Business Plans

by Pamela Hubbell

A Business Plan is description of what a business is or will be and how it will be run. Business Plans are used to either provide a guide for running an existing business or to solicit financial backing for a new business. It is important for you to determine which of these is your objective when writing a Business Plan.

If your objective is to provide a guide for running an existing business, your goal is to project where the business is going. This type of plan allows a business not only to direct their course, but also to compare actual performance with the projected plan and make corrections as needed.

This type of planning involves broad strategic planning (generally over a five year period), short term operational planning (usually for a one year period), budgeting (quarterly), and forecasting (monthly, quarterly, or yearly). Depending on the size of the business and the requirements of the assignment, your Business Plan may only include some of these areas, such as strategic and operational planning.

If your objective is to secure funding for a new business, your goal is to describe the company's mission and strategic methods for attaining that mission. This includes aspects of planning discussed above such as strategic and operational planning. However, it is important for you to identify what type of financial backing you are seeking and who your audience will be because this affects the plan's emphasis. If your audience is a venture capital firm or other equity investor, your Business Plan should emphasize their return on investment when the business performs well. On the other hand, if your audience is a bank lender or other debt investor, your Business Plan should emphasize how the loan is protected in the event the business performs only moderately or fails. Lenders often require collateral and want to see forecasts of stable cash flows needed to pay the interest and principle on a loan.

For either objective, the Business Plan consists of both written descriptions of and financial statements about the organization. An effective Business Plan includes information on products, markets, employees, technology, facilities, capital, revenue, profitability, and any other issues relevant to the business. 

When preparing a Business Plan, your focus should be on convincing the reader that there is a market for the product, qualified management of the organization, and a forecast assuring strong financial performance.


Writing the Business Plan

The structure of a written Business Plan mirrors the actual organization in that it contains sections for business functions such as marketing, finance, and production. The general components of a Business Plan are as follows:

Title Page

Contents

Executive Summary
 
Mission and Strategy Statement 

Marketing and Sales
A. Background
B. The customer need
C. Who the customers are
D. Product/Service description
E. Strategy/Approach
F. Competitive analysis
G. Pricing/Profitability

Operations
A. Sources of input and costs
B. Processes
C. Facilities/Equipment

Management/Staffing
A. Backgrounds and qualifications of key players
B. Staffing plan

Financial Projections
A. Current financials (if an existing business)
B. Projected financial statements
C. Application of funding requested (if applicable)
D. Capital structure

Contingency Planning

Appendices
A. Supporting documents
B. Additional detail as required

Brief Guidelines for Sections

Executive Summary:

This is a one-page summary of what is in the Business Plan. Your goal is not only to summarize the contents of the plan, but also to generate the reader's interest so he or she will continue reading the plan. When your objective is to secure funding for a new business, begin with a brief description of the business, product, and market. Then summarize the qualifications of the people involved in the business. Finally summarize what is being requested (money), how it will be used, and what are the expected returns on investments. Write the Executive Summary last. For more detailed information, refer to the Executive Summary page.

[back to components]

Mission and Strategy Statement:

The Mission Statement should define what the business will do and what its long-term goals are. Generally, it should identify what need will be met by the business, who the customers are, and what technology or means will be used. Making a profit should never be included as part of the Mission Statement. The Strategy Statement should differentiate the business from others and assert why the business will succeed. The Strategy Statement should identify the business's strength, competitive advantage, and several key success factors.

[back to components]

Marketing and Sales:

Begin with a description of the product and the market the business serves. This should include a detailed analysis of the market and the company's relationship to it. Also include short-term projections on sales, pricing, revenues, and profitability (generally for one year). Refer to the Market Analysis and Industry Analysis pages for more information.

[back to components]

Operations:

Describe how the product or service is produced or acquired. Depending on the type of business, this section may vary greatly. For example, if the business's manufacturing processes are crucial to the quality of the product, the section will be more detailed and technical.

[back to components]

Management/Staffing:

Present the competence of key members of the management group by providing information on their personal background, employment history, experience in the industry or small business, management experience, education, and motivation. Also present a staffing plan (in tabular format) of the types and numbers of people the business plans to hire in the near future.

[back to components]

Financial Projections:

Using financial statements, present a picture of the business's projected performance. You should include projected financial statements for at least three years. The first year should be forecasted monthly, and thereafter it should be quarterly. If the Business Plan is for an existing business, also include actual statements for the past three years. The financial statements to be included are the Income Statement, the Balance Sheet, and the Cash Flow Statement.

[back to components]

Reference

Lasher, William. The Perfect Business Plan Made Simple. New York: Doubleday, 1994.

Writing Center 141 East Twelfth Street, Claremont, CA 91711 909-607-0012

2014 Claremont Graduate University 150 E. 10th St., Claremont, CA 91711 (909) 621-8000 Campus Safety Emergency Info Campus Map/Driving Directions