Remember when you were a kid and your allowance was just never enough for all the hockey cards or bubble gum that you wanted? So like any normal kid, you came up with creative ways to make more money. Maybe you tried selling an old broken toy to your little brother, or perhaps you decided to take on a venture like the iconic lemonade stand. Perhaps, you would try poaching supplies from the kitchen, only to be run off by a parent. Or maybe, you had a more organized approach. Maybe some of you knew you would have to have a plan before the parents would let us get into something so involved. You would make a list of what was needed, what you would charge per serving and how you split up the money. It would have been your first business plan – albeit a little undeveloped.
No matter the size, age or purpose of a business – it needs a plan. Even if you started your business years ago with the intention of just running it out of your garage, you still need a plan. So what is a business plan, aside from a list of supplies and prices? It is a formal statement of goals for your business, the reasons they are attainable and a plan for reaching them. Some business plans are hundreds of pages long, others begin as notes on a scrap piece of paper. No matter how it begins, the end result will bring your business closer to success. Below is an outline of the main components to your business plan.
The executive summary summarizes your business plan. The most important component of it is your mission statement. It will sum up the purpose of your business, what you will tell your clients to make them understand what it is you do. The executive summary will not contain any technical language, highlighting the most important components of the business and how you plan to make it succeed. Basically, if your reader does not wish to go over every detail of the entire plan at that particular time, they will be able to read the executive summary and still have a good grasp of your venture. If you are drawing up a plan for an existing business, include how many years in operation, the existing legal and financial structures. The document will make recommendations on how you plan to meet your goals, but the step by step details will be in the body of the business plan. If there are multiple sections in your business plan, the executive summary will summarize them. If you are seeking financial assistance, this where you would sum up your needs, the reasons you need the money and how you plan to pay it back. The document will end with a conclusion summarizing the overall executive summary. The executive summary should be located at the front of your business plan, but it is best to write it after you have written the rest of the plan first. When all the research is done and you have thought about every little detail of the past, present and future of your venture, the executive summary will be much easier to write.
Here is where you describe your business in more detail. Some very small businesses do not include this section because the information is already adequately listed in the executive summary. For mid to large ventures, this section is very important as it gives the reader a much clearer idea of the day to day operations. If you are an existing business, list the details on your corporate structure, the size of your work force, key product lines, physical locations of assets (such as real estate and large equipment) and the annual sales figures. If you are a brand new business, your business description will be more simple. List employees you expect to hire, projected sales figures, the products you expect to push the most revenue, location of facilities (where you plan to do business), at what stage of development you are in and your corporate structure (if you have one). The management team is also outlined in this section, as well as their responsibilities.
For larger more comprehensive ventures, there will be sections on business environment analysis, industry background and competitor analysis. These are very important issues to cover, especially when asking for financial assistance. Any one defect in the above assessments could mean the failure of the venture, so be realistic in your research and conclusions. For smaller businesses, old or new, these sections may not need to be covered at all. If you feel they are relevant to your plan but do not require their own section, simply include them with the business description portion of the business plan.
The business description will probably be the first and easiest part of the business plan to write. It is a great way to begin, as it gets you thinking about all the details you may not have considered before. If we continued to use the lemonade stand as our example business for drawing up a business plan, then the business description would probably be very simple. We would describe whose house our table would be in front of, if a parent was supervising the operations and what we have already done in preparation to open. In part two of this series, we will look at the core of our business and how to document it.