Writing Tutorials

How to write a business plan

By Gerry Richmond

This site has been reproduced with the kind permission of Gerry Richmond. His original site can be found at www.business-plan-help.com

Key Parts and Examples of Business Plans

Here's a brief look at the key parts of a business plan. I have also included some business plan examples, and tips on how to write each section of your business plan so as to help you communicate your business ideas as clearly as possible.

Business Plan Cover

Your business plan cover creates your first impression. Here’s what you need.

• Company Logo and Business Name
• Title
• Address
• Principal Officers
• Contract Details

Business Plan Executive Summary

This is the most important section. Every potential investor or decision-maker will go straight to this section and many may not read beyond the summary. Your summary must clearly explain your aim and include essential facts such as the main aims, business ideas, key financial and marketing facts, profit projections and capital requirements. Keep your summary short—to a maximum of 300 words.

poor executive summary

The sports goods industry has expanded rapidly in the past several years and growth is expected to continue at a strong pace for the foreseeable future. This offers excellent opportunities for new companies to enter this market.

SportsTM intends to address the needs of customers in this market who seek higher quality, higher priced sporting accessories. We will address this need by importing, selling and distributing high-quality, designer sports equipment from cheap manufacturing centers overseas.

 

 

 

 

 

excellent executive summary

SportsTM is a $14 million a year turnover company supplying European and North American sports shops with Asian-made specialist sports clothing and footwear.

By raising and investing $8 million in marketing direct to customer through lifestyle magazines and the Internet, SportsTM expects to double its turnover within two years in this market that grew by 12 percent last year.

SportsTM expects to offer investors a 10% to 18% return in each of the next three years.

 

 

Writers Tip: Think of the executive summary as the only part of the business plan most readers will study. Even if they go through the whole plan, what you want them to remember is the information in the executive summary.

Writers Tip: Imagine you met a potential investor who was about to go into a meeting. How would you explain and sell your business idea in 45 seconds? Keep this idea in mind and it will help you concentrate on the most relevant 200-300 words to put in your executive summary.

When you have drafted your first 200-300 words, you can decide what other information you need in the executive summary. For example, you might to explain what your company has achieved so far, how you are raising other finance and the role of the management team. However, go through your executive summary critically. Make you have covered the most important points of your business plan. Do not dilute the summary with background information or general statements.

Business Idea

Here you must describe your business idea, the product or service you will sell and its markets. Set out the competitive advantage the business idea offers. Make sure you detail:

• The benefits you offer your customers.
• The unique features of your product or service.
• How you will attract and keep customers.
• How you can meet this demand at a profit.
• How you will beat your competitors.

The business idea should be concise to keep your readers’ attention.

business idea example

Autoweb site software uses templates to guide users in designing web pages. Twelve templates let inexperienced computer users design and submit web pages. Users only need to type in information, choose style and typefaces or click on clip art from a built-in database. Once designed, Autoweb site automatically loads and indexes the web page to its own library of sites and sends details to the main search engines.

The main marketing feature is to let users design the first web page live on the Internet. If users like the result, they pay $20 to submit the page or pay $99 to receive a full copy of Autoweb site.

As the software is web-based, all marketing and product supply will be on the Internet, serving all English-speaking countries. Test marketing suggests this low-cost web design service would lead, in the first year, to over 150,000 users trying the service, 28,000 submitting pages at $20 and 3,500 users buying the software for $99. This turnover of $900,000 would lead to a profit of around $350,000 in the first year.

 

Business Plan Description

You’ll need a good business description, that places your business within the industry. You’ll need to look at the trends in the industry and your company’s size, products or services and the main market. If you are writing this description for potential investors, don’t assume they know as much as you. If you are writing the description for your own working business plan, don’t skimp thinking this is a waste of time. Writing your business assumptions down on paper helps you clarify and think about some of the basic information underlying your business plan.

Here is an example of a business plan description for a existing computer IT services company:

business description example

ComputerFix is a $950,000 a year turnover, private company offering Californian organizations service contracts to maintain computers and software. Four state government departments comprise 90 percent of the work, through annual service contracts. Now in its second year, ComputerFix contracts out the repair work to six freelance engineers. By not directly employing engineers, the company can compete at lower costs and price than its competitors in this statewide $2 billion business.

This year, ComputerFix expects to earn $190,000 profit after a first-year loss of $110,000.

New business comes from client recommendations and running business seminars for IT managers in running helpdesk and service support. The company plans to start seminars on budget controls and management reporting for IT manager and expand its service into this area.

 

 

 

 

 

 

Market Analysis

It’s essential you understand the industry, your target market and competitors. The market analysis is a clear picture of your strategy to sell at a profit. It looks at the conditions and trends in the industry, reviews the market for your product or service, and describes the competition. Then you have to show your business plan to develop your share of the market. You’ll have to specifically describe your customers, how you are going to spend your advertising budget, and use your sales force to meet demand.

Writers Tip: A business plan looks into the future and most are overoptimistic. When writing up your market analysis, think conservatively. Are your sales going to be that high? Are your costs going to be that low? Thinking conservatively will make you and your business forecasting more realistic and plausible.

In drawing together your market analysis, think about your customers and what makes your product attractive to them. Here you can expand on such information as:

• The benefits you offer your customers.
• How you can offer a better price, quality or service than your competitors.
• How you are going to expand sales while controlling costs.
• Your proposed advertising and marketing budgets.

Financial Position and Forecasts

Your financial forecasts are critical. They must be realistic and plausible, highlight the most important financial points and show the potential and pitfalls. Usually, you should put worst-case, expected-case and best-case forecasts. Whenever possible, back up current financial positions and forecasts with marketing data. For example, sales growth figures for the past three years are more powerful in backing up your forecasts than assumed growth based on a hoped-for market share.

Make sure you concentrate of the three most important financial breakdowns.

• Cash-flow Projection and Break-even Point
• Profit and Loss Statement
• Balance Sheet

Don’t forget to give historical as well as current and projected data. Include any current debts, funding sources, start-up costs for a new business, return on investment and so on. Include all the information the reader needs to understand your business, its history and its prospects.

Writers Tip: If you find putting this information together difficult, get professional advice from your accountant.

Funding Needs

If you’ve designed your business plan to raise money, state specifically how much you need and summarize how you plan to use the money. Include information on existing finances, alternative sources of finance, collateral, guarantors, and contracts and so on. If you are an existing business, list your main customers, expected contracts, past sales performance and so on.

Management Team

A competent team at the top of the company can mean the difference between success and failure. In both new ventures and established companies, don’t forget to look at the strengths and weaknesses of your management team and others contributing to the business idea.

Describe the team that will run your business and any important new positions you need to fill. List the talents and experience they bring, where you need to improve personnel and how any changes will help meet the business's objectives.

management team example

Albert Bungle BSc FCCA, Finance Director (aged 43)

Joined the company as a finance director in 1985, having been group controller with Bigmania P/L since 1980 until it was taken over by Supercorp in 1985. He was responsible for all financial reporting at Bigmania, was closely involved in their $180 million rights issue in 1984 and was part of the bid defense team. Previous experience includes two years as finance director of a $82 million turnover engineering and contracting subsidiary of Hugecon plc, during which he oversaw the installation of a new computing and accounting system.

 

 

 

 

Finally, make sure the board; advisers, such as accountants and advertising agency; workforce and industry-specific backup is there to support the aims of management.

Next: Business plan attachments

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