overtime, and what benefits you intend to provide. In addition, you should discuss any training requirements or training programs that you will have to implement.

Financial Statements

The financial statements section of the business plan should be broken down into three key subsections: the income statement, the balance sheet, and the cash-flow statement. Before proceeding with these sections, we discuss the assumptions used to build these sections. The opening section of the financial statements section should also include, in summary format, projections of sales, the sales growth rate, key expenses and their growth rates, net income across the forecasting horizon, and assets and liabilities. [29]

As previously discussed, bankers—and to lesser extent venture capitalists—will be primarily concerned with this section of the business plan. It is vital that this section—whether you are an existing business seeking more funding or a start-up—have realistic financial projections. The business plan should contain clear statements of the underlying assumptions that were used to make these financial projections. The clearer the statements and the more realistic the assumptions behind these statements, then the greater the confidence the reader will have in these projections. Few businesspeople have a thorough understanding of these financial statements; therefore, it is advisable that someone with an accounting or a financial background review these statements before they are included in the report. We will have a much more in-depth discussion of these statements in Chapter 9 .

The future planning horizon for financial projections is normally between three and five years. The duration that you will use will depend on the amount of capital that the business is seeking to raise, the type of industry the business is in, and the forecasting issues associated with making projections. Also, the detail required in these financial statements will be directly tied to the type and size of the business.

Income Statement

The  income statement examines the overall profitability of a firm over a particular period of time. As such, it is also known as a profit-and-loss statement. It identifies all sources of revenues generated and expenses incurred by the business. For the business plan, one should generate annual plans for the first three to five years. Some suggest that the planner develop more “granulated” income statements for the first two years. By granulated, we mean that the first year income statement should be broken down on a monthly basis, while the second year should be broken down on a quarterly basis.

Some of the key terms (they will be reviewed in much greater detail in Chapter 10 ) found in the income statement are as follows:

  • Income. All revenues and additional incomes produced by the business during the designated period.
  • Cost of goods sold. Costs associated with producing products, such as raw materials and costs associated directly with production.
  • Gross profit margin. Income minus the cost of goods sold.
  • Operating expenses. Costs in doing business, such as expenses associated with selling the product or the service, plus general administration expenses.
  • Depreciation. This is a special form of expense that may be included in operating expenses. Long-term assets—those whose useful life is longer than one year—decline in value over time. Depreciation takes this fact into consideration. There are several ways in which this declining value can be determined. It is a noncash expenditure expense.
  • Total expenses. The cost of goods sold plus operating expenses and depreciation.
  • Net profit before interest and taxes. This is the gross profit minus operating expenses; another way of stating net profit is income minus total expenses.
  • Interest. The required payment on all debt for the period.
  • Taxes. Federal, state, and local tax payments for the firm.
  • Net profit. This is the net profit after interest and taxes. This is the term that many will look at to determine the potential success of business operations.

Balance Sheet

The  balance sheet examines the assets and liabilities and owner’s equity of the business at some particular point in time. It is divided into two sections—the credit component (the assets of the business) and the debit component (liabilities and equity). These two components must equal each other. The business plan should have annual balance sheet for the three- or five-year planning horizon. The elements of the credit component are as follows:

  • Current assets. These are the assets that will be held for less than one year, including cash, marketable securities, accounts receivable, notes receivable, inventory, and prepaid expenses.
  • Fixed assets. These assets are not going to be turned into cash within the next year; these include plants, equipment, and land. It may also include intangible assets, such as patents, franchises, copyrights, and goodwill.
  • Total assets. This is the sum of current assets and fixed assets.

Liabilities consist of the following:

  • Current liabilities. These are debts that are to be paid within the year, such as lines of credit, accounts payable, other items payable (including taxes, wages, and rents), short-term loans, dividends payable, and current portion of long-term debt.
  • Long-term liabilities. These are debts payable over a period greater than one year, such as notes payable, long-term debt, pension fund liability, and long-term lease obligations.
  • Total liabilities. This is the sum of current liabilities and long-term liabilities.
  • Owner’s equity. This represents the value of the shareholders’ ownership in the business. It is sometimes referred to as net worth. It may be composed of items such as preferred stock, common stock, and retained earnings.

Cash-Flow Statement

From a practical and survival standpoint, the  cash-flow statement may be the most important component of the financial statements. The cash-flow statement maps out where cash is flowing into the firm and where it flows out. It recognizes that there may be a significant difference between profits and cash flow. It will indicate if a business can generate enough cash to continue operations, whether it has sufficient cash for new investments, and whether it can pay its obligations. Businesspeople soon realize that profits are nice, but cash is king.

