Business planning is about creating results. Whether you are researching the feasibility of a business concept, approaching a bank for a business loan or trying to attract investors, a business plan provides the roadmap for your business idea. The contents of the plan should match the purpose of the business you are developing.
What is a business plan?
A business plan is a written document that evaluates all aspects of the practicality of a business idea. The business plan provides a blueprint for planning, goal setting, implementation and evaluation of a business model. It also helps the business owner prepare for possible problems and opportunities.
Unfortunately, many people think a business plan is a tool only used by new businesses getting started, or those who are looking for a business loan. While it is true a business plan is required when applying for a business loan, and is an incredibly helpful tool for start-ups, it is also a valuable tool for existing businesses.
Why prepare a business plan?
A business plan is useful for many reasons. First and foremost, it will define and focus your objectives using appropriate information and analysis tools. The business plan is often used as a sales tool in working with bankers, investors and lenders. This tool can also be used to identify weaknesses of the business, as well as offer a reality check on the viability of the business. Finally, the business plan provides both the business owner and potential investors profitability projections.
Business Plan Format
Most business plans include two primary sections: a company narrative and financial documentation. Both sections are equally important.
The standard narrative section includes the following:
- Executive Summary – This section includes information on the business owner(s) and important highlights of the business idea.
- Business Description – Identifies the legal structure of the business, historical information, start-up plans, etc.
- Products/Services – Describes services and/or products offered. It is important to focus on the benefit to the customer and any unique qualities.
- Market Analysis – Highlights the current market, customer needs, location of customers, and how to reach them.
- Marketing Plan – Details how business will reach the customer base. Specific information on how, where, and cost of marketing efforts should be provided in this section.
- Management Team –Bios for the key management team, personnel strategies, with focus on why your team is qualified to run the business.
The second area of the business plan, are the financial documents:
- Balance Sheet – Provides a snapshot of the financial position at any given time. The balance sheet compiles assets, liabilities and the owners’ or stakeholder’s equity.
- Income Statement – Also known as the profit and loss statement, the income statement provides a financial status over a specified period of time. The income statement illustrates how much profit or debt a company has accumulated during that period of time.
- Cash Flow – Cash Flow refers to the cash being moved into or out of a business.
- Break Even Analysis – The break-even point is the point where total revenue received equals the total costs associated with the sale of the product.
- Budgets – If the business is a start-up, a detailed list of any/all expenses related to opening the business should be included. In addition, an ongoing monthly expense list should also be included in the plan.
- Projections – When presenting a business plan to a bank for funding, the banker will want to see projected sales and expense figures for a three-year period.
Where to find help writing a business plan
A number of resources are available to business owners in a variety of delivery methods. The Small Business Administration (SBA) offers detailed business planning information at their website, sba.gov. In addition, the Alaska Small Business Development Center (SBDC) is located in your area and offers free business counseling, including business planning. We also offer business plan writing workshops, as well as business plan software products, including Pitch Then Plan, Business Plan Pro, and Ultimate Business Planner.
Whether you’re a startup or an existing business, the business plan is a valuable tool in guiding you through any development phase of your operations. Business planning can be time consuming and intimidating, but with the help of technology tools and with the support of your local small business advisors at SBDC or online support from SBA, this daunting task can prove to be a life-saving tool for the life of your business.
Written by Julie Nolen, Associate State Director of the Alaska Small Business Development Center