When Rhonda Jordan wanted to start a fabric store, “write a business plan” was one of the first pieces of advice she got.
She gave it a shot, and in March 2012, her plan succeeded when she launched Tabby Fabric and Studio in Beaufort, South Carolina. What’s even more intriguing is that the business started to break even just months after the launch.
Her success story reveals the three factors that played a significant role in her store’s successful launch: Rhonda’s ingenuity, financing… and business plan.
Whether you’re growing an existing business or starting a new one, you’ll need to learn the art of writing a business plan.
A business plan provides a roadmap of your objectives and the measures needed to get your business off the ground. Without one, you leave a lot of questions (from investors, banks, partners, third-parties, backers, etc.) unanswered.
Why Is a Business Plan Important?
Palo Alto Software did a survey of its customers and asked questions about their goals, business planning and businesses. The results showed that those with complete business plans were 2x more likely to obtain capital, secure a loan and grow their businesses than those who didn’t write a plan.
Source: Small Business Trends
So Rhonda’s chances of securing financing for her fabric store would have been slim without a business plan. But even if you don’t need to secure financing or grow capital, writing a business plan can help your venture significantly. Here’s why:
In short, a good business plan will convince you to go ahead with opening a business—or rethink your strategy.
How to Write a Strong Business Plan
A strong business plan will help you set priorities, save time and free up resources. Below is a business plan template along with tips on how to write each section:
The executive summary is the first section of any business plan. It is 1 or 2 pages in length, and provides an overview of your business objectives. The executive summary is an opportunity to engage the reader because it’s the first thing they come across in a business plan. Even though it’s actually the first section of a business plan, the executive summary should be written at the end.
In your executive summary, you should include your mission statement, business information, financial information, product and service details, market opportunity, future projections, and exit strategy. The primary reason for writing it last is so that you can include the best highlights from other sections of the business plan in your executive summary.
This section includes the description of your enterprise, its ownership and legal structure, and the plan that it’s going to follow to start operations in the marketplace. After going through this section, the reader should have a clear picture of your business structure, the industry you’re targeting, and your main strengths.
Therefore, you should include things like whether you’re opening a limited liability company or a corporation. You also have to define your potential customers and what would be the competitive advantage of your product/service. At the end of the business overview, you should explain how you plan to generate recurring profits.
In this section, you should talk about your target market’s size, main competitors, regulations and potential for gaining market share. To find this information, you can look into:
When analyzing competitors, you should include information like their competitive advantage, current market share, and recurring revenue. A lot of background research needs to be done. You may want to use the Porter’s 5 Forces model or SWOT Analysis when mentioning your competitors to give readers a good understanding of what your business is up against.
Next, write about the special regulations in your target industry such as policies for hiring remote workers and laws that require you to protect the sensitive information of your customers.
With data gathered through research on market size, competitors and industry regulations, you can forecast anticipated growth of your market share in the short and long-run.
This section should focus on how your business can take advantage of the opportunities you’ve identified. Expect to include answers to these questions:
This part of the business plan outline also requires you to talk about the 4 P’s: Product, price, place and promotion.
For the product, write about what needs it satisfy and what features have been included to satisfy those needs. You can also talk about your branding strategy, the name of the product, and how customers will use it.
The pricing part should talk about the value of the product, any established price points, standard markup in your market, and your price in comparison with your competitors’. Ensure that your price covers costs and write about how you plan to find ways to reduce your costs.
For the place section, write about where customers would look for your items. Do they shop online? Or do they prefer brick-and-mortar outlets? You can analyze the distribution channels leveraged by your competitors, and find ideas on using them to distribute your products. The place matters most if you’re a local business.
Promotion will include the tools and strategies you’ll use to reach your target audience. You can write about cultural or environmental issues and how they can influence your promotional activity. Also, feel free to write about low-cost promotional opportunities, such as the use of LinkedIn advertising to promote a small business in the B2B industry.
In this section, write details about people who will have the management responsibilities, as well the description of their key roles in the business. A biographical summary of business owners, key managers and board of directors needs to be included.
You also have to explain the following:
The management section may also include the criteria used to assess performance, increase compensation, and give bonuses. Explaining how the success of your business is contingent upon the performance of your management is critical to the success of your business plan.
And lastly, how will the management change if the business is acquired or if the business acquires a new company? Would all levels of hierarchy change or the middle management only? Would the company need to recruit additional staffers to fill management positions? Details like these should be included.
For this section of the business plan outline, you need to write about the internal structure of your business and what equipment you will purchase to produce your goods and services for customers. You should also discuss how you plan to manage operational resources and legal complications that may arise.
The operations plan covers instructions to guide people in the day-to-day business operations. The key personnel listed in the management plan should be able to take guidance from the operational plan to carry out tasks and activities needed to run the company.
You will also talk about the location or facilities you’ll need to run the company (machinery, real estate, etc.). Some startup businesses only need an internet connection, a phone and a desk. The location proximity, such as being close to airports, highways, or rail, can also be crucial.
List potential barriers to production capacity and an alternate plan should the business needs exceed the available resources. Also, talk about the key suppliers you’ll be working with and the purchasing process. While writing, ask yourself:
Lastly, write about labor and break down staffers by the functions they will perform, their hours of operation, and expected hourly wage.
The last section of the business plan should include information about the company’s finances. You will tell the current financial status of your company and provide projections for future expansion. Projections should extend at least 2 years into the future (investors and other parties usually require 2-5 years).
Important elements of the financial plan include:
It’s important to explain any assumptions you make about the factors or trends that could influence the financial forecast. All the assumptions should have a historical base to them because investors, banks, etc. want to see an analysis that’s backed up with solid assumptions or accurate data.
To create a strong financial plan, include the following:
You can create an appendix section for including the last few items. Backing the numbers with figures will give more credibility to your business plan while supporting the predictions made for the future.
Where to Find a Business Plan Template
The business plan template discussed above is a basic one. Below is a list of resources that can be used to download business plan templates that will enable you to customize the structure of your business plan.
You can use any of these resources while writing a business plan to save time and get ideas for existing templates.
When writing a business plan, remember to be realistic, clear and concise. It will serve as a recognized document that will outline exactly what your business wants to do and how it plans to stay competitive in the future. The above-mentioned tips will ensure you start off on the right foot with a business plan outline.