Introduction to Business Plans
Regardless of the type and/or size of your potential business, doing a written business plan is a good idea. If you’re in need of some sort of financing, a formal business plan is a must. For the new entrepreneur, completing a business plan forces you to formulate and crystallize the ideas and goals for your business. If you have partners or other persons involved, it is imperative this be a collaborative effort so everyone is on the same page of the company’s road map.
In going through each of the components of the plan, you will notice that it will be necessary to research competition, explore marketing options, and put lead-to-paper with numbers – past, present and future. Creating a written document makes sure you don’t leave anything out and gives you a comprehensive picture of your budding enterprise. Now before you get all “OMG,” most companies may only require a one-page plan.
Mission. What is your company’s purpose? What is your overall goal? What are your company’s strategies toward accomplishing your purpose and goals? For example, PepsiCo’s mission statement (from their Web site) is: Our mission is to be the world’s premier consumer products company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.
Vision. This is a statement about what your company looks like in the future, your inspiration, the framework for all your strategic planning. PepsiCo’s vision statement is: PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today.
Customer need. Define a need or want that your company can provide.
Your solution. What will your company do to meet that need or want?
Target market. Who are your customers? Individuals? Companies? How many of them are there? Are there enough customers to sustain your business for the long-term? What are your strategies to find customers?
Competition. What advantage do you have over your competition? What is it about your product or service that would sway a customer to choose you?
Operations and management team. Who is on your management team? What are their qualifications to be involved in your business?
Description of business model. How is your company going to make money? What is your marketing strategy? How are you going to reach your customers?
Financials. Whether or not you need to borrow money for your business will determine how detailed these statements need to be. Going through these steps will give you critical information on the viability and potential success of your business.
Profit and Loss. Project yearly income and sources of income as well as outflows, including specific categories of expenses. For example, expenses may include loan payments to investors/banks, utilities, advertising, rent, salaries, etc.
Income Statement. This statement provides similar information to the Profit and Loss Statement. However, it also includes the income tax expense and a “Cost of Goods Sold” section. The Cost of Goods Sold section includes the cost of materials and adjustments for inventory to determine the company’s gross profit before other expenses.
Balance Sheet. This is a list of projected assets and liabilities. Assets include owners’ contributions, equipment, furniture and fixtures, leasehold improvements, land and building, and intangibles such as patents or copyrights and goodwill. Liabilities include bank loans and loans from shareholders and/or investors, and various accounts payable such as for taxes and interest.
You can also find excellent examples and templates of these statements on the internet by searching the title of the particular statement.
Funding Required. How much money will you need? For what?
There are several websites which can provide you with a free template for a business plan. One in particular seemed to be straightforward and comprehensive – Rocket Lawyer. It guides you through a five-minute interview process at the end of which you have a business plan. Also, Score.org is an amazing resource for small business. They offer a variety of templates for business plans and financial statements, both online and local workshops, and links to possible mentors. The Small Business Administration provides advice about not only starting but also managing your business, obtaining grants and loans, answering contracting questions, as well as accessing various training opportunities.
Your local library also provides a wealth of information in this area. Check out a collection of examples of business plans entitled: Business Plans Handbook: a Compilation of Actual Business Plans Developed by Small Businesses throughout North America.