Plan for Success: How to Write a Business Plan

A good business plan both defines a business and guides it. This formal document outlines a company's goals, explains why those goals exist, and charts the path to achieving them. It is not the place for hype or optimism. For your plan to be useful, it must be founded in solid facts and realistic goals. Projections should be achievable with hard work; not with miracles or record breaking years. All industry and sales data should be footnoted and include a source list. This is particularly important if you will be using your business plan to solicit venture capital or bank loans. Even if the document is only for internal use, forcing yourself to source your statistics and projections is a good way to check your gut instincts about the company.

Executive Summary

Since the assumptions you hold when you begin writing your business plan may change, it is best to write the summary last. The executive summary is a synopsis of top-line facts contained in the plan. It includes who you are, what your current business position is, financial highlights and any major recent achievements. Since most business plans are updated annually, the achievements listed might be limited to successes of the last 12 months.

Business Description

Start the business description with the background of the company. Who founded the company and what was the original goal. Explain how the company has grown or changed since it was established. Management bios are often included in this section of the business plan and some companies will include organizational charts.

Product or Service Details

What is your company selling? This should be the easiest section of your plan because it requires no research. No one knows your product or service better than you do. Keep in mind though, that your business plan may be used to help indoctrinate new hires or key executives in the company. So make this section as detailed as you can by answering the basic questions: what is the product, how does it work, where is it made, etc.

Market Summary

The market summary section should be chock full of sourced information and statistics. This is where the real leg work involved with researching the plan comes in. You may have started your company with limited knowledge of the industry (as many entrepreneurs do) but to grow your business you will need to become an expert in your field.

The market summary should identify the total size of the market, as well as include details on categories within the market. Point out current market trends and their causes. It should list the other players in the market-both competitors and customers-and show the market share of both. Lastly, it should outline your current market share and detail projections for growth.

Marketing & Sales Analysis

This section will help determine where funds and energy will be allocated for the year, and is the springboard for development of the full marketing plan. The section explains who your target markets are and demonstrates how you will reach them this year. It should include sales forecasts with details on where the revenue will be coming from; either by customer categories, distribution avenues, or product lines. These forecasts should match the share projections from your Market Summary.

Financials

All key financial indicators should be reviewed in the financial section. This will include a detailed look at product costs and margins, a current profit and loss statement, and a balance sheet. Terms with major customers or vendors, details on any existing loans, and long-term financial goals should be included.

Appendix

The appendix contains extra details on each section. For example, the appendix might contain actual sales data by retailer that supports your sales projections or market share goals. It could contain samples of marketing efforts that will be launched during the year such as merchandising or new products. Vendor contracts outlining specific terms might be include as well. If you have really done your homework, this section might even include a SWOT (Strengths Weaknesses Opportunities Threats) analysis on your main competitors.

For extra help writing your business plan, check out the Small Business Association business planning workshop. There is also software available that will walk you through the process and format the document for you. Or, just download our Business Plan outline and get started right away!