Cash flows can be divided into three areas of analysis: cash flow from operations, cash flow from investing, and cash flow from financing. Cash flow from operations examines the cash inflows from revenues and interest and dividends from investments held by the business. It then identifies the cash outflows for paying suppliers, employees, taxes, and other expenses. Cash flow from investing examines the impact of selling or acquiring current and fixed assets. Cash flow from financing examines the impact on the cash position from the changes in the number of shares and changes in the short- and long-term debt position of the firm. Given the critical importance of cash flow to the survival of the small business, it will be covered in much more detail in Chapter 10 .

Additional Information

Depending on the nature of the business and the amount of funding that is being sought, the plan might include more materials. For an existing business, you may wish to include past tax statements and/or personal financial statements. If the business is a franchise, you should include all legal contracts and documents. The same should be done for any leasing, licensing, or rent agreements. This section should be seen as a catchall incorporating any materials that would support the plan. One does not want to be in the position of being asked by readers of the plan—“Where are these documents?”

The financial section of the business plan should include summaries of the three key financial elements. The details behind the financial statements should be included as an appendix along with clear statements concerning the assumptions that were used to build them. The appendixes may also include different scenarios that were considered in building the plan, such as alternative market growth assumptions or alternative competitive environments. Demonstrating that the author(s) considered “what-if” situations tells potential investors that the business is prepared to handle changing conditions. It should include items such as logos, diagrams, ads, and organizational charts.

Developing Scenarios

Business plans are analyses of the future; they can err on the side of either optimistic projections or conservative projections. From the standpoint of the potential investor, it is always better to err on the side of conservatism. Regardless of either bias, business plans are generally built on the basis of expected futures and past experience. Unfortunately, the future does not always emerge in a clearly predicated manner. One can have a dramatic change that can have significant impact on the business. Often such changes occur in the external environment and are beyond the control of the business management team. These external changes can occur within the technical environment; it can be based on changes in customer needs, changes with respect to the suppliers, changes in the economic environment—at the local, national, or global level. Dramatic change can also occur within the organization itself—the death of the owner or members of the management team. [30]

One way for an organization to deal with significant changes is a process known as scenario planning . The real origins of scenario planning can be traced back to the early nineteenth century activity known as Kreigsspiel—war gaming—a system for training officers developed by the Prussian command. This process of looking at future wars was adopted by many militaries in the later nineteenth century. In the 1950s, a more formal format was used at the RAND Institute for examining possible future changes in the military and geopolitical environments. The early 1980s saw it applied to industrial settings. Royal Dutch Shell examined the question of what would happen if there were a significant drop in the price of oil. This was after two oil crises that pushed the price of oil up significantly. The notion that oil prices would drop was considered to be an extremely unlikely event, but it did occur. Royal Dutch Shell was one of the few oil companies that did not suffer because its scenario analyses enabled them to be ready to deal with that situation. [31]

What could be the possible use of scenario planning for small businesses? There are several areas in which small businesses should apply scenario planning to be better prepared for future disruptions.

Identify Significant Changes That Might Impact the Business

Consider major shifts in the customer’s notion of value. As mentioned in Chapter 2 , the firm should always be examining what constitutes value in the eyes of the consumer and how that might shift. Henry Ford’s model T car was a global success because customers initially valued a reliable vehicle at a low price. Ford Motor Company continued to meet the customer’s notion of value by constantly driving down the unit cost. However, by the mid-1920s, customers’ notion of value included not only price but also issues such as styling and improved technologies. General Motors was able to recognize that there were changes in the customer’s value notion and provided them with a range of vehicles. Ford failed to recognize that change and suffered a significant drop in sales.

Shifts in the economic environment. The recent recession clearly indicates that economies can suffer significant shifts in a short period of time. These shifts can have dramatic impact on all business operations. Small-business owners have seen significant tightening of bank credit and changes with respect to the requirements for using credit cards. One could easily imagine the critical importance for small businesses to consider the impacts that would follow significant changes in interest rates. Southwest Airlines, in anticipation of possible fluctuations in oil prices, used futures contracts to deal with dramatic shifts in the price of oil. When oil prices rose significantly, they were in a much better position than their competitors.

The entrance of new competitors. Small businesses should always be ready to consider the impact of facing new competitors and new types of competition. Consider the case of small local retail outlets when a Walmart superstore opens in the area.

