How do I write a business plan?
Construction of a Business Plan
- Business Description: Includes your business name, address and owner identification and identifies goals and objectives. Further, the description clarifies why the business person wants to be in business.
- Products and Services: Describe what the company is selling and why. Explain, in detail, what products and services will be offered.
- Sales and Marketing: Sales and marketing are the core of business rationale. A business plan should address several basic questions: Who and how large is your market? How will the business be competitive? What pricing and sales terms are planned? How will the business market its products and services?
- Operating Requirements: The plan should identify and describe the equipment, facilities and people necessary to generate products and services. How will the products and services be produced and made available to the customer?
- Financial Management: This is the most critical part of any business plan. Businesspeople will establish vital schedules that will guide the financial health of the business.
For a new business, the plans should include:
• Projected “start-up costs”
• Expected profit or return on investment (ROI) for the first year • Projected income statement and balance sheet for two years
• Projected monthly cash flow statement for 12 months
Whether your company is young or established, the business plan should include:
• Income statement and balance sheet for the last two years
• Projected income statement and balance sheet for the next two years
• Projected monthly cash flow statement for 12 months
The plan should include an explanation of all projections. If you feel your finance or accounting knowledge is not sufficient to prepare these statements you should seek professional assistance. The bottom line is: will, or does, the company make a profit?
6. Concluding Narrative: This segment of the plan should summarize business goals and objectives and send a message that owners are committed to the success of the business.
Put Your Best Foot Forward
The business plan should be complete, clear, neat and accurate. It will be an extension of you and your business.The length of a good plan will vary from a few pages to a hundred or more. The plan should provide a sound “blueprint” for the business and entice any reader to want to know more.
Sample Business Plan Outline
I. Cover Letter
Include items below for loan applications:
A. Dollar amount requested
B. Terms and timing
C. Type and price of securities
II. Cover Letter
A. Dollar amount requested
- Name
- Location and plant description
- Product
- Market and competition
- Management expertise
B. Business Goals
C. Summary of financial needs and application of funds
D. Earnings projections and potential
return to investors
E. “Exit” Strategy—describe to potential investor(s) exactly how they will be repaid for their investment. Repayment may come from refinancing or selling stock to others.
Whether a business plan is developed mainly for the benefit of inside or outside investors, the summary should “sit up and sing!” The company’s goals, strategy and critical success factors belong up front.
III. Market Analysis
A. Description of total market
B. Industry trends
C. Target market
D. Competition
The market analysis should highlight the opportunities for the company to achieve its goals by asking:
• To whom are you trying to sell?
• What are the trends in your target market?
• Who are your customers and what are their product/service preferences and reasons for purchasing?
IV. Products or Services
A. Description of product line
B. Patents, copyrights, legal and technical considerations
C. Comparison to competitors' products
D. Opportunities or plans for expanding or redesigning product or service lines
E. Project changes in sales mix cost and profit. This section should fully describe each product or service including any brand names and unique features. Analyze competitive advantages and disadvantages of each. The company’s customers may be the final users or may resell to someone else. In the latter case, the business owner should know identity of the ultimate consumer as well as immediate customers.
V. Manufacturing Process (if applicable)
A. Materials
B. Sources of supply
C. Production methods
VI. Market Strategy
A. Overall strategy
B. Pricing policy
C. Sales terms
D. Method of selling, distributing and servicing products. What customer groups will the business target?To generate sales, what product or service attributes will the company emphasize? How will the company advertise and otherwise promote its products or services?
VII. Market Strategy
A. Critical risks the business faces
B. Problems that may hinder plan execution
C. How to avoid or offset problems: Things hardly ever proceed exactly according to plan. Develop contingency plans to meet crises and likely problems.
VIII. Management Plan
A. Type of business organization
B. Board of Directors composition
C. Officers, organization chart and responsibilities
D. Resumes of key personnel
E. Staffing plan/number of employees
F. Facilities plan/planned capital improvements
G. Operating plan/schedule of upcoming work for next one to two years.
A business plan should list a company’s key managers and owners (along with their education, skills and experience, duties and responsibilities), its board of directors (with their affiliations and experience) and any outside consultants.
XI. Financial Data
A. Financial history (last five years)
B. Five-year financial projections (first year by quarters; remaining years annually)
- Profit and loss statements
- Balance sheets
- Cash flow chart
- Capital expenditure estimates
C. Explanation of assumptions underlying the projections
D. Key business ratios
E. Explanation of use and effect of new funds
F. Potential return to investors compared to competitors and the industry in general. These reflect, in dollar terms, a business’ past and its expected future. Financial statements and projections must be consistent with descriptions elsewhere in the business plan, your marketing assumptions and strategy.
Additional Help Constructing a Business Plan
The U.S. Small Business Administration includes suggestions for writing a business plan on its website at:
The New Jersey Small Business Development Centers (NJSBDC) network provides comprehensive assistance to small and medium businesses (SMBs) to maximize opportunities for growth and generate economic impact statewide.
To request counseling from the SBDC of NJ, you can talk to an expert near you at https://njsbdc.com/counseling/
