PerfectBusiness.com
Business Plan Outline & Instructions
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This is the recommended business plan structure used in the Business Plan Builder online software. For more information, go to PerfectBusiness.com/BusinessPlan.
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PerfectBusiness.com BUSINESS PLAN OUTLINE & INSTRUCTIONS By PerfectBusiness.com
A business plan is the most important tool an entrepreneur can use to present a business concept to investors, lenders and potential business partners. To create a properly formatted business plan, use the BUSINESS PLAN BUILDER online software. To write an effective business plan, you must: Describe your product or service and how it fills a need. Know your market and competition. Have a great team in place. Show how your business will be profitable. Be honest. Get to the point quickly. Investors and lenders do not have time to read long business plans, but that doesn't mean you shouldn't be prepared. Do your homework. Talk to potential customers and clients. Figure out your business model and financials. Do these things both before and while you create your plan. There are no formal standards for what must appear in a business plan; however, most investors and lenders will expect these major sections: Executive Summary - introduces your business - MANY PEOPLE WRITE THIS LAST Company - explains the current status of your company and whether it is new or existing Products or Services - describes what your business makes, sells or provides Market Analysis - outlines your competition and the size of the market Strategy & Implementation - describes the action plan, marketing tactics and goals Management - profiles the management and staff Financial Plan - startup costs, projections and assumptions NOTE: You do not have to adhere to the strict outlines within each section. As long as you convey the important aspects of each section, you are free to add or remove paragraphs, as you see fit. According to many influential investors, you should be able to convey your full plan in seven pages or less (plus financials), so try to limit each section to one page. The purpose of a plan is to share your business concept, team, market, budget and objectives. Your plan may be used as an internal document or as a tool to attract potential investors, lenders or partners. In most cases, it does not need to be exhaustively thorough. It only needs to communicate the most important elements of your business. Investors will use your plan to assess your communication skills and the viability of your business. If you are able to demonstrate that your business can succeed, and that you are the right person to execute your plan, then you will have an excellent chance of achieving your goals.
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PerfectBusiness.com 1 - EXECUTIVE SUMMARY The Executive Summary is the most important part of your business plan. Most business plans are judged and disregarded without reading beyond the Executive Summary, so make it perfect. Be brief and clear. Write this section LAST to ensure that it summarizes and conveys the best elements of your plan. COMPANY What is your product or service? What is your market or industry? Describe your company’s history and plans as quickly and effectively as possible. PRODUCTS & SERVICES Explain your product or service in one or two sentences. What makes it special? How will it be positioned in the marketplace? Who are your competitors? Are you going to compete on price, quality or uniqueness? MARKET ANALYSIS How large is your market? Will you seek customers locally, regionally, nationally or internationally? Where is your industry headed? What are the trends in your industry? STRATEGY & IMPLEMENTATION Elaborate on your plans for sales, marketing, publicity, distribution and strategic partners. What deals or relationships have you already secured? What tactics will you use to achieve your goals? MANAGEMENT Who are the key members of your team? Summarize their experience and strengths. What roles will they perform? What jobs will need to be filled? FINANCIAL PLAN Describe the main elements of your financials. How will the business earn revenues? What are your profit margins? When will your business reach its break-even point? What are your projected sales and profits? FUNDS REQUIRED & USE How much money does your business require? What sources of funds are you proposing? Summarize how the funds will be spent, including startup costs and operations until the business reaches profitability.
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PerfectBusiness.com 2 - COMPANY COMPANY & INDUSTRY What are your company’s legal name, DBA name and primary business location? What is your product or service, and in what industry would you classify your business? LEGAL ENTITY & OWNERSHIP Is your business a corporation, LLC, partnership or sole proprietorship? In which state is it formally organized? Who are the principal owners of your business, and what are their shares of ownership? COMPANY HISTORY TO DATE Is this a new or existing business? For a new business, what inspired its startup? For an existing business, when and how was the company founded? Provide a brief summary of the company’s history. FACILITIES Does the business have an existing place of business? Describe the present circumstances and future needs. Will facilities be leased or owned? Are the terms favorable? What adjustments will be made as the business grows? KEY ASSETS What physical assets and real estate is owned by the business? Does the business own any valuable intellectual property, such as trademarks, copyrights or patents? Does the business possess any rights or contracts of value? What assets will be needed that the business does not already own?