Consideration of Disasters

The best way to deal with any potential disaster is not while it is occurring or after it has happened but before it occurs. Small businesses should anticipate what they will do in the case of physical disasters, such as fire, earthquakes, or floods. Other disasters might involve the bankruptcy or loss of a major supplier or a major customer. A restaurant or a food market should have a contingency plan in the case of a power failure that might lead to food spoilage. Such a business might also want to conduct a scenario planning exercise to see what its responses would be in the case of a customer complaining of food poisoning. Other disaster scenarios that should be considered by small businesses include the impact and ramifications of having the computer system crash; having the service for the website crash; or having the website hacked, with the possible loss of customer information.

New Opportunities

Almost all businesses, large and small, must be prepared to seize new opportunities. This may mean that they have to consider the impact of technological change on the business or how technology can offer them new business opportunities. The technology of stereo lithography, a process by which three-dimensional objects are built layer by layer, has been available for more than a decade. Bespoke Innovations saw the potential for using this technology. Bespoke Innovations can develop, in a short period of time, custom artificial legs for a price of $5,000–$6,000 and with features that are not found in $60,000 prostheses. [32]

Scenario planning should be a periodic exercise, but it should be conducted no more than once a year. The actual frequency might be dependent on the perceived rate of change for the industry or the presence of storm clouds on the horizon. Scenario planning has several distinct activities, which may be as follows:

  • Pick one area that might occur in the future that would have significant impact on the business. What if the national joblessness rate remains at over 9 percent for the next three to five years? What if a major customer decides to buy from a competitor or that customer is in financial trouble? What if there are changes in the national defense budget? A luncheonette in New London, Connecticut, where Electric Boat builds nuclear submarines, wants to consider the impact of changes in the defense budget. A decrease in the budget for building nuclear submarines would reduce the number of subs made in New London, which might lead to layoffs at Electric Boat and fewer customers for the luncheonette.
  • Identify factors that might impact that issue. This sometimes is referred to as a PEST analysis, where the P stands for political issues, E stands for economic issues, S stands for sociocultural issues, and T stands for technology issues. Each factor would be analyzed to see how it might impact the scenario. In our previous luncheonette example, the restaurant might want to consider an upcoming election to see how each party would support defense appropriations, and it might look at the overall economy to determine whether a downturn in the economy might lead to a cut in defense appropriations. It is unlikely that sociocultural issues would impact defense appropriations. Technology issues, whether a breakthrough in some design by the United States or by some other country, might determine the number and location of submarines built in the United States.
  • Rank the relative importance of the previous factors. Not all factors under consideration can be considered equally important. It is critical in a scenario planning exercise to see which factors are most important so that decision-makers can focus on the ramifications of those factors in the analysis.
  • Develop scenarios. Having identified the relative importance of the factors, the next stage would be to develop a limited number of possible scenarios (no more than two or three). Each scenario would map out possible outcomes for each key factor. Based on these values, the group conducting the scenario planning exercise would develop insights into this possible future world.
  • How do the scenarios impact your business? For each future scenario, the team should examine how that possible future state would impact the operation of the business. Continuing with the luncheonette example, the owner might see that a particular political party would be elected in the next election and the economy will still be in the doldrums. Together, this might indicate a cut in the naval building budget. This will translate into a reduced number of submarines built in New London and a reduction in employment at Electric Boat. The luncheonette’s sales will obviously drop off. Now the owner must consider what it might do in that situation.

Scenario planning offers the opportunity for small business owners to examine the future on a long-term basis. It should force them to look at external environments and conditions that can have a dramatic impact on the survival of their firm. It broadens their thinking and creates an environment of increased flexibility. It enables a business to respond to those sudden shocks that might destroy other firms.

Computer Aids

Business plans can be built using a combination of word-processing and spreadsheet programs by those who are adept at using them. However, the entire process of constructing a comprehensive business plan can be greatly simplified by using a dedicated business plan software package. These packages are designed to produce reports that have all the required sections for a business plan, they greatly facilitate the creation of the financial statements with charts, and they often allow for the inclusion of materials from other programs. Most of them are fairly reasonably priced from $50 to $150.

There are many such packages on the market, and they range from those designed for novices to those that can generate annual plans by easily incorporating data from external sources, such as the accounting programs of a business. When evaluating competing programs, there are some primary and secondary factors that should be considered. [33] The primary factors are as follows:

  • Ease of building the report. The various sections of the report should be clearly identified, and the authors should be able to work on each section independent of their sequence within the report. Text and data entry should be simple and allow for easy corrections or revisions.
  • Financial statements. The software should facilitate building the income statement, the balance sheet, and the cash-flow statement. For multiyear projections, the software should support the forecasting process.
  • Import from other programs. The software should be able to incorporate data from a variety of programs, such as Word and Excel. Ideally, it should be able to import data from a variety of accounting programs.
  • Support services. The software company should bundle a variety of support services, including clear instructions, tutorials, and access to Internet or call-number support. Many packages provide sample business plans for different industries.

