Your Business Plan

A business plan is a vital tool for the successful operation of any business, yet many small business owners bypass this critical element of their business planning and operations. The Wharton Small Business Development Center identifies three main reasons why the small business owner should make the effort to prepare a business plan:

  1. Preparing a business plan forces the business owner to take an objective, critical view of the business project, and helps to determine the feasibility of the project.
  2. A business plan provides information to investors and lenders to help them determine whether they should invest in or finance the project.
  3. A business plan serves as an operating tool that can be used to manage the operations and finances of the business.

While each business plan is unique and tailored to the specific company, there are established, accepted guidelines that are generally followed when creating a business plan. A business plan usually contains seven main sections:

  1. Executive Summary
  2. Business Description
  3. Development and Production
  4. Sales and Marketing (Marketing Plan)
  5. Management
  6. Financials
  7. Funding Request

These sections are broken down further as follows:

  1. Executive Summary - This is a clear and concise overview of the main elements of the business plan containing:
    • A description of the business, including information about the product or service it provides, the market, and its competitive advantage.
    • A summary of the financial aspects of the business such as cash flow, sales, profits and the expected return on investment.
    • A description of the company, its legal structure and date of formation, its owners and principals, and key personnel.
    • A clear statement of funding requirements, how these funds will be allocated, and how the funding will help to make the business profitable in order to ensure repayment.

  2. Business Description
    (a) The Industry
    • Overview of the current state and future outlook of the industry, containing thoroughly researched and substantiated facts.
    • Details about the trends, legislature etc. that will impact the industry.

    (b) The Company
    • The Company's Mission Statement.
    • The status of the business (whether it is a startup, an expansion, or a takeover of an existing business).
    • Details about the type of business, date the company was formed, why it was formed, and the business entity(sole proprietorship, corporation, partnership).
    • Details about the Company's principals and their expertise.
    • Information about the market needs the company will meet, the target market, how the product will be sold, advertising and promotion, and product support.

    (c) The Product
    • A detailed description of the product or service, emphasizing the benefits to the customer.
    • An explanation of the uniqueness of the product/service, and why it will be successful.

    (d) Positioning
    • Details about how the company wants to be perceived by its customers and competitors in the marketplace.
    • An analysis of the company's position in relation to its competitors regarding needs fulfillment, distribution, pricing, value, content, and availability.

    (e) Pricing Strategy
    • Details of the cost of the product/service, with an explanation of how prices were derived, how the price will contribute to good positioning in the marketplace, and how pricing compares with the competitors'.

    (f) The Market
    • A thorough and detailed description of the company's target market, including demographics, customers' characteristics and concerns.
    • A discussion of the market size and the positive and negative factors that will affect future growth such as industry and socioeconomic trends.
    • A description of the main competitors - their market share, how they do or do not meet their customers' needs, and how the company can do better at meeting those needs.

    (g) Estimated Sales
    • Projected sales figures for the next three years in units and dollars, based on market size, number of customers, competition and product/service advantages. Also, a discussion of what makes the product/service unique, why customers would buy, and how the company expects to see the customer base growing.

  3. Development and Production
    • Details about the current status of the product, and a development schedule outlining the steps needed to get it ready for market.
    • An explanation of the various stages of production from inception to selling.
    • A design and development budget itemizing all expenses involved in producing the final product.
    • Details about labor requirements, apart from management, including current and future labor force, skills, and training needs.
    • Operating Expenses spreadsheet, detailing fixed and variable costs.
    • Cost of Goods spreadsheet detailing the costs of producing the product.

  4. Sales and Marketing (Marketing Plan), reflecting the results of extensive research and analysis of the market:
    • A description and analysis of the target market. This includes demographics, as well as information on customers' lifestyles, attitudes, and preferences.
    • A competitive analysis, which identifies the competitors, their strengths and weaknesses regarding their product range, pricing policies and strategies and their competitive advantage.
    • A description and analysis of the marketing mix:
      • Pricing - An explanation of the pricing method chosen, and why this method is considered the best for the business.
      • Product - A description of the product/service being sold, emphasizing the benefits to the customer.
      • Distribution - A description of the business location as well as the methods used to get the product to the target customers (direct selling, sales representatives, wholesale and/or retail distributors, brokers).
      • Promotion - Details of the advertising and promotion strategy used to inform the target market about the product/service being sold, its features and benefits.
        • Advertising - Description of media used to get the message across (newspapers, television and radio etc.)
        • Public relations - press releases and a list of targeted media.
        • Packaging, including a description of the package design and a sample.
        • Sales promotions, which includes brochures, flyers as well as special promotions such as coupons, gift certificates, and special sales.

  5. Management
    • A description of each member of management, including expertise and responsibilities.
    • A description of the people who own and control the Company.
    • A list of the members of the Board of Directors, including their expertise, and a demonstration of how each would contribute to the Company's success.

  6. Financials
    • Cash Flow Statement that demonstrates the company's ability to generate cash, and how the cash will be used.
    • Balance Sheet detailing the Company's assets and liabilities.
    • Income Statement detailing revenue, expenses, capital, and cost of goods.

  7. Funding Request
    • The amount of money needed, with a breakdown of how it will be spent, as well as a demonstration of how these funds will make the business profitable.
    • Details of the investments made by the owners/principals.