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Business Plans 101:...

Business Plans 101: Nailing the Basics

There are two primary components to a business plan: the narrative portion (the words), and the financial portion (the numbers). Below is a guide to handling both with aplomb.

The Words
The narrative portion of your business plan should clearly explain your business concept, strategies for achieving your goals, and so on. Specifically, you need to include the following:

1. Business Description

  • Describe it simply and clearly.
  • What is the opportunity? What problem are you solving for paying customers?
  • How much do customers currently pay to solve that problem?
  • Your business model, i.e., source(s) of revenue.

2. Products and/or Services Offered

  • What are you selling?
  • At what price?
  • What are the features and benefits of what you are selling?
  • What makes it different and desirable?
  • How will products be manufactured or services provided? 

3. Market Analysis

  • Industry overview—describe the size of your industry and its unique characteristics
  • Define your target markets. What is the size of your target market? What is its growth potential?
  • Is the market competitive? If not, why not?
  • Who are your customers?
  • Why will they buy from you?
  • How will you reach your customers, i.e., what is your marketing/sales plan?

4. Location

  • Where will your business be located? Why this site?
  • Do you need to rent space? If so, how much square footage do you need?
  • At what cost? Who pays for utilities? Who pays the real-estate taxes?
  • Are renovations or a build-out required? If so, who pays?

 


5. Competition

  • Give an overview of the competitive landscape
  • What is your competitive advantage?
  • Is it defensible, i.e., will your competitors be able to copy you easily?
  • List your five closest competitors and describe who they are: their products/services, their strengths and weaknesses, how you will be better than them.

6. Management

  • Provide bios, qualifications, and experience of you and your team.

7. Personnel

  • Who will you be hiring and at what pay rate?
  • For what positions? Describe the responsibilities
  • Who reports to whom?
  • What is your staffing/hiring plan, i.e., when will you fill each position?

8. Application and Expected Effect of Investment/Loan

  • How much money are you trying to raise?
  • What, specifically, will it be used for?

The Numbers
Your numbers need to support your words. Just as important, carefully examine your financials to be sure that you are where you want to be—sales don’t necessarily equal profit, and without making a profit your business won’t survive. 

1. Sources and Uses of Funding
A numerical restatement of section 8 as described above. Here you should list all your funding sources and the specific uses for those funds. 

2. Capital Equipment List
All the equipment you need to run your business, i.e., the equipment you use to provide your service, manufacture your product, and sell, store, or deliver merchandise. Do not include equipment you sell or equipment you expect to replace frequently (annually or more often).

3. Balance Sheet
Shows the assets, liabilities, and net worth of a business at a specific point in time. Think of it as a snapshot of your finances on a particular day.

4. Breakeven Analysis
The point at which your business will be breaking even, i.e., neither making a profit nor losing money—shown either in dollar sales or unit sales.


5. Projected Income Statement
Also known as a Profit & Loss Statement. Shows a business’ financial state over a period of time, and is typically the basis for your budget(s). Don’t forget to include an explanation of your assumptions. The following are typically included:

  • Three-year summary
  • Detail by month, year one
  • Detail by quarter, years two and three

6. Cash Flow Projections
Cash is king! These are the most important financial spreadsheets you will create. They show when (and from where) cash will flow in and out of your business over time, and can make the difference between success and failure. They show you not only how much cash your business will need, but when it will be needed.  Don’t forget to include an explanation of your assumptions. The following are typically included:

  • Detail by month, year one
  • Detail by quarter, years two and three

That’s it! The goal is to write a business plan that tells a coherent story and has the numbers to support that story. Once all of these questions are answered, you can write your executive summary which is meant to be a very, very short version of your business plan. While the executive summary is typically placed before the full business plan begins, it should be written last. You can’t summarize what you haven’t written, right?

By Diane Tarshis, founder of Springboard Business Plans, LLC.

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