Business Plan Outline
It is important to start with a business plan outline so that you do not miss any issues and only concentrate on your strengths. Your business plan will outline the route you intends to take to grow your revenues by using all of the business and not just parts of it.
There is no longer any doubt that to survive in the present market you need to create a business plan; so why do so many businesses race towards failure without bothering? Well they just do not have the time - they have a failing business to run; they are hoping things will work out - they do not have the time to plan how to make it a success; they are too busy trying to save it.
And yet a business plan is simple to produce; you just need to answer a few questions ...
Your Business Plan Outline
Below is an outline for a business plan. Use this model as a guide when developing the business plan for your business
Elements of a Business Plan
- Cover sheet
- Statement of purpose
- Table of contents
- Description of business
- Operating procedures
- Business insurance
- Financial data
- Loan applications
- Capital equipment and supply list
- Balance sheet
- Breakeven analysis
- Pro-forma income projections (profit & loss statements)
- Detail by month, first year
- Detail by quarters, second and third years
- Assumptions upon which projections were based
Pro-forma cash flow
- Detail by month, first year
- Detail by quarters, second and third years
- Assumptions upon which projections were based
- Tax returns of principals for last three years
- Personal financial statement (all banks have these forms)
- In the case of a franchised business, a copy of franchise contract and all supporting documents provided by the franchisor
- Copy of proposed lease or purchase agreement for building space
- Copy of licenses and other legal documents
- Copy of resumes of all principals
- Copies of letters of intent from suppliers, etc.
The business plan - what it includes
- the description of the business,
- the marketing plan,
- the financial management plan and
- the management plan.
Exploring the Elements of a Simple Business Plan
Small Business Secrets Course
Business Plan Outline - Description of the Business
In this section, provide a detailed description of your business. An excellent question to ask yourself is: "What business am I in?" In answering this question include your products, market and services as well as a thorough description of what makes your business unique. Remember, however, that as you develop your business plan, you may have to modify or revise your initial questions.
The business description section is divided into three primary sections. Section 1 actually describes your business, Section 2 the product or service you will be offering and Section 3 the location of your business, and why this location is desirable (if you have a franchise, some franchisors assist in site selection).
When describing your business, generally you should explain:
- Legalities - business form: proprietorship, partnership, corporation. The licenses or permits you will need.
- Business type: merchandizing, manufacturing or service.
- What your product or service is.
- Is it a new independent business, a takeover, an expansion, a franchise?
- Why your business will be profitable. What are the growth opportunities? Will franchising impact on growth opportunities?
- When your business will be open (days, hours)?
- What you have learned about your kind of business from outside sources (trade suppliers, bankers, other franchise owners, franchisor, publications).
A cover sheet goes before the description. It includes the name, address and telephone number of the business and the names of all principals. In the description of your business, describe the unique aspects and how or why they will appeal to consumers. Emphasize any special features that you feel will appeal to customers and explain how and why these features are appealing.
The description of your business should clearly identify goals and objectives and it should clarify why you are, or why you want to be, in business.
Product and / or Service
Try to describe the benefits of your goods and services from your customers' perspective. Successful business owners know or at least have an idea of what their customers want or expect from them. This type of anticipation can be helpful in building customer satisfaction and loyalty. And, it certainly is a good strategy for beating the competition or retaining your competitiveness. Describe:
- What you are selling.
- How your product or service will benefit the customer.
- Which products/services are in demand; if there will be a steady flow of cash.
- What is different about the product or service your business is offering.
Business Plan Outline - The Marketing Plan
Marketing plays a vital role in successful business ventures. How well you market you business, along with a few other considerations, will ultimately determine your degree of success or failure. The key element of a successful marketing plan is to know your customers-their likes, dislikes, expectations. By identifying these factors, you can develop a marketing strategy that will allow you to arouse and fulfill their needs.
Identify your customers by their age, sex, income/educational level and residence. At first, target only those customers who are more likely to purchase your product or service. As your customer base expands, you may need to consider modifying the marketing plan to include other customers.
Develop a marketing plan for your business by answering these questions. (Potential franchise owners will have to use the marketing strategy the franchisor has developed.) Your marketing plan should be included in your business plan and contain answers to the questions outlined below.
