How to Write a Business Plan
How to write a Business Plan
What is a Business Plan?
The Business Plan is perhaps the most important document an entrepreneur can create. The business plan helps guide the direction of the start-up company's first several years, as well as giving potential investors an idea of the company structure, goals and future plans.
What are the parts of a Business Plan?
The following information is taken from the "Business Plan Development Guide", written by Alex F. De Noble and Audrey B. Voyles
Section 1 - The Executive Summary
The purpose of the executive summary is to capture the interest of the investors/lenders so they will want to find out more about the venture. These investors are likely to spend no more than 3 to 5 minutes before making a preliminary decision about your proposal. Therefore, this section is first, and in some ways is most important. This section should emphasize key issues and be no longer than 2 to 3 pages. The following information should be addressed in the executive summary:
Company profile
Nature of the product/service being offered
Size and growth trend of the market
Make-up and background of the management team
Financing requirements
Key projections (sales, gross profits, net income)
Proposed use of funds
Proposed exit strategy including projected ROI
The executive summary is written last, after the rest of the plan is completed.
Section 2 - Business Description
This section of the business plan should provide the reader with a more detailed overview of the company and the nature of the product/service offering. It should include the following:
Mission Statement
History behind the idea or current business
Company's current or proposed legal form
Proposed entry strategy and time line of events
Description of the initial product/service (including any anticipated competitive advantages)
Product research and development
Section 3 - Market Analysis
The main objective of this section is to convince the reader that an explosive market opportunity exists, and that the entrepreneur understands it well enough to capture a share large enough to support the new venture. The entrepreneur can do this by addressing the following areas:
Description of the industry
Targeted markets
Marketing research
Competition
Barriers to entry
Section 4 - The Management Team
The strength of the management team plays a key role in investors' and lenders' decision to fund a venture. The objective of this section is to convince the reader that the entrepreneur has a management team that can effectively manage the product/service into the market place and make the venture a success. The key areas to cover are:
Background and primary responsibilities of the management team
Organizational structure
Board of directors/advisors
Ownership
Section 5 - Operations
This section should provide an overview of the strategy for implementing the business plan. The objective here is for the entrepreneur to demonstrate that he/she has an understanding of how the plan will be implemented. Also, this section will help the entrepreneur focus on relevant costs associated with implementing the plan. The entrepreneur must remember to incorporate the assumptions made in this section into the assumptions in the financial section of the business plan. Depending on the type of business, the entrepreneur should address the following key areas:
Marketing Strategy
Production Plan
Personnel
Customer Support
Future research and development plans
Section 6 - Critical Risks
In this section the entrepreneur should identify potential problems that could have a significant adverse affect on the new company. By disclosing such possibilities, the entrepreneur is letting the reader know up-front that there are risks associated with the venture. Such an approach will contribute to a heightened respect on the part of the reader for the entrepreneur. The following areas should be covered:
External Risks
Internal Risks
Insurance Provisions
Contingency plans
Section 7 - The Financial Projections
The purpose of the financial section of the plan is to convince the reader that the venture makes sense from a financial standpoint. The entrepreneur must be able to translate the idea into a plausible set of financial projections which address procurement, allocation, return on investment, and cash management. The financial section should include actual performance data for at least the preceding three to five years. If the company has no operating history, then this section will deal only with financial projections. For existing and new companies, this section will include the following:
First year financial projections by month
First year financial projections by quarter
Five year forecast
Break-even analysis
Ratio analysis
Exit strategy
Historical financial data
Section 8 - Appendix
The purpose of the appendix is to provide additional documentation that supports the business plan. This section gives potential investors the option of looking at more detailed information if they so desire. At a minimum you should make sure that you include in the appendix all information referenced in the plan. The following is a list of items that should be included.
Details explaining the tax advantages associated with the proposed structure of the new venture
Copies of patents, trademarks or copyrights that have been completed
Reviews by independent firms, publications, or outside agencies
Letters expressing an interest to buy the product or service
Questionnaires used to collect data as part of your marketing research
Detailed results of marketing studies that support your marketing assumptions
Non-compete agreements signed by the management team and key contributors, particularly if they play a key role in the invention of the new product
Resumes of the key management team and key technical advisors
Price list of competitors
Promotional brochures or advertisements that describe the product or service
What is a Business Plan?