The secondary factors are as follows:

  • Access to research support. Some software packages include access to business publications and databases to aid with market research.
  • Export options. These packages allow for the report or parts of the report to be exported to different formats—Word, Excel, PowerPoint, HTML, or PDF.
  • Ancillary analysis tools. Some packages either directly include or offer additional programs for market planning, budgeting, or valuation.

The following is a partial listing of companies that have business planning software:

  • Business Plan Pro . This company provides business planning software with sample plans for a wide number of industries plus options for acquiring industry data at national, state, or local levels. The company also has programs for marketing planning and legal issues advice.
  • Business Plan Software . This company offers a number of products, including business planning software, a strategic planning program, financial projection and cash-flow forecasting programs, and marketing planning software.
  • Plan Magic . This company offers a suite of planning products ranging from particular industries to financial and marketing planning software.
  • The business planning for a start-up business should consider if the owner(s) is/are ready to accept the challenges of operating a business.
  • Comprehensive business plans will require information about the industry, competitors, and customers. Owners or the writers of the business plan should be aware of where they can obtain this information.
  • Forecasting is critical to the success of any business. There are many different approaches to forecasting: some are simple extrapolations of trends, while others can be computationally complex. The business should use a forecasting system that is not only accurate but also makes the users feel comfortable.
  • Although business plans come in different “sizes and shapes,” they should have some key sections: executive summary, mission statement, industry analysis, marketing plan, description of the management team, and financial projections.
  • Some businesses should make it a practice of conducting scenario analyses. This is a process of examining possible future events and what should be the response of the business.
  • The complexity and difficulty of building a comprehensive business plan can be significantly reduced by using one of the available business-planning software packages.
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The path by which a firm seeks to provide its customers with value, given the competitive environment and within the constraints of the resources available to the firm.

A firm is in the position of being the lowest cost producer in its competitive environment.

A firm provides products or services that meet customer value in some unique way.

A firm seeks to provide value through low cost for a subset of the market given the competitive environment and within the constraints of the resources available to the firm.

A firm concentrates on providing a unique product or service to a segment of the market.

Individuals who provide money for start-up businesses or additional capital for a business to grow. They invest to make not only a profit but also returns that are substantially above those found in the market.

Individuals who initially invested in Broadway shows and films. As with venture capitalists, they are looking for returns higher than they can normally find in the market; however, they often are expecting returns lower than those anticipated by the venture capitalist.

Methods that assume that one does not have historical data or cannot rely on past historical data.

Methods that consist of techniques that assume you can use past data to make projections of the future.

The introduction to the business plan that describes the company’s business, the intended customers, the legal structure, the type and amount of funding that will requested, and the capabilities of the key executives.

A document that articulates the long-term purpose and idealized notion of what the business wishes to become.

A document that articulates the fundamental nature of the business. It should address what business the company is in, the company’s potential customers, and how customer value will be provided.

A report that provides an examination of the overall profitability of a firm over a particular period of time.

A report that examines the assets, liabilities, and owner’s equity of the business at some particular point in time.

A document that maps out where cash is flowing into a firm and where it flows out. It recognizes that there may be a significant difference between profits and cash flow.

A process that examines the impact and possible responses to events that may be unlikely but that would have significant impact on a business.

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Business Plan - Operations Section

Operations Section of the Business Plan

given the outline of a business plan which part ought to be given priority

Written by Jason Gordon

Updated at April 21st, 2024

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What goes into developing an operational Plan?

All of the components that allow your business to create value.

The operations portion of the business plan serves two purposes:

  • Allow you to take a holistic approach to your business, and
  • Provide interested third parties with a description of your business.

The operational plan outlines the particular components that allow your business to create value.Below, we discuss the primary components of the business operations plan, including: a description of the product produced, the business location, personnel, inventory, suppliers, payment processing (credit policies and accounts receivable/payable). You will describe each of these sections in detail to the extent that it is relevant or applicable to your business. You will need to outline where are you in the creation of your business. Specifically, what steps have you taken to put your business in motion? Now, what do you have left to accomplish?  

What is Product or Service Development?

How do you plan to make your product or carry out your service? Start with an outline of the process for delivering value to your customers. You will need to account for the necessary production activity at each stage. Outline the day-to-day activity necessary to carry out your business.