- Who are your customers? Define your target market(s).
- Are your markets growing? steady? declining?
- Is your market share growing? steady? declining?
- If a franchise, how is your market segmented?
- Are your markets large enough to expand?
- How will you attract, hold, increase your market share? If a franchise, will the franchisor provide assistance in this area? Based on the franchisor's strategy? how will you promote your sales?
- What pricing strategy have you devised?
How you advertise and promote your goods and services may make or break your business. Having a good product or service and not advertising and promoting it is like not having a business at all. Many business owners operate under the mistaken concept that the business will promote itself, and channel money that should be used for advertising and promotions to other areas of the business. Advertising and promotions, however, are the life line of a business and should be treated as such.
Devise a plan that uses advertising and networking as a means to promote your business. Develop short, descriptive copy (text material) that clearly identifies your goods or services, its location and price. Use catchy phrases to arouse the interest of your readers, listeners or viewers. In the case of a franchise, the franchisor will provide advertising and promotional materials as part of the franchise package, you may need approval to use any materials that you and your staff develop. Whether or not this is the case, as a courtesy, allow the franchisor the opportunity to review, comment on and, if required, approve these materials before using them. Make sure the advertisements you create are consistent with the image the franchisor is trying to project. Remember the more care and attention you devote to your marketing program, the more successful your business will be.
Competition is a way of life. We compete for jobs, promotions, scholarships to institutes of higher learning, in sports-and in almost every aspect of your lives. Nations compete for the consumer in the global marketplace as do individual business owners. Advances in technology can send the profit margins of a successful business into a tailspin causing them to plummet overnight or within a few hours. When considering these and other factors, we can conclude that business is a highly competitive, volatile arena. Because of this volatility and competitiveness, it is important to know your competitors.
Questions like these can help you:
- Who are your five nearest direct competitors?
- Who are your indirect competitors?
- How are their businesses: steady? increasing? decreasing?
- What have you learned from their operations? from their advertising?
- What are their strengths and weaknesses?
- How does their product or service differ from yours?
Start a file on each of your competitors. Keep manila envelopes of their advertising and promotional materials and their pricing strategy techniques. Review these files periodically, determining when and how often they advertise, sponsor promotions and offer sales. Study the copy used in the advertising and promotional materials, and their sales strategy. For example, is their copy short? descriptive? catchy? or how much do they reduce prices for sales? Using this technique can help you to understand your competitors better and how they operate their businesses.
Pricing and Sales
Your pricing strategy is another marketing technique you can use to improve your overall competitiveness. Get a feel for the pricing strategy your competitors are using. That way you can determine if your prices are in line with competitors in your market area and if they are in line with industry averages.
Some of the pricing strategies are:
- retail cost and pricing
- competitive position
- pricing below competition
- pricing above competition
- price lining
- multiple pricing
- service costs and pricing (for service businesses only)
- service components
- material costs
- labor costs
- overhead costs
The key to success is to have a well-planned strategy, to establish your policies and to constantly monitor prices and operating costs to ensure profits. Even in a franchise where the franchisor provides operational procedures and materials, it is a good policy to keep abreast of the changes in the marketplace because these changes can affect your competitiveness and profit margins.
Business Plan Outline - The Management Plan
Managing a business requires more than just the desire to be your own boss. It demands dedication, persistence, the ability to make decisions and the ability to manage both employees and finances. Your management plan, along with your marketing and financial management plans, sets the foundation for and facilitates the success of your business.
Like plants and equipment, people are resources-they are the most valuable asset a business has. You will soon discover that employees and staff will play an important role in the total operation of your business. Consequently, it's imperative that you know what skills you possess and those you lack since you will have to hire personnel to supply the skills that you lack. Additionally, it is imperative that you know how to manage and treat your employees. Make them a part of the team. Keep them informed of, and get their feedback regarding, changes. Employees oftentimes have excellent ideas that can lead to new market areas, innovations to existing products or services or new product lines or services which can improve your overall competitiveness.
Your management plan should answer questions such as:
- How does your background/business experience help you in this business?
- What are your weaknesses and how can you compensate for them?
