There are numerous approaches to compiling, setting out and delivering your business plan. There is no exclusively right way, but also many wrong ways to do a business plan. The following structure represents an approach that has been proved. However, you should use it as a guide and modify it to your own use.
The main of a business plan sections are:
- The title page
- The executive summary
- Table of Contents
- The concept (Hook & Problem)
- The Product Proposition
- Resource plan
- Management team & Organization (People)
- Competition Analysis (Proof)
- Marketing & Sales
- Operating and control systems
- Contingency plans
- The financial deal
- Financial information
The Title Page
This single page should invite the reader into the document and be visually appealing. It must contain the product or service name and the name of the company. At the bottom of the page, it should always be marked CONFIDENTIAL. It may be worth getting a local service to design and print your cover page as well as bind the publication in coil binding to facilitate easy reading.
The Executive Summary
In a pitch, you should always have a hook and solve a problem. In the business plan, this is where you create the hook for the reader. This section should ensure that the reader wants to know more. This may be the only page they read. 80% of venture capitalists admitted this is the only page they read before rejecting the application. Just as in any report, the executive summary is always done at the very last after the overall plan has been completed and polished to cover all details. The executive summary should not exceed one A4 page.
Table of Contents
Here, only the main sections should be outlined and presented in a clear, readable font. Keep it simple - so a maximum of one page.
The first sentence should state what the product is.
In this section you have to use the standard language that your industry uses. Don’t add too much jargon, but ensure you come across as knowledgeable and up to speed with current practice. Only state facts, not hopes, desires or future ambitious plans. Then, you need to go into detail about the problem and how you solve it.
What's so special or unique about your product or service? - How does it compare to current competitors or ways of doing things. If it is a manufactured item, then emphasize that uniqueness - all patents, trademarks, formulas, brand names or other copyright strategies should be included. What innovative technology, methods, or processes do you use?
What is the category of business? - Google “business categories” to find the standard list. Are you a Distribution, Manufacturer, Retailer, Service Provider, etc...? Explain which of these or other services you offer and the details of the service.
Describe your intended customer and their needs? - What product benefits to this customer? What problems are you solving for this customer?
Who will create the product? - Will it be manufactured locally or overseas? How will you protect yourself against unforeseen problems in guaranteeing supply.
How will the product be sold? - Will it be offered locally, nationally, or internationally? Will you sell it online, via resellers, and/or retail it yourself?
This should be on one or two pages. Keep to the point and ensure the reader comes away knowing product concept and an insight into how it will all come together. Now we need to go into more detail.
The Product Proposition
Describe the purpose of the product or service. Provide the details of the "Unique Selling Proposition" (USP), or what makes your product different from every other. What is the current stage of development? Do you have real users (not friends or family) who have purchased the product or is it in prototype, beta testing or just a concept?
How was/is/will the product be developed and will you be continuing to use the same methods? Will any part of it be subcontracted? Does the product have a lifecycle? Does it face any issues relevant to storage, sell by dates, seasonal selling, product updating requirements and handling? Is it capital intensive, labour intensive, and/or material intensive?
Even though it may be ready for the market today, will changes be needed to reflect changing technology, shipment sizes in the near future? What future research and development is needed to maintain it in the marketplace and also ensure repeat purchases? Do you have to pay or receive licence or royalty agreements and, if so, are they in place?
If you don't own the product, the publication, the software, etc., whom do you have to pay for it's use and how will you protect yourself? What other approvals are needed? What are the potential liabilities and do you have insurance?
This should be on one or two pages.
What do you need to make the product or service and scale to achieve the plan set out? You will need to set out the People, Raw Materials, Machinery, Office and also what levels of stock will you will need. This will then explain the cost of maintaining necessary levels of stock.
What are the skill sets of the people you will require? Add job descriptions in the annex and refer to these. Will these people be required full time, part time, or contracted for a period of time.
What are terms of purchase, employment, office lease, etc... If you have examples, add them into the annex.
This should be on one or two pages.
Management Team & Organization (People)
Investors buy into a team and the ability for the team to deliver. So how long have you been working together and what are your core strengths and abilities? It is vital that this is shown clearly and must include overview CVs (five lines) of all directors with all relevant experience shown. Full CVs should be appended.
Provide a summary table of shareholdings and options which have been allocated to the management team. If they are ‘options’, then state the dates when they become valid. An organization chart can be provided and also indicate vacancies and future expansion clearly showing the planned management lines of control. Job descriptions and objectives of the positions will enable rapid understanding of the strength of management and the focus on output-led results.
This should be on one or two pages.
Competition Analysis (Proof)
You do have competitors, everyone does. If you state we don’t have competitors, then you are either naive or stupid. Now all you need to do is decide which one you want your investor to think you are.
Most investors want you to be a in a proven market, with a proven business model and proven set of customers with money which provides a proven rate of return (i.e. a understandable and controlled risk). So present them what they want and show how everyone else makes money from this and that you also know how to do it.
This is not about downloading the yellow pages and listing the 47,000 companies which do the same thing. It's about you thinking how these companies compete with you and how you are going to manage this opportunity.
- List only 10 direct competitors by product and geographic market. Annex all the others.