  • Production Process/How Services Carried Out:  Here you should outline the process of manufacturing your product. If you provide a service, you should outline all of the moving parts and individuals necessary to carry out the service. Provide a generally checklist or flowchart for delivering value.
  • Production Timeline : Explain how long it takes to produce a unit, and when you'll be able to start producing your product or service. Include factors that may affect the time frame of production and how you'll deal with potential problems, such as rush orders.
  • Production Feasibility : You will want to give an overview of any research or testing you have done to prove the feasibility of producing your product in accordance with your operational plans. This could include Market Research, Questionnaires, Competitor Process Analysis, Beta Testing, etc.
  • Vulnerability : You should identify any potential problems that could arise in the production process. How will you handle any such issues? What would be the effect on the business?
  • Quality Control : How will you maintain oversight of the production or service provision process? Develop a plan for supervision of the process.
  • Customer Service : What is your plan for customer service? This includes sales communication, return products, and customer follow-up.

Equipment and Other Assets

  • Necessary Equipment : What equipment do you need to carry out the basic operations?
  • Current Assets : You may already have some of the necessary equipment to carry out operations. Identify these assets and explain what asset requirements they fulfill.
  • Equipment Priority : Some equipment is may be desirable but not a necessity. Ascribe a level of priority to obtaining it. The priority should be higher depending upon the likelihood of the equipment to increase production or efficiency.It may also be helpful to outline the equipment output, required maintenance/repair, and expected life.
  • Equipment Pricing : Outline a projected cost for purchasing (new or used) and renting the necessary equipment. You need to explain your rationale for your decision.
  • Equipment Financing : Explain any financing arrangements. Make a list of your assets, such as land, buildings, inventory, furniture, equipment, and vehicles. Include legal descriptions and the worth of each asset.

Special Requirements

Are there any special requirements or situational factors necessary for carrying on your business? In this section, you will list any requirements that are unique to your business and would fall outside general expect ions. This could include special assets, economic conditions, legal conditions, etc.  

What qualities do you need in a location?

  • Drawings of the building, copies of lease agreements, and/or recent real estate appraisals.
  • What is the expected value of the land or buildings required for your business operations?
  • Explain the significance of each physical location to your business.
  • Amount of Space : Explain the use of space. Have a plan for space demands with the expected growth.
  • Type of Building : Justify your decision to rent vs. buy, and a class of facility.
  • Zoning : Make certain the anticipated activity meets the applicable zoning requirements. If not, explain a plan to request a variance or petition the municipality for re-zoning.
  • Power and other utilities : What will be your specific power needs. Have estimates for the cost of power and the resources/regulatory approvals necessary to obtain such funding. A strong plan will discuss preliminary data and on-going discussions with the available utility providers.
  • Access : What type of access do you need for your location? Detail how customers, employees, logistics personnel, etc., will access your business. Ex. Do you need easy walkin access? Is it convenient for customers and suppliers?
  • Construction : Will you build or rent a building? You should explain the benefits of one over the other. This justification should include a cost/benefit analysis of each option.
  • Costs : Determine a preliminary figure for costs associated with building/occupying the intended location. Examples of expenses include: rent/mortgage, maintenance, utilities, property taxes, insurance, construction/remodeling, etc. These numbers will become part of your financial plan.
  • Hours of Operation : Indicate and give a justification for your intended hours of operation. Does your location support these hours of operation? Does it conflict with other local or resident businesses?

In this section, you provide an overview of the key personnel involved in the business and the types of positions that will be necessary. Basically, you are going to tell who will do what. Describe whether you intend to hire new personnel or contract with independent contractors to carry out business functions. You will need to account for the personnel requirements as the business grows.

  • Startup Team : Who is part of your startup team? What will be their primary area of responsibility? Describe what you understand their role and duties to be and explain how they are qualified or competent for these duties.
  • Types of Personnel : Give a general description of the main employees or positions that you will need to fill. This includes skilled, unskilled, and professionals. As part of this process, your will outline who performs the specific tasks at each stage of operations. Some of these positions may be filled by independent contractors who render services on a fee basis. If so, document the nature of these anticipated relationships. At first, there will only be a few positions. Try to determine the types of personnel that will be needed as the business grows.
  • Number of employees : Construct a timeline depicting the growth in personnel in accordance with the projected business growth.
  • Procedural Protocol : Begin by describing the procedures necessary to effectively carry out each position or function of the business. This is necessary to maintain operational stability as well as consistency in operations. This could include procedural steps or written manuals for carrying out individual stages of the operations.
  • Methods for Recruiting Employees : This is most important for professional service or high-tech companies. You will need to have a plan for recruiting new service providers and skilled professionals. This will first require establishing job descriptions and desired employee skills. Note: A good place to start is documented any established relationship with local universities with technical programs and professional schools.
  • Personnel Training : How will you conduct the training? What will be your plan for preparing new employees? Do you have a continuation plan in the event you lose a key employee? Be careful not to place too much operational importance on any single individual without developing a training plan for replacements.
  • Compensation : Along with the description of personnel and timeline for employment, you will want to associate an estimated cost at each period in time. As such, you will need to devise a projected compensation structure for employees. It is important to develop a realistic plan that fits the companies revenue projections and incentivizes the employee to perform and remain with the business. The startup team or key leadership compensation (including benefits and equity options) is often the most difficult to structure.