- Who will be on the management team?
- What are their strengths/weaknesses?
- What are their duties?
- Are these duties clearly defined?
- If a franchise, what type of assistance can you expect from the franchisor?
- Will this assistance be ongoing?
- What are your current personnel needs?
- What are your plans for hiring and training personnel?
- What salaries, benefits, vacations, holidays will you offer? If a franchise, are these issues covered in the management package the franchisor will provide?
- What benefits, if any, can you afford at this point?
If a franchise, the operating procedures, manuals and materials devised by the franchisor should be included in this section of the business plan. Study these documents carefully when writing your business plan, and be sure to incorporate this material. The franchisor should assist you with managing your franchise. Take advantage of their expertise and develop a management plan that will ensure the success for your franchise and satisfy the needs and expectations of employees, as well as the franchisor.
Business Plan Outline - Financial Management plan
Sound financial management is one of the best ways for your business to remain profitable and solvent. How well you manage the finances of your business is the cornerstone of every successful business venture. Each year thousands of potentially successful businesses fail because of poor financial management. As a business owner, you will need to identify and implement policies that will lead to and ensure that you will meet your financial obligations.
To effectively manage your finances, plan a sound, realistic budget by determining the actual amount of money needed to open your business (start-up costs) and the amount needed to keep it open (operating costs). The first step to building a sound financial plan is to devise a start-up budget. Your start-up budget will usually include such one-time-only costs as major equipment, utility deposits, down payments, etc.
The start-up budget should allow for these expenses.
- personnel (costs prior to opening)
- legal/professional fees
- payroll expenses
An operating budget is prepared when you are actually ready to open for business. The operating budget will reflect your priorities in terms of how your spend your money, the expenses you will incur and how you will meet those expenses (income). Your operating budget also should include money to cover the first three to six months of operation. It should allow for the following expenses.
- loan payments
- miscellaneous expenses
- payroll expenses
Business Plan Outline - Systems
The accounting system and the inventory control system that you will be using is generally addressed in this section of the business plan also. If a franchise, the franchisor may stipulate in the franchise contract the type of accounting and inventory systems you may use. If this is the case, he or she should have a system already intact and you will be required to adopt this system. Whether you develop the accounting and inventory systems yourself, have an outside financial advisor develop the systems or the franchisor provides these systems, you will need to acquire a thorough understanding of each segment and how it operates. Your financial advisor can assist you in developing this section of your business plan.
The following questions should help you determine the amount of start-up capital you will need to purchase and open a franchise.
- How much money do you have?
- How much money will you need to purchase the franchise?
- How much money will you need for start-up?
- How much money will you need to stay in business?
- Other questions that you will need to consider are:
- What type of accounting system will your use? Is it a single entry or dual entry system?
- What will your sales goals and profit goals for the coming year be? If a franchise, will the franchisor set your sales and profit goals? Or, will he or she expect you to reach and retain a certain sales level and profit margin?
- What financial projections will you need to include in your business plan?
- What kind of inventory control system will you use?
Your plan should include an explanation of all projections. Unless you are thoroughly familiar with financial statements, get help in preparing your cash flow and income statements and your balance sheet. Your aim is not to become a financial wizard, but to understand the financial tools well enough to gain their benefits. Your accountant or financial advisor can help you accomplish this goal.
Evaluating your Business Plan
It is often difficult to figure out how to research your idea, especially if you have never been in business for yourself. You will need decide if your idea has profit potential. Use the following twenty steps as a guide to help you determine if your idea is worthwhile and the answers will assist you in developing your business plan
Create a profile of your paying customer.
Your customers might be consumers or retail stores, wholesalers or manufacturers, government or other institutions. List as many points as you can about who you think will buy your product. If you are selling to a consumer market, try collecting magazine pictures of what you think your customer looks like. List their age, gender, marital status, income and try to describe their lifestyle.
If you expect to sell to another business or organisation, estimate what industries they are in, what kind of company, how long they have been in business, how many employees, their annual sales, what department would be interested in your offer, who their customers are and anything else you can identify.
List and describe the features / benefits of your product or service.
