how to write a business plan template

how to write a business plan template

Writing an Effective Business Plan

1. Introduction

The primary purpose of a business plan is to define what the business is or what it intends to be over time. Clarifying the purpose and direction of your business allows you to understand what needs to be done for forward movement. Pointing your business in the right direction is a lot easier when there is a clear vision of what the business is trying to achieve. A business plan can provide the blueprint to run your business or it may provide the impetus to get your new business off the ground. It is the most important element to your business support. The business plan is a tool with three basic purposes: communication, management, and planning. Communication As a communication tool, it is used to attract investment capital, secure loans, convince workers to hire on, and assist in attracting strategic business partners. The development of a comprehensive business plan shows whether or not a business has the potential to make a profit. It requires honest analysis of an idea.

2. Executive Summary

The first paragraph provides a brief, clear idea of the business concept and the value it represents to its target market. This value may be expressed in terms of perceived consumer benefits, sales, or profits. An example may be a mission statement for a non-profit organization attempting to prevent child abuse. Its concept may be expressed with, “Stop the abuse before it happens.” A for-profit business should provide a clear idea of how much revenue the business will bring with an explanation of the way this money will be earned. This can be conveyed with a concept known as the “Unique Selling Proposition” or USP. An executive summary for a large bathing towel designed to dry long hair rapidly may explain, “Aquis Hair Towel is an exciting new product that will redefine the way people dry their hair. This towel will generate $15 million in retail sales in five years. Aquis will license the technology to a major manufacturer to achieve an 8% royalty on all sales and 2% equity.” (This example was borrowed from the Small Business Administration)

The executive summary is the most important part of your business plan. Because if it doesn’t interest readers, they won’t read any further. Imagine five busy investors on the ten criteria – criteria that may be used to screen initial business ideas. After perusing the executive summary, each investor must place a score for “level of interest” between one and five, and only ideas rated four or five are considered further. How may you convince all five to read on? A strong executive summary is one of the most effective ways to boost your odds of scoring the interest of these five investors. Ideally, the executive summary can act as a stand-alone document that will also be the refresher that any investor may refer to prior to reading the entire business plan.

3. Market Analysis

This begins with a description of the industry you plan to enter and the reasons you believe it will be profitable. Then it proceeds to present the data for your primary and then your secondary markets. Your aim is to convince the reader of your market insight – that you know the specific place of your product/service in the market, both now and in the foreseeable future. With this in mind, you should present evidence of a gradual increase in the potential market for your product due to external factors. Always remember to explain the logic of an increase in market demand at every step. This section should be concluded with an analysis of the competition for your product and your various strategies for entering the market. This analysis is a crucial part of the business plan. If your business is to succeed, it must be more than simply a good idea. But without the development of a clear and insightful business strategy, it can be very difficult to convince investors that this is the case. So this section and the next are pivotal in your quest for funding.

4. Business Strategies

A good way to start writing your business strategies is to summarize what has happened in the last year, as it’s likely your business strategies will be based around changing certain things. Create a list of all the good and bad things that occurred (keeping in mind the things that were in and out of your control). Then split these points into internal and external factors that affected your business. Now you can use SWOT analysis (strengths, weaknesses, opportunities, threats) to summarize your situation. Only when you have a clear understanding of your situation should you move on to writing business strategies.

After you have explained your marketing plan and are ready to begin writing your business strategies, you should keep in mind the golden rule: be consistent. It’s imperative that you maintain a consistent angle and viewpoint throughout your business strategies. If you start off providing information about a certain topic in one place and then later on address the same topic from a very different angle, it could confuse your audience and lose you a sale. This is very easy to do if you are writing business strategies for an upcoming year where you want to make big changes, just ensure that if you do plan to make changes they are potential improvements.

5. Financial Projections

The financial plan consists of a three-year profit and loss projection, a cash flow projection, a projected balance sheet, and a break-even calculation. The profit and loss projections are what the business expects to earn (or lose) over the course of the business. For the first year, monthly projections are necessary. Major income or expense items should be identified. A projected income statement provides a clear picture of how and when the company expects to be profitable. With this information, the company can go back and identify how changes to the strategy or implementation can be made to alter the projections.

One of the important benefits of business planning is to forecast future requirements of funds. A well-prepared projected financial statement will provide a great deal of assistance to a business in planning its financial strategy. This will enable the business to determine how much finance it requires, what type of finance is most feasible, when it is required, and what will be the source of funds. This part of planning helps an entrepreneur avoid the shortage of funds. The duration for a financial statement is often a year, but it should be projected monthly for the first year and annually for the next two years.