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Writing a Business Plan
While it may be tempting to put off, creating a business plan is an essential part of starting your own business. Plans and proposals should be put in a clear format making it easy for potential investors to understand. Because every company has a different goal and product or service to offer, there are business plan templates readily available to help you get on the right track. Many of these templates can be adapted for any company. In general, a business plan writing guide will recommend that the following sections be incorporated into your plan.
The executive summary is the first section that business plans open with, but is often the last section to actually be written as it’s the most difficult to write. The executive summary is a summary of the overall plan that highlights the key points and gives the reader an idea of what lies ahead in the document. It should include areas such as the business opportunity, target market, marketing and sales strategy, competition, the summary of the financial plan, staff members and a summary of how the plan will be implemented. This section needs to be extremely clear, concise and engaging as you don’t want the reader to push your hard work aside.
The company description follows the executive summary and should cover all the details about the company itself. For example, if you are writing a business plan for an internet café, you would want to include the name of the company, where the café would be located, who the main team members involved are and why, how large the company is, who the target market for the internet cafe is, what type of business structure the café is, such as LLC, sole proprietorship, partnership, or corporation, what the internet café business mission and vision statements