Whether you are starting a new business, changing the course of an existing business or simply re-evaluating your company’s current condition, a business plan will serve as a roadmap for you and your team. The process of writing a business plan will also help refine your ideas and consider how to best communicate your strategic vision. When raising capital or looking to secure a business loan, investors and lenders alike will want to obtain a copy of your business plan to understand your company and how you intend to use any funding you receive.
There is no single way of writing a business plan, the plan should reflect you, your company, the industry you operate in and also the interests of the parties you intend to share the plan with. Nevertheless, there are certain key topics that most business plans will tackle. Following this structure will help you tackle the potentially overwhelming task of writing a comprehensive business plan.
Part 1: Executive Summary
The executive summary is the two-minute sales pitch for readers who don’t have the time or interest to read your entire business plan.
Readers of the executive summary want to know what need or problem your company solves, what your goals are for the coming 3 to 5 years and why you will be successful.
To answer these three questions, the executive summary should include your mission statement, brief information of your products or services, a description of your team, any important information about your company’s performance to date, a brief financial summary and also your plans for the uses of any funding you are raising and how you intend to repay any money you intend to borrow.
Keep the executive summary brief and to the point, it should be at best one or maximum two pages long.
Part 2: Company Description
This is where you go into details about your company and its product or service to a greater depth than in the executive summary. In this section, you discuss your strategic vision and your goals for the coming 6 months to 5 years and beyond. Highlight possible challenges and explain how you intend to tackle them.
Firstly, discuss the product or service you offer and how you identified the need for it. Be specific about who your prospective customers are. Include the results of any studies, test marketing or surveys you have done to measure the demand for your product or service. Include information about any big contracts that you have already won and summarize any contracts that are currently in negotiation.
Second, provide a detailed description of the product or service and also the current production status. Provide details of how and where production and sourcing will occur.
Outline any R&D plans going forward and discuss your plans for future product launches. Detail any patent or other intellectual property rights that you have obtained.
Finally, discuss how your company will operate within the larger industry and marketplace. It is sometimes helpful to include a SWOT analysis discussing your business’s Strengths, Weaknesses, Opportunities and Threats.
Part 3: Industry & Competitor Analysis
You need to show the reader that you have a keen understanding of the market, industry and competitor landscape you operate in.
Describe the current market and your potential position in it including;
- Your estimation of the market size;
- The market’s growth outlook? Discuss how will the market change over the next one to five or ten years;
- Describe external factors such as changes to regulation or technology that may impact or disrupt the industry;
- Who are your main competitors and how they operate? What do they do well and what could you do better?
- Are there any other potential new entrants into this market? How does their product or service differ from yours?
- Are there any barriers to entry that protect this market from new entrants? How do you intend to overcome these barriers?
It is sometimes helpful to include a SWOT analysis in this section which considers your business’s Strengths, Weaknesses, Opportunities and Threats in relation to the market and competitors.
Part 4: Management & Organisation
The management and organization section should include an overview of the company’s corporate, legal and business structure. Identify key stakeholders and investors and how much of the company they own and in what form.
The management section should include biographies or CVs of your key team members. Explain why these individuals joined the team and what unique background and experiences they bring that will benefit the business.
An organisational chart is helpful in explaining communication lines and responsibilities.
Part 5: Marketing & Sales Strategy
Successful businesses usually have a well-thought-out marketing and sales strategy. It is a good idea to lay out the Four Ps;
- Product – How will you position your business and product? You can refer to the company and industry discussion above;
- Price – Discuss how you will price your product and how flexible customers are to price increases / discounts. How does your pricing compare to market average;
- Place – Where will you market your product or service? Will you have a storefront? A webpage? An online store? Discuss the implications of each;
- Promotion – This section includes the many various ways that you can promote your product or service. How you promote your product or service ranges from any product packaging, to PR plans, search engine marketing, email marketing, social media marketing, and more “traditional” advertising on television, radio or billboards.
Part 6: Funding Request
A business plan used to request funding needs to clearly lay out how much funding is needed and what it will be used for whether you are approaching a lender for a small business loan, or speaking to private investors or looking for venture capital.
Specify what type of funding you will need be it self-funding, equity or debt. Be as specific as possible about the uses of the funds be it to purchase equipment, property or raw materials, to fund salaries or marketing plans or to pay specific bills. Outline how and how fast you plan to repay your investors be it through interest payments, dividends or a sale of the company.
Part 7: Current & Projected Financials
Current and projected financials are an absolutely essential part of any business plan or funding request. A thorough section that delves into the numbers in depth not only provides investors and lenders details about the company’s current financial position and projected performance but also shows that its management team has a strong understanding of the company’s financials and how they are impacted by its day to day operations.
An existing business should provide an income statement, balance sheet and cash flow statement for each of the past three to five years. In addition to this, a breakdown of accounts payable and receivable and information about any debt outstanding can be helpful.
If your business is a start-up, list any and all assets owned and enumerate any start-up costs or personal expenses that have been made to date.
In addition to current financials, lenders and investors often want to see financial projections for the coming three to five years. To put together your financial forecasts, begin by laying out your estimated sales for the upcoming years and then from this you can work down through your costs and expenses, showing how they will grow in relation to revenues, to form a full income statement and cash flow statement. A forecasted balance sheet is also helpful, in particular if you can demonstrate capital expenditures over time and how you will pay down your debts over time.
Part 8: Appendix
The appendix should include any documents supporting the business plan such as product pictures, personal and business letters of reference, patents, permits, credit checks, contracts, licenses, etc.
While the writing of a business plan may seem overwhelming, putting down your plans on paper can help crystallize your thoughts and can give you a better understanding of how to implement your plans. By breaking the business plan up into the sections above, you can focus on one section at the time and feel comfortable in knowing that the most important questions will have been tackled.
Approaching potential lenders and investors with a complete and thorough business plan will demonstrate that your company is serious in its intention to raise finance and has a clear plan for how to use, and repay, those funds. Contact the team at Broker.com.au and one of our brokers can help you understand your financing options and find the best solution for your business.
For further reading, have a look at the Business.gov.au website which has some excellent business plan templates and guides.