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PerfectBusiness.com 3 - PRODUCTS OR SERVICES DESCRIPTION Describe your product or service in full detail. What does your business do? What is your focus or specialty that your business will be known for? How will profits be earned? Describe your pricing and margins. FEATURES & BENEFITS What are the key features of your product or service? How will you define and differentiate your product or service in the marketplace? Will you compete on price, quality or unique features? What are the benefits that you offer to customers? COMPETITION Who are your direct and indirect competitors? List types of competitors as well as specific companies. Break down the strengths and weaknesses of your competitors. What percentage of the market does each competitor control? (TIP: Research your competition through industry web sites and magazines.) COMPETITIVE ADVANTAGE/BARRIERS TO ENTRY What competitive advantages will your business have? How will you overcome your competition? Are there barriers to entry that will prevent existing or future competitors from taking away your advantages? Do you have any proprietary rights, contracts, abilities or relationships that will protect the value of your business in the long term? DEVELOPMENT What is your long term plan to enhance your products or services? Will you add more product lines or services? Will you open new locations? Where will you find growth opportunities?
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PerfectBusiness.com 4 - MARKET ANALYSIS TARGET CUSTOMER Is your business B2C or B2B? (Are your customers individual consumers or other businesses?) Describe your target customer. Are your customers trend setters, or are they conservative and loyal? What is the primary motivation of your customer? Is it price, convenience, service, quality, unique features or something else? How do they make their purchasing decisions? MARKET SIZE What is the approximate size of your target market? Is your business reliant on its location, such as its city, street or proximity to an attraction? If so, describe the applicable market information, including population, age, ethnicity, income, spending patterns and street or pedestrian traffic. If your business has no geographic limitations, or a large market area, define your market by its industry size in number of potential customers and total spending. Demonstrate that the market is large enough to support your business and provide substantial opportunity for growth. (TIP: Contact your local Chamber of Commerce or industry trade publications for statistics.) TRENDS Is your market growing or shrinking? What are the relevant population, economy or industry trends? How will your business compete as technology and competition changes? Explain why this is a good industry for the long term. SWOT ANALYSIS STRENGTHS – What are the strongest attributes of your business? WEAKNESSES – What are your biggest weaknesses? (Be honest here.) OPPORTUNITIES – Where might you find the best growth opportunities and profit sources? THREATS – What are the obstacles or challenges that you will need to overcome?
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PerfectBusiness.com 5 - STRATEGY & IMPLEMENTATION PHILOSOPHY Describe your overall business strategy. What is your mission? How will you position your business in its industry? How will you build your brand’s reputation? PRODUCT DEVELOPMENT Does your business require research and development, programming, product design or other production steps? Are there any regulatory or technology hurdles to overcome? What is your development plan? INTERNET STRATEGY Will your business have a web site? If so, how will it be used to grow your business? Will you offer products for sale, provide online services or feature photos, videos or blogs? Do you plan on outsourcing your web design or employing an in-house designer? MARKETING STRATEGY What is your marketing message? Describe your logo and marketing slogans. What marketing tools and tactics will you use? Outline how you will promote your business using the Internet, email, newsletters, traditional advertising, signage, trade shows, promotional materials, networking, mailings, flyers, viral marketing, publicity and other methods. Elaborate on the costs and specific marketing techniques you plan to use most. (TIP: Read the “7 Keys to Success” - Marketing page for ideas.) SALES STRATEGY How will your business generate actual sales? Will you have a sales team? What is the compensation structure? What sales materials and procedures will the sales people use to make sales with customers? Will your company offer financing terms, refunds, promotional discounts or customer service? Will your sales people be inside staff, outside staff, independent representatives or a contracted company? What training and leadership will your company provide for sales people? STRATEGIC ALLIANCES Do you have any present agreements with strategic partners? What potential partners can you reasonably expect to partner with? What arrangements will you have with these partners and how will these alliances benefit your company? OPERATIONS How will your company specifically perform its primary functions, such as designing, manufacturing, distributing or serving customers? How will your facilities and staff be used? What will your business do to control costs while ensuring quality? Do you have accounting, merchant, staff and inventory control systems? What equipment and software are required? Describe your operational strengths and challenges. GOALS What are your business goals? What milestones do you hope to achieve? How do you expect the company to be perceived or positioned in five years? What are your personal goals with the company?