Inventory & Materials

In this section, you explain where you are going to receive your inventory or the materials necessary to produce your product or carry out your service. You should indicate your suppliers or manufacturers and outline the nature or terms of your agreement.

  • Inventory : What type of inventory (finished product, supplies, raw materials, etc.) will you keep on hand and where will you get it?
  • Cost/Value of Inventory : You will need to use the projections for the cost of inventory in your financial projections. A key provision in the pre-money valuation (pre-equity funding) of your business will be an accurate assessment of the value of assets, including inventory.
  • Inventory Turn-Over : At what rate will you need to restock your inventory? This is an important figure used in assessing the sales strength of the business. You will want to make a special note about how the inventory turn-over compares to industry averages.
  • Special Inventory Requirements : You will also want to outline a plan for dealing with inventory requirements seasonally. This includes a plan for lead-time ordering.
  • Inventory Control : You will have to establish a plan for monitoring and controlling inventory. This should be incorporated into an employee/personnel description.

Production Costs

All of the above information will be combined as an estimate of production costs to include in your financials. You may want to maintain separate figures regarding the cost of goods and the cost of labor. You may also want to create a third category of production costs for non-recurring, incidental costs associated with operations.  

Now is the place to provide detailed information about the companies/individuals who will supply you with the inventory/materials outlined above.

  • Supplier Background : You should include background information on the supplier. This lends credibility to the stability/dependability of their service.
  • Inventory Details : Attribute the type, amount, and cost of inventory supplied by each supplier. This should include a description of any anticipated fluctuations in the requirements or costs of the inventory. For example, you will want to outline the spikes in seasonal cost.
  • Payment Terms : Outline the terms of performance of the supplier-purchaser relationship. What are the terms of payment? What are the terms of delivery?
  • Back-Up Plan :It is important to have a back-up plan in the event you lose a supplier or the supplier is unable to meet for operational needs. This could include options of alternative suppliers. This avoids placing too much operational importance on third parties.

Payment Policies

In this section, you will outline how you will be compensated for the goods you sell or services you provide.

  • Issuing Credit : Are you planning on accepting in-house credit? You will want to look at industry standards and the payment policies of your competitors. Don't forget, your payment policies can be a point of differentiation between you and those competitors. What will be the terms of payment for customers who purchase on account?
  • Determining Who Can Purchase on Credit : You will have to have some established policies in place to determine who can purchase on credit and under what terms. Remember, you will have to comply with applicable laws prior to carrying out a background check. Also, extending credit could implicate fairness or anti-discrimination in lending laws.
  • Terms of Credit : What will be the term of payment? If you extend credit you will need to decide on the terms of repayment and the interest, if any, attributable to giving the credit. What will be the rate of interest charged and penalties for late payment? Will there be a discount for early payment?
  • Security Interests : Will you take a security interest in the goods sold? If so, do you have a standard documenting these transactions?
  • Slow-Paying or Non-Paying Customers :You will need a policy for dealing with slowpaying customers. What process will you establish for reminding, urging, and possibly threatening customers to render payment? You should outline an escalating plan for requesting payment, such as making a phone call, sending a letter, using a collection agency, and hiring a collection attorney.
  • Credit Cards : If you accept commercial credit, doyou have a service provider to process the payment?
  • Costs of Extending Credit : Any time that you extend credit there will be a cost involved. The cost could be the risk of the purchaser not paying or it could be the cost of capital over the credit period. Regardless, you will need to build these costs into your financials. For example, there always needs to be some allowance for bad accounts.

Managing Your Accounts Payable

As part of the operations process, you may be in the role of a creditor to a servicer or supplier. You should develop a plan for payment of accounts owed. The key considerations in developing a payment plan include: maintaining positive relations with the supplier/servicer, optimizing the use of available cash. If the supplier/servicer offers a discount for early payment then you should consider whether this option is in your best interest. If your business would greatly benefit from making a payment toward the end of the available period, then it may be worth extending the payment obligation out.  

