Writing a Business Plan
Five Easy Pieces
Your business plan is one of the best tools you have to communicate your vision and excitement to a lot of different people. It doesn’t have to be a dry, boring document. Here are some ways you can make it into a document that reflects all the critical areas that people in the business world are interested in.
There’s five easy pieces:
- Executive Summary
- Describe the products/services (buildings, inventory, technology, manufacturing)
- People and Stakeholders
- Dollars and Sense
Each of these is like a puzzle piece that affects the other pieces.
Writing a business plan involves writing each of these once, and then going back in and reworking them as new ideas and relationships surface as other sections are completed. By breaking the business plan into these five steps it becomes much easier to write and refine.
A business plan should be viewed as a working document. It helps to think of it as software that changes with different revisions. Each revision can be released and utilized, but the software is always being improved and extended into new areas. As your business grows it will need other, more detailed solutions. Your business plan documents this so others know and can realize what version you are currently using to run and operate your business.
The following highlights some common questions that may help you finalize each piece.
People that read business plans for a living have very little time. The Executive Summary is written to make their job easier and more interesting.
In just a few paragraphs you not only want to capture the essence of your company, but catch the reader’s interest as well. Write this once and then revisit it each time you’ve finished working on one of the other sections. Then, weeks later, revisit this summary again and read it with more objective eyes.
Don’t labor too long over the Executive Summary. But reread it, rewrite it, and refine it often.
A good way to start is by writing five bullet points answering who, what, when, where, and why.
Frost your executive summary by adding a catchy headline. Not too cutesy, but something that will pique everyone’s interest. Keep in mind the old newspaper example for catchy headlines: Dog Bites Man vs. Man Bites Dog
Describing the products/services you are offering describes the what of the business plan. A simply as possible describe the products and services that the company will be offering. If you have multiple products/services give each one its own section.
For now just write a paragraph describing the product or service. Don’t add any fluff, or if you do, edit it out later.
Writing this section may trigger lots other ideas for marketing, and people, and money. First of all, try to stay focused on describing your product/service. But, if you are worried you might forget your ideas, go ahead and jot them down as a footnote. That way you can grab them and include them later with more details as you work on the other pieces.
The people piece is the who of your business plan. You will want to describe the owners of the company and list your board members. In addition, include the different types of employees (job descriptions) that are necessary to offer the products/services you’ve already described.
Being a small business it is necessary that several people may do many different tasks. It’s not unheard of for the President to also be in charge of sales as well as head janitor, especially during the start-up phase of a company.
You’ll want to demonstrate the team of experts that you are using to make the company successful. Depending on the business you will most likely be using an outside accountant, legal counsel, technology expert, and marketing consultant. Listing each of these professionals shows you know how to build a strong management resource team.
You probably have other stakeholders as well. Include them as part of this section, describing what their involvement is in the business.
You can mention the customer as one of your stakeholders, but the customer is so important that they get their very own piece. It’s called Marketing.
Marketing is best summarized by the two questions: Who is the customer and what does he or she need?
Marketing includes all the activities that involve determining who the customer is and making a connection between them and the product/service being offered.
This section can get fairly involved. You may want to set up several subtopics describing the following:
- Who is the customer? If you have different target customers describe each one.
- What needs does the product/service meet? It is often helpful to envision a particular person that you know that fits the customer profile being targeted. Simply describe the traits this person has and how the product/service will meet his or her needs.
- How will we tell the customer about the product/service?
- How will we inform people about the company? (goodwill, publicity, community service)
- How will we inform people about specific products?
- Different types of media to be used (web site, email campaigns, brochures, magazines, trade shows, articles and white papers)
- Where is the target market located?
- Describe the sales process (handling leads, closing the sale, customer service and follow-up after the sale)
- Who is the competition and why are you different?
- Marketing calendar
- List the marketing activities will you be doing each month for the next twelve months.
- What were the actual results of each of these activities
- What should be done differently next time? (discard the activity, modify the activity, combine it with another activity)
This section will probably have the most information and be changed frequently. It is recommended that the marketing calendar be made an active part of your business activities and be updated often.
Dollars and Sense
This piece describes the why of the business plan. You might be in business for several reasons, but most likely it is to make a profit. This piece shows what things will cost, what your margins of profit are, and how much profit you plan to make.
As the company becomes older it is very helpful to include past history as well as projections. Don’t go into vast details here. Just give monthly or quarterly sales as well as fixed costs (salaries, rent/utilities, supplies) and variable costs (production materials, research & development, taxes).
Two important items to include in this piece:
- Margin of Profit (MOP) – This is a percentage showing how profitable an item is or a product line, or sales in general.
- Return on Investment (ROI) – Compares how much money is made when compared to how much was spent. If you invest 1,000 dollars for a new web site that brings in only 500 dollars for the year, than the ROI is very poor. However, if you can show that the web site will probably increase sales way beyond the 1,000 dollar investment, than the ROI is very good. MOP and ROI work closely together. If you are working with a very low margin, you will need much more sales before you can see a return on your money. On the other hand if you have a high margin you can see immediate ROI. But, a higher MOP may increase the sales price too high, resulting in loss of sales and a smaller return on the investment.
Your business plan is probably the best way you can communicate your vision and excitement to a lot of different people. These five steps will help you write a business plan that is effective and helpful. You may use it to help secure a business loan, to determine what and how you are going to proceed in business, as well to get others excited about your ideas and the potential of the company’s future. Don’t forget to smile as you write it. After all, it is your future!