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PerfectBusiness.com EXIT STRATEGY If investors are involved in your business, how will they be repaid? Will additional capital be needed before an exit is possible? Are you willing to merger or sell the company in three to seven years? Which companies would be likely to purchase your company once its goals are achieved? If no buyer can be found, are you willing to buyout your investors? (TIP: Think about your investors’ perspective. How can they get out after a few years? Remember, this is your dream, not theirs. Ideally, investors want to be repaid with a large profit.)
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PerfectBusiness.com 6 - MANAGEMENT ORGANIZATIONAL STRUCTURE What are the key roles involved in the operation of your business? Describe the organizational chart for your company. How will management and staff interact? List the positions and responsibilities of each management and staff role. LEADERSHIP Who are the key members of your team? Provide a full background and duties for each. Notate shares of ownership, if applicable. Are there any key positions that remain unfilled? What skills and qualities are needed by candidates to fill these positions? Are there any prospects being considered? STAFF MEMBERS What roles and number of employees are needed to operate your business? Outline the staff, wages, commissions, bonuses and other compensation. Will you be able to find capable labor at wages that fit your budget? How will your staff grow over time? BOARD MEMBERS & ADVISORS Provide information on your board of directors and any technical or professional advisors that are committed to your business. What are their roles in your company? What are their qualifications to be involved in your business? If you created an informal advisory committee to help develop your business, share the names and positions of the people that are assisting you. (TIP: Attorneys, accountants, technical experts, business executives and entrepreneurs are excellent people to have on your team.)
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PerfectBusiness.com 7 - FINANCIAL PLAN REQUIREMENTS How much capital will your business require, and what sources are you seeking? How much will be equity? How much will be debt? Have you negotiated any barter deals or creative sources of funds? How much of your funding has already been secured? How much are you able to invest personally? USE OF FUNDS Elaborate on where the funds will be spent. Include descriptions of startup costs, capital expenditures and working capital. These figures should match the table created in the Financials section. FINANCIAL HISTORY If applicable, describe the financial history of the business, including revenues, profits and historical trends. What were the highs and lows? How can the highs be replicated or even increased? How can the lows be avoided? Provide one to three years of historical income statements, if possible. INCOME STATEMENT PROJECTIONS Create an income statement to demonstrate how your business will be profitable. Summarize the totals that are calculated in the Financials section. All businesses should create monthly projections for the first year, and annual projections for three years. When will your business reach its break-even point? CASH FLOW PROJECTIONS Create month-to-month cash flow projections for the first year. If your business sells products and services for cash, this analysis may not be necessary. However, if your business collects payment after products or services are rendered, or if you provide credit or allow terms for your customers, then this is a critical component of your business plan. Cash flow projections will demonstrate your ability to pay bills on a daily basis, especially when substantial sums are owed to you by customers. BALANCE SHEET Create a balance sheet to show your company’s assets and debts (liabilities). Your company’s net worth is calculated by taking your assets and subtracting your liabilities. (This is similar to calculating the equity in your house.) Describe what your balance sheet will look like at the end of your first year. ASSUMPTIONS Describe the logic behind your projections, including your methods for calculating sales, costs, loan payments and any other significant estimates. Are you expecting important industry or economic trends to continue? Do you require any technological advancements, governmental regulations or other significant changes to occur in order to meet your projections?