Legal Environment

Establishing and maintaining operations will require the crossing of numerous legal hurdles. You should describe the anticipated legal issues in advance and outline a plan for addressing them. Below are some sample, but common, legal issues.

  • Entity Selection and Formation : Outline your justification for choosing a given entity structure. Explanations should include: taxation, equity funding, and ownership and control.
  • Business License, Professional Licenses, Inspections, and Zoning Requirements : Identify all of the licensing requirements for carrying on your business. This includes the licensing of your business, personnel, property, etc.
  • Insurance and Bonding Requirements : Outline the requirement for bonding of professional insurance. You should indicate the plan for obtaining coverage, as well as the cost of such coverage.
  • Permits : Certain business activities in specific places require special permits. You must conduct the necessary background research on the legal requirements and provide a synopsis of how you will handle those requirements.
  • Workplace and Environmental Regulations : Outline a plan for the necessary workplace inspections and standards. These standards can drastically affect your construction plans and applicable costs. Environmental regulations include proper documentation and accountability for waste, waste and environmental surveys of the location, etc.
  • Employment Laws : Develop a plan for legal compliance with all employment laws. This includes hiring/firing procedures, employee benefits (Health Insurance, etc.), worker's compensation, affirmative action (if accept federal contracts), etc.
  • Taxation : Federal tax registration, state tax registration, estimated tax payments, employee payroll withholdings, sales tax registration and withholding, property tax, etc.
  • Protecting Intellectual Property : You will need to develop a plan for protecting and maintaining all applicable forms of intellectual property, including: trade secrets, trademarks, copyrights, and patents. In some cases, protecting your intellectual property can be very costly (such as patent filings). Account for these costs within the financials.

After working through this business plan section you will have a detailed operating plan and a comprehensive outline of what actions need to be taken next in developing the business.

Related Topics

  • Business Plan, Part 1 (Outline Overview)
  • Business Plan, Part 2 (The Executive Summary)
  • What is a Mission Statement?
  • What is a Values Statement?
  • Setting Company Goals
  • Business Plan, Part 4 (Market Analysis)
  • Business Plan, Part 5 (Competitive Analysis)
  • Business Plan, Part 6 (Marketing Plan)
  • Business Plan, Part 7 (Operations)
  • Business Plan, Part 8  (Management and Organization)
  • Business Plan, Part 9 (Financial Projections)
  • Business Plan, Part 10 (Appendices)
  • Business Plan , (Final Modifications)

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  3. 37+ Best Outline Examples in MS Word

    given the outline of a business plan which part ought to be given priority

  4. FREE 9+ Sample Business Plan Outline Templates in PDF

    given the outline of a business plan which part ought to be given priority

  5. How to Write a Business Plan Outline

    given the outline of a business plan which part ought to be given priority

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COMMENTS

  1. How to Write a Business Plan Outline [Examples + Templates]

    The goal here is to showcase why your team is the best to run your business. Investors want to know you're unified, organized and reliable. This is also a potential opportunity to bring more humanity to your business plan and showcase the faces behind the ideas and product. 5. Marketing and sales.

  2. 13 Key Business Plan Components

    10. Traction. Many investors see hundreds of deals every year. If you want to stand a chance of making any sort of meaningful impression, it's important to show them that your business is more than just an idea and that you've already got some irons in the fire. Traction is a huge part of making that case.

  3. Business Plan Outline: Everything You Need To Know

    Finishing Touches. Your business plan should look like a formal, professional document. This is especially important if you are presenting the plan to potential lenders and investors. Make sure you proofread for grammar and spelling and use appropriate formatting and margins. If you provide paper copies of the plan, have them professionally ...

  4. How to Write a Business Plan: Guide + Examples

    Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. A good business plan is much more than just a document that you write once and forget about. It's also a guide that helps you outline and achieve your goals. After completing your plan, you can ...

  5. How To Write A Business Plan (2024 Guide)

    Describe Your Services or Products. The business plan should have a section that explains the services or products that you're offering. This is the part where you can also describe how they fit ...

  6. A Simple Business Plan Outline to Build a Useful Plan

    Be sure to download your free business plan template to start drafting your own plan as you work through this outline. 1. Executive summary. While it may appear first, it's best to write your executive summary last. It's a brief section that highlights the high-level points you've made elsewhere in your business plan.

  7. 5.6 The Business Plan

    A business plan tells the story of your business concept, provides an overview of the industry in which you will operate, describes the goods or services you will provide, identifies your customers and proposed marketing activities, explains the qualifications of your management team, and states your projected income and borrowing needs.