The Business Plan is perhaps the most important document an entrepreneur can create. The business plan helps guide the direction of the start-up company's first several years, as well as giving potential investors an idea of the company structure, goals and future plans.
What are the parts of a Business Plan?
The following information is taken from the "Business Plan Development Guide", written by Alex F. De Noble and Audrey B. Voyles
Section 1 - The Executive Summary
The purpose of the executive summary is to capture the interest of the investors/lenders so they will want to find out more about the venture. These investors are likely to spend no more than 3 to 5 minutes before making a preliminary decision about your proposal. Therefore, this section is first, and in some ways is most important. This section should emphasize key issues and be no longer than 2 to 3 pages. The following information should be addressed in the executive summary:
Company profile
Nature of the product/service being offered
Size and growth trend of the market
Make-up and background of the management team
Financing requirements
Key projections (sales, gross profits, net income)
Proposed use of funds
Proposed exit strategy including projected ROI
The executive summary is written last, after the rest of the plan is completed.
Section 2 - Business Description
This section of the business plan should provide the reader with a more detailed overview of the company and the nature of the product/service offering. It should include the following:
Mission Statement
History behind the idea or current business
Company's current or proposed legal form
Proposed entry strategy and time line of events
Description of the initial product/service (including any anticipated competitive advantages)
Product research and development
Section 3 - Market Analysis
The main objective of this section is to convince the reader that an explosive market opportunity exists, and that the entrepreneur understands it well enough to capture a share large enough to support the new venture. The entrepreneur can do this by addressing the following areas:
Description of the industry
Targeted markets
Marketing research
Competition
Barriers to entry
Section 4 - The Management Team
The strength of the management team plays a key role in investors' and lenders' decision to fund a venture. The objective of this section is to convince the reader that the entrepreneur has a management team that can effectively manage the product/service into the market place and make the venture a success. The key areas to cover are:
Background and primary responsibilities of the management team
Organizational structure
Board of directors/advisors
Ownership
Section 5 - Operations
This section should provide an overview of the strategy for implementing the business plan. The objective here is for the entrepreneur to demonstrate that he/she has an understanding of how the plan will be implemented. Also, this section will help the entrepreneur focus on relevant costs associated with implementing the plan. The entrepreneur must remember to incorporate the assumptions made in this section into the assumptions in the financial section of the business plan. Depending on the type of business, the entrepreneur should address the following key areas:
Marketing Strategy
Production Plan
Personnel
Customer Support
Future research and development plans
Section 6 - Critical Risks
In this section the entrepreneur should identify potential problems that could have a significant adverse affect on the new company. By disclosing such possibilities, the entrepreneur is letting the reader know up-front that there are risks associated with the venture. Such an approach will contribute to a heightened respect on the part of the reader for the entrepreneur. The following areas should be covered:
External Risks
Internal Risks
Insurance Provisions
Contingency plans
Section 7 - The Financial Projections
The purpose of the financial section of the plan is to convince the reader that the venture makes sense from a financial standpoint. The entrepreneur must be able to translate the idea into a plausible set of financial projections which address procurement, allocation, return on investment, and cash management. The financial section should include actual performance data for at least the preceding three to five years. If the company has no operating history, then this section will deal only with financial projections. For existing and new companies, this section will include the following:
First year financial projections by month
First year financial projections by quarter
Five year forecast
Break-even analysis
Ratio analysis
Exit strategy
Historical financial data
Section 8 - Appendix
The purpose of the appendix is to provide additional documentation that supports the business plan. This section gives potential investors the option of looking at more detailed information if they so desire. At a minimum you should make sure that you include in the appendix all information referenced in the plan. The following is a list of items that should be included.
Details explaining the tax advantages associated with the proposed structure of the new venture
Copies of patents, trademarks or copyrights that have been completed
Reviews by independent firms, publications, or outside agencies
Letters expressing an interest to buy the product or service
Questionnaires used to collect data as part of your marketing research
Detailed results of marketing studies that support your marketing assumptions
Non-compete agreements signed by the management team and key contributors, particularly if they play a key role in the invention of the new product
Resumes of the key management team and key technical advisors
Price list of competitors
Promotional brochures or advertisements that describe the product or service
posted by jcibaguio at 8:12 PM
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