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What is a business plan?
A business plan is a document that helps you transform an idea into reality. Your business plan describes your business from a planning aspect: What will you sell? How will you market it? How will you make a profit? A business plan is an important tool to help you reach your goals.
Your business plan should give an overview of your business, your product, the current market environment, and most importantly, show how you will make a profit. Larger business plans may include an executive summary, integrated marketing plan and an appendix for supplementary material (charts and reports).
How is a business plan used?
You can emphasize different areas of your business plan, according to its purpose. One common use is when requesting a bank loan. If you intend to seek funding for your business, the numbers must add up in your plan! A business plan may also be used as an internal training document, strategic planning guide, or a way to keep track of business milestones.
How do I write a business plan?
Start with a good idea. Then collect the information you need to show how your business will make a profit. Consider all the costs involved with developing, producing and marketing your product.
Where do you want your business to be in three to five years? Use your business plan to map out realistic goals, with clearly identified keys to success.
Lots of help is available online. See the Small Business Administration's Business Planning online article: "Write A Business Plan" and BPlans.com (www.bplans.com) for free business plan examples.
Table of Contents
- Executive Summary
- Company Overview
- Product
- Environment
- Marketing
- Financial Statements
- Balance Sheet
- Income Statement
- Statement of Cash Flows
- Appendix
- SWOT Analysis
Business Name
Choose a name that is short, easy to spell and identifies your type of business. If the "dot com" top-level domain (Internet name) for your business isn't available, consider using "dot biz" instead. The dot-biz domain is for ecommerce websites.
Your business name will perform better in searches if you include keywords. If your business is bike repair, call your business www.TomsBikeRepair.com or a name that contains the phrase "bike repair."
Management
Here you will define the responsibilities of the employees in your company. If your company is a sole proprietorship, you are the only employee, and all the responsibilities are yours. As your business grows, you may need to hire specialists to perform some jobs (accounting, sales, production, etc.)
Mission Statement
The mission statement describes your company's purpose. Your mission statement should answer these questions:
- Who uses the product?
- What are the benefits of the product?
- How does it work? (Or, how does the product provide the benefits?)
Example: "The mission of Chauncey's Pub is to serve the dining and entertainment needs of Bay Area residents by providing quality Cajun cooking, drinks, and great local live bands." This statement answers the questions, "Who uses the product?" (Bay Area residents), "What are the benefits?" (dining and entertainment needs served), and "How does it work?" (by providing meals and live music).
You can add to your mission statement, but it should contain at least that much information. Your mission statement can reflect internal goals. Starbucks Coffee's mission statement is ... "To inspire and nurture the human spirit." Starbucks' mission statement also describes its ethical and global responsibilities.
Long-Term Goals
It may be helpful to think of your business plan as a living document. It describes your values, your product, your team organization, and even your ideas for the future. In this section, describe your plans for growth. Where do you want your business to be in three to five years? Will you offer new products? Hire new staff? Conduct market research? Your goals should be realistically attainable and quantifiable, i.e., X number of sales within Y months, not simply "sell a lot of stuff."
In this way, your business plan is like a road map, laying out a direct route to your goals. One way of ensuring that you meet your goals is to identify intermediate steps or key milestones. By using key milestones you can break up complex tasks into simpler parts.
Product Description
In this section of your business plan, you'll describe your product. Keep in mind that someone reading your business plan (like a bank loan officer) might not be familiar with your product. Explain what the product is, what it does, how it's used, what it's made of, etc. Go beyond a basic description of physical characteristics. Explain your product's competitive advantages, and why it's better than your competitor's product.
Market Segment
Segmenting the market is a way of defining your product line and advertising according to customer demographics (age, income, interests, etc.). In other words, who uses your product? In order to focus the advertising message, certain demographics may be targeted. For example, even though most bathroom products are similar, they are marketed differently to men and women (strong for men, gentle for women).
Target Customer
Your "target customer" is someone who is likely to buy your product. The target customer is a (narrow) subset of the market segment. Imagine your target customer as someone walking down the street, cash in hand, looking to buy your product. Can you describe your target customer?
Market Analysis
Market analysis refers to your product's environment with respect to sales. What economic trends might affect your business? How are products like yours generally sold, and how are they received? Is this a growing sales channel, or a shrinking one? In this section, describe what external factors might influence your business, and how you will deal with those factors.
Competition
In planning your business, it's important to understand your competitors. What are they doing? How might they influence your business? What is working for them, and what isn't? Understanding your competitors' successes, while avoiding their mistakes, will help you increase sales and avoid mishaps. If you want to use your business plan to request financing, it's important to demonstrate an understanding of the market, your competitors, and to demonstrate that your product can compete with, if not best, the competition.
Other Factors
This is a general catch-all area where you can discuss environmental factors specific to your product. Are there special legal considerations? If you're importing products, are there special trade considerations? Might your product be affected by weather, politics or other hard-to-predict factors? Use this section to describe any important environmental considerations not listed elsewhere.
Sales
Sales is the contract you make with customers for goods or services rendered. Since this is where money changes hands, it's important to think about the transaction itself. How easy is it for the customer? Simplifying the checkout process and offering multiple payment methods help to increase sales. Payment services such as Paypal help merchants collect payment online.
Advertising
Advertising is the way you reach your customers. The current school of thought today is to use a "marketing mix" with analysis and research to follow-up. In other words, a traditional approach. The Internet does offer several natural benefits to advertisers. Services like these are free on the Internet:
- Reach a global audience
- Mass email marketing
- Store stays open 24 hours a day to take orders
- Social networking sites can be used to build client lists
Describe broad marketing strategies here* in addition to specific methods. You can even create a separate marketing plan to supplement your business plan.
In planning your advertising strategy, it's important to understand how your customers think. What websites do they visit? What types of Google searches do they do? Your market segment and target customer analyses help you understand what your customers are looking for.
(*Some new Internet marketing strategies have been developed by Chris Anderson, author of "The Long Tail" and "Free.")
Branding
Branding is the creation of a positive product identity. How will you create a favorable impression of your product? Many online sellers borrow the brand of the website where they sell ("... a seller on Amazon"). One important goal for your website is to create your own independent brand.
Competitive Advantage
Competitive advantage is the perception of your product as better than the competition. Some typical competitive advantages include reputation, experience, customer satisfaction (for an established company) or affordable, high-tech and innovative (for a new company).
Any way in which you compare favorably vs. the competition is a competitive advantage. Finding ways to maximize your advantages is part of strategic business planning. Competitive advantages are also used as part of an overall marketing mix (see Wikipedia, "Marketing Mix").
Customer Service
Customer service describes your daily interactions with your customers. How easily can customers reach you? Can they resolve grievances quickly? How promptly do you return emails and phone calls? When doing business on the Internet you should check and respond to emails at least once a day.