An effective business plan serves at least four useful purposes:
A well-written business plan is an important document for any business seeking financing. However, a thorough business plan is an essential tool for all businesses, regardless of financial needs. Most lenders will not even discuss financing without a business plan. The business plan brings together all the goals, plans, strategies and resources of a business. In addition, if you write a comprehensive business plan prior to the commencement of operations, it may save you from significant financial and professional losses in an unprofitable business. Both the federal and state governments provide assistance in helping you create your business plan and in locating financing opportunities. Refer to the Sources of Assistance and Financing Options chapters of this guide.
There are no hard and fast rules in formatting your business plan. The length and content often vary depending on such factors as the company’s maturity, the nature and complexity of the business and the market it serves. The following outline is effective and comparatively easy to develop.
This section is a summary of the key elements of your plan. The executive summary is sometimes all the potential investor or lender will read, so it must capture his/her attention. An effective summary will properly position your company and help to distinguish your concept from the competition. It should be concise, persuasive and no more than two to three pages in length. If the executive summary fails to move your potential investor into the depths of your plan, it has failed to do its job. The Executive Summary should include:
The purpose of this section is to explain in detail who you are, what you do, what your goals are and how you plan to get there. This section should include:
The purpose of the financial plan is to provide the reader with vital financial information about your business. The financial plan should include projections for two to five years minimum. Projections, as realistic as possible, are vital for the success of a new business. If you have not had experience in preparing financial information, you may need to obtain professional assistance with this section of your business plan. This section should include:
BE = FC/(P-VC)
BE = Breakeven: The point where total costs equal total revenue
FC = Fixed Costs: Costs that remain constant over time such as rent insurance, interest, salaries, etc.
P = Price: Money received for a product or service
VC = Variable Costs per unit: The per unit costs that vary directly with sales volume such as manufacturing labor, materials, sales costs, etc.
You may include personal resumes and financial statements, credit reports, letters of reference, letters of intent, copies of leases, legal documents and anything else relevant to your plan.