You’ve got a great idea for a new company, and you need financing to get started. Before anyone will consider your request, though, they want to read your business plan.
As you search the Internet for “business plans,” you start getting a better idea of what bankers and other potential funding sources want to see—and it seems like more than you’ve ever told anyone about yourself in your life.
The list includes your personal background, your professional experience, copies of your personal and business tax returns, your credit reports, your financial statements and what you can offer as collateral.
But don’t let yourself be intimidated. Millions of entrepreneurs have put together business plans that helped them launch their companies—and most of them didn’t have any experience writing business plans either.
Even business counselors and other experts don’t agree on how many sections a business plan needs to include. Some say four. Others say seven, eight or even 10. But here are some of the most common (and useful) pieces to put in your business plan.
Financial Projections
Bankers will be especially interested in financials, said Mike Haughton, a longtime counselor at the Kansas City chapter of SCORE, a free counseling and mentoring service for small and emerging businesses.
At a minimum, your business plan should include 12-month profit-and-loss projections, cash flow projections, a projected balance sheet for when the business opens and a break-even analysis showing when the business will turn profitable.
“They want to know how soon investors will get paid back and how well thought out those projections seem,” Haughton said.
SCORE’s national website, www.score.org, offers free templates for business plans and other documents that entrepreneurs can download and tailor to fit their specific ideas.
Marketing
Next up, backers will want to review your marketing plans and market analysis, Haughton said.
“They want to see how good an idea this person has of how the business will reach customers,” he said.
Again, at a minimum, a marketing plan will include some information about the size of the service or industry into which you want to go, some research into the trends now moving that sector, and information on barriers you likely will face and your solutions for overcoming them. Your analysis also will describe the demographics of customers you want to reach, the competitors you will encounter, and how you plan to carve your niche in that market.
The Other Essentials
AN EXECUTIVE SUMMARY This is a one- or two-page outline of your idea, summarizing everything you might address in a five-minute interview. You’ll want to quickly cover the fundamentals of your business—what you will provide, who your customers will be, who the owners are and what you think the future of your business and the industry will be. Try writing this last, even though it’s the first part of the report, because filling out other sections first will help focus your thinking.
A GENERAL COMPANY DESCRIPTION Include a mission statement explaining your business’s reason for being. Include company goals and important short-term objectives that measure progress toward those goals. Again, include a brief description of what you will provide and who you plan to provide it to. Describe your industry and changes you expect in the short, middle and long term. List your strengths and what experiences and skills you contribute. Tell how the business is organized—sole proprietor, partnership, corporation or limited liability company—and why you chose that form.
A LISTING OF YOUR PRODUCTS AND SERVICES Describe in depth what products or services you offer. Include any photos, brochures, drawings or other bulky illustrations in an appendix. In this section, you also should provide more detail about any unique or proprietary features of your product or service. Include the pricing, fee or leasing structures of what you offer, too.
AN OUTLINE OF YOUR ORGANIZATION AND MANAGEMENT Tell your readers who will manage your business on a daily basis and what experiences or special strengths he or she brings to the enterprise. Describe what you would do if that person is lost or incapacitated. Create an organizational chart outlining who will be responsible for which key decisions if your business will have more than 10 employees. Include position descriptions for key employees. List your other supporters, too—your board of directors, your advisory board, your attorney, your accountant, your insurance agent, your banker and the important consultants, mentors and other advisers you work with.
Plan on reviewing your business plan regularly to gauge how things are working out.