State how these features will benefit your customer. Defining the features of your idea and determine what these features do for your customer. You will create a list of the selling points that you can use in your advertising, your brochures, and in your sales presentation. This will help you establish why your customer might buy your product or service.
Define the main geographic area you intend to sell to during your first year.
Are you selling locally? regionally? nationally? internationally? By defining where you are going to sell in your first year you immediately put yourself in focus. You will likely be able to figure out how many potential customers are located in this area. If you are selling to a large geographic area, you will probably need a good deal of money, marketing and resources. Defining this area makes it much easier to work out what your needs are going to be.
What competitors are selling to this geographic area?
Once you determine who and where your customers are, you must determine whom you have to share them with. Find out if similar products are carried in retail outlets, similar companies advertise in the yellow pages or are listed in industry directories.
What price do these competitors charge?
Establish what your competitors charge and list selling points of their product or service. Try to find the industries wholesale and retail prices.
Estimate what price you can charge, yet still remain competitive.
Determining how competitive you can be is a big step toward how feasible your idea is. If your product is superior to your competition and your market is not very price sensitive then you may be able to charge considerably more than your competition. If you are selling to retailers or wholesalers, you will have to leave enough room for others to mark your products up .
Why would your customers buy from you instead of your competition?
What is unique about your offer that would benefit your customer? There may be something about your product, your price, the friendliness and speed of your service, your hours of operation, your level of quality, the skills of your employees or other aspect of your business.
Business Plan Outline - Market Trends
List and briefly describe trends in your market or industry.
Knowing trends in your market or industry will help you determine where it's going and how your business can take advantage. Check business and industry/trade magazines for recent articles. Some libraries have a "business periodicals index" to help you find these articles.
What is the growth potential of the market?
Is your industry or market growing or declining? Are trends or fads new, peaking or declining? Generally, you will be more successful being part of a growing market. Check business and industry/trade magazines for recent articles.
How are you going to let your customer know you exist?
So now you know who your customer is, where they are and why they will buy your product. How are you going to communicate your offer to them? Will you rely on having a good location? Will you use advertising? Sales calls? Direct marketing? Yellow pages? You may find it helpful to examine the Business Promotion Idea List.
Estimate Sales for the first year.
Base your estimates on the size of your market, level of competition, your price, your plans for promotion and trends in your industry. Create a pessimistic, an optimistic, and a middle of the road forecast.
List any government or Local Authority approvals necessary to launch your idea.
There may be some extensive or expensive regulations involved with your type of business. Your local Small Business Service (or Business Link until April 2001) can assist you with determining regulations affecting your business.
Briefly describe your manufacturing or purchasing process.
State how you will make or acquire the goods you plan to sell. Use your sales forecast to help you plan this part of your operation. Think about potential growth in future years.
Briefly describe your fulfilment process.
How does your customer get their order and how do you get paid.
Estimate the capacity of your operation in the first year.
How big will your operation be? What is the limit of what you can produce, stock, service and sell. Can you meet your sales forecasts? Have you taken future growth into consideration?
Make a list your potential suppliers.
Your concept may rely heavily on the reliability of your raw material suppliers and/or your subcontractors. How dependent will you be? Work out who your suppliers will likely be and try to find back-up suppliers.
Make a list of the resources you will require to start your business.
List the employees, floor space, leasehold improvements, equipment, vehicles, inventory, supplies and services you will require to open your business. Estimate the costs of each item on your list. You will need this list to determine your start up costs.
Determine what resources you will finance, lease or rent.
You will probably not pay for large purchases outright but will instead lease, rent or finance these items. You will need to estimate your monthly payments to help you prepare a cash flow worksheet.
List your financial strengths and weaknesses.
How much of your own money do you have for this business? What assets can you use as collateral to secure a loan? Do you already own the vehicles, computer equipment or tools needed to start your business? Do you have family, friends or others who are prepared to invest in your business? Do you have a strong personal credit rating?
Prepare a monthly cash flow forecast for your first year of operation.
Cash is the oil in the engine of your business - regardless of how much potential profit you can make, cash will determine whether you can survive, or not. See the section on Cashflow for this aspect.
A strong Business Plan may not guarantee success; but it could certainly prevent failure!
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