- Describe these competitors using SWOT analysis. Refer to Course 2, Developing and Idea and Validating the Opportunity, Module 7, Lesson 1, to learn more about SWOT
- Describe competitors’ share of the market. Try to do this using the publically available data.
- Discuss any relevant background information concerning competitors.
- On what basis will you compete with these competitors?
- How is your business or idea superior to that of the competitor?
- Does this threaten your competitor and what do you expect them to do about it?
- If the competitors threaten to destroy your market position - how will you respond?
- Who are your indirect competitors?
The quick answer is whatever someone is willing to pay. The long answer is based on the business costs, the investment and profit required. It is important to set some prices, so design a pricing sheet for customers listing various options. Compare your pricing and business models to that of your competitors and what margins are acceptable to your business. Describe your prices as they relate to your costs, and the price that the market is able to pay.
Marketing & Sales
This section provides the business plan reader with details of the market, how you are going to attract potential customers in that market and then turn these people into your loyal customers. Describe the benefits of the product and how you meet the customer’s needs. Do your potential customers know they want the product? How big is the market? What are the potential volume and sales? What market research has been done - and with what results? List the costs and revenues for each market segment. What advertising/marketing will be used to address each market segment?
Demonstrate that this is where it makes the most sense to get the attention of your targeted customer. What are the costs of such advertising? Who will produce, deliver and manage your ads? How will your marketing differ from that of competitors? What service support, warranties, and guarantees must you offer? How can you use other companies to promote your product/service? Perhaps you can work out reciprocal arrangements. How will you stay in touch with developments in your industry (e.g. joining trade clubs, conferences, etc.)?
Operating and Control Systems
You will spend the least amount of time writing this and the most amount of time doing it. So think about the processes you are going to have, how you will control the business and know what is happening. If you don’t write it down, or share the information, how will people know what is happening? Your investors will look at this section to see if you understand and can control your business.
What is the process when receiving and processing orders? What administrative policies, procedures and controls do you have? Make a flow diagram of every step, from customer asks for goods, pays for them, to them receiving the goods. Now think about what could go wrong and what you can do about it. What happens if a good you send gets damaged? What happens if the payment is rejected? What documentation is needed for each transaction? How will you manage all this information and know the status at any one time?
One thing is guaranteed, this plan is not going to happen the way you thought, so how will you cope with the unexpected? In this section, we add a series of what-if’s.
- Your sales projections prove wrong, up and down?
- Your supplier can not meet demand or goes out of business?
- Product reliability problems arise?
- Problems with management, personnel or partners arise?
The Financial Deal
If you are looking for investment, then include this section. How much and what type of capital is required for the start-up and for the first three years and beyond? Investors want to know if you expect to get a number of rounds of capital and, if so, what amounts.
- If the funds come from debt, what collateral is being offered as security?
- What funds will be injected by outside investors and what will they demand/receive in return?
- What leases, loans and other liabilities will/do exist?
- What tax benefits will be provided to you and investors?
- What government loans, guarantees or grants can you call upon?
Financial information is hard to present as being interesting, so many entrepreneurs will just copy the spreadsheet's 5000 cells into the document. While this is important detail, you will also need to deal with how you will manage the financial controls and projections. So describe how you have come up with these projections and how you will look after (control) the money they give you.
Then have one page for each of the following sheets. When sending out the business plan electronically, include the spreadsheets as attachments.
The Opening Balance Sheet
This shows the snapshot of a company's financial condition. An opening balance sheet has two sides; one side showing the money that you have, or intend to invest in leasehold improvements, equipment and machinery, vehicles and recurring start-up expenses. The other side details the financing you will need. For instance, term loans, owner's equity, founders’ investment or outside investors.
The Profit and Loss Statement
This shows projected sales (revenue) and expenses (costs). It provides a view of the profitability of the business over a specific period of time. This may be the first 12 months of the new business or longer, and, to be credible, should reflect a slow start followed by reasonable growth.
The Cash-Flow Statement
Cash is king and having it means you’re in business. Not having cash means bankruptcy. A cash-flow statement shows all the cash you expect to receive each month, invoicing may take 30 or 90 days. It also shows all the bills you anticipate in the specific month in which you expect to pay them. A cash-flow is not an estimate of your sales and expenses, but rather an estimate of when the money associated with the sales will be received and when the money involved with paying for expenses will be paid.
- Full CVs of all relevant directors and senior personnel. Ensure that the experience in the CV matches the roles they are performing.
- Historic accounts of the company if you have any. If you have been funding the business through your time or personal accounts, then include these costs.
- Reconstruction of the balance sheet, naming the extraordinary costs involved and the reason for their discounting.
- Marketing information including customer testimonials to show the success of the company so far.
- Brochures relevant to the opportunity.
(Sodergren & Bozward, 2010).
For some more detailed information on different sections please refer to Synthesis (2014) Module 3: Business Plan, attached to this lesson below and available for download under LESSON MEDIA.
→Click the View the Lesson Quiz button below and successfully complete the quiz to advance to the next lesson...
Sodergren, D. and Bozward, D. (2010). Make Your Passion A Success. Available at: http://www.makeyourpassionasuccess.com/ebook/makeyourpassionasuccess.pdf [Accessed 28 January 2018]
Synthesis (2014). SYNTHESIS Center for Research and Education - EN Youth Teacher Project: Module 3 – Business Plan.