  8. How to Write a Business Plan (Tips, Templates, Examples)

    1. Executive Summary. While your executive summary is the first page of your business plan, it's the section you'll write last. That's because it summarizes your entire business plan into a succinct one-pager. Begin with an executive summary that introduces the reader to your business and gives them an overview of what's inside the ...

  9. How to Write a Business Plan (Plus Examples & Templates)

    How to Write a Business Plan Step 1. Create a Cover Page. The first thing investors will see is the cover page for your business plan. Make sure it looks professional. A great cover page shows that you think about first impressions. A good business plan should have the following elements on a cover page:

  10. 12 Key Elements of a Business Plan (Top Components Explained)

    Here are some of the components of an effective business plan. 1. Executive Summary. One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

  11. How To Write a Business Plan

    Step 2: Do your market research homework. The next step in writing a business plan is to conduct market research. This involves gathering information about your target market (or customer persona), your competition, and the industry as a whole. You can use a variety of research methods such as surveys, focus groups, and online research to ...

  12. 1.1: Chapter 1

    As the road map for a business's development, the business plan. Defines the vision for the company. Establishes the company's strategy. Describes how the strategy will be implemented. Provides a framework for analysis of key issues. Provides a plan for the development of the business. Helps the entrepreneur develop and measure critical ...

  13. Business Plan: What It Is + How to Write One

    A business plan is a written document that defines your business goals and the tactics to achieve those goals. A business plan typically explores the competitive landscape of an industry, analyzes a market and different customer segments within it, describes the products and services, lists business strategies for success, and outlines ...

  14. The Perfect Business Plan Layout & Outline for a Great Plan

    To help you get started, you can download our business plan outline pdf or follow the outline below: 1. Executive Summary. Your executive summary is the most important part of your plan. It comes at the beginning and is the first thing potential investors or lenders will read. If they aren't excited by what they see, they'll unfortunately ...

  15. Project Prioritization: A Practical Guide with Examples

    A practical example of project prioritization. Let's look at an example of how you might apply the scoring model framework to a project so you have a clear understanding of how it works in the real world. First, I want to set the scene. Let's say you work for an agency that has a larger university system as a client.

  16. Parts of Business Plan and Definition

    The parts of business plan and definition refer to the governing document of your company and the elements it should include.3 min read updated on February 01, 2023. The parts of business plan and definition refer to the governing document of your company and the elements it should include. The business plan thoroughly describes your company's ...

  17. 10 Important Components of an Effective Business Plan

    Effective business plans contain several key components that cover various aspects of a company's goals. The most important parts of a business plan include: 1. Executive summary. The executive summary is the first and one of the most critical parts of a business plan. This summary provides an overview of the business plan as a whole and ...

  18. How to Structure and Sequence a Business Plan

    How to Structure and Sequence a Business Plan. ORDER. The following is a general outline of the Order that should be followed in constructing your business plan. With the exception of the Executive Summary and the Marketing Summary, all other summaries should be no more than one [1] paragraph in length. The purpose of each summary is to give ...

  19. Important Parts of a Business Plan Outline

    The next key sections ought to be addressed in each business plan: Executive Summary: This section summarizes the entire plan and emphasizes the key points within 2 pages. Company Analysis: This section contains the background of the business, its present status, along with the goods or services that the company will provide. Industry Analysis ...

  20. Answered: Given the outline of a business plan,…

    Explain you answer. Principles of Management. OER 2019th Edition. ISBN: 9780998625768. Author: OpenStax. Publisher: OpenStax. Chapter17: Organizational Planning And Controlling. Section: Chapter Questions. Problem 1CTQ: What do you think are some of the difficulties of adding 25 percent more employees for the holiday...

  21. 11.4 The Business Plan

    If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary "box," but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure ...

  22. OUTLINE OF A BUSINESS PLAN Flashcards

    OUTLINE OF A BUSINESS PLAN. Flashcards. Learn. Test. Match. Flashcards. Learn. Test. Match. Created by. Kimberly_Santos38. Terms in this set (10) vision ... - It is an essential part of establishing priorities and setting your company up for success over a set period of time. objective

  23. Chapter 5

    The business plan should follow a logical structure. No ideal business plan clearly specifies the exact sections that need to be included nor is there an ideal length. Literature concerning business plans indicates that the appropriate length of the body of a business plan line should be between twenty and forty pages.

  24. Business Plan

    The operations portion of the business plan serves two purposes: Allow you to take a holistic approach to your business, and. Provide interested third parties with a description of your business. The operational plan outlines the particular components that allow your business to create value.Below, we discuss the primary components of the ...