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PerfectBusiness.com 8 - BUSINESS PLAN FINANCIALS Following is a list of the most critical business plan tables. For functional tables that can calculate the math for you, please visit the BUSINESS PLAN BUILDER. SOURCES & USE OF FUNDS If you are writing a business plan for a startup or to raise funds for an existing business, this table will outline where you expect to raise funds (SOURCES) and how you plan to spend those funds (USE). For Sources, you must distinguish between Equity Investment (money received from investors in exchange for ownership) and Debt (loans or other obligations). Clearly explain the Use of these funds by breaking down Capital Expenditures and Working Capital. Capital Expenditures should list your spending on tangible property, such as real estate, equipment, vehicles or leasehold improvements (physical renovations made to your office or retail space). Working Capital shows how the remainder of your money is used for starting and operating your business. It may include legal expenses, web design, research, marketing costs, office expenses, rent, utilities, wages and other expenses. Keep this table simple by grouping the money that you set aside for day-to-day expenses under "Operating Capital". The specifics of these expenses can be shown later in your Cash Flow and Income Statements. INCOME STATEMENT - MO-TO-MO Your Income Statement (aka Profit & Loss Statement) is your most important financial statement. This worksheet shows your projected sales and spending once your business is operating. Although it may look complicated, it is really a simple worksheet that outlines how your SALES minus EXPENSES equals your PROFITS, or net income. Most startups should create a Month-To-Month Income Statement for the first year as well as a 3 Year Income Statement to show your long term projections. Complete your Month-To-Month Income Statement first, and then import the totals into your 3 Year Income Statement. Total Sales - All sales without subtracting any costs. Cost of Goods Sold - This is the actual cost of the inventory, raw materials or products that you sold during a particular period. Gross Profit - This is the amount of sales you have left over after your direct selling costs. Hopefully, you will have enough remaining to cover your business operating expenses. Operating Expenses - This is a list of overhead costs that allow you to be in business, such as wages, rent, utilities and other day-to-day business expenses. Net Income - The amount of income remaining after subtracting all costs of doing business. NOTE: Your expenses should not include investments in real estate, vehicles, major equipment, leasehold improvements or other large purchases. This worksheet tracks your spending on continuing operations, such as wages, advertising, rent, utilities and other expenses needed to stay in business. (However, you can write-off most capital investments over time through "Depreciation & Amortization" expenses, just not all in one year.)
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PerfectBusiness.com INCOME STATEMENT - 3 YEAR The 3 Year Income Statement projects your sales and expenses for the next three years. Complete your Month-To-Month Income Statement first, because it will help you to estimate your income and expenses more accurately for future years. This worksheet follows the same structure as the Month-To-Month Income Statement, but only annual totals are shown. CASH FLOW STATEMENT - MO-TO-MO The Cash Flow Statement is similar to the Income Statement. The difference is that the Cash Flow Statement is used to evaluate the cash your company has on hand each month. This is important, because many companies allow customers to pay AFTER products or services are provided. If too many customers are slow to pay, a profitable company could actually run out of cash to cover its bills. This is especially relevant for startups, which may experience long payment delays from initial customers. All startups should prepare a Cash Flow Statement to verify that the business won't run out of cash during the first year of operations. BALANCE SHEET Some people have trouble grasping the concept of a Balance Sheet, but there's a very simple analogy that most people will understand. A Balance Sheet is very similar to calculating equity in real estate. For example, if you own a house, your equity would be the value of your home minus your liabilities (debt). A Balance Sheet shows this exact calculation for your business at a given moment. A Balance Sheet has three parts: ASSETS, LIABILITIES and NET WORTH. Just like the calculation for the equity in your home, your ASSETS minus LIABILITIES equals your NET WORTH (equity). (Or, as accountants like to explain it, your Assets must equal your Liabilities plus Net Worth. If you are new to accounting, the real estate analogy might be easier to understand, but the math is the same.) In a business example, most startups begin with cash from investors (called equity or net worth), loans (liabilities) or both. This initial cash is often spent on inventory, equipment and leasehold improvements (all assets). Upon starting operations, a Balance Sheet should calculate perfectly. At the end of the first year, assets will be increased to include cash and receivables earned through sales. The net worth will increase an equal amount, because the company is now worth more. This should make sense, because the company has worked to create cash (an asset) that it didn't have before. On the Balance Sheet, net worth is increased by inserting the proper dollar amount into a sub-category called "Retained Earnings" to reflect the profits that the company earned. (Other adjustments, such as changes in inventory, depreciation and liabilities should also balance properly.)
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PerfectBusiness.com 9 - ATTACHMENTS Photos of your products, facilities and team will enhance your plan and allow readers to get a better understanding of your business. Logos, product illustrations, blueprints, charts and designs can also be beneficial. A newspaper or magazine article may add credibility to your plan, but keep this to a minimum. More than one press clipping can often have a negative impact. Only include the best or most relevant article. Where necessary, add brief captions to describe the images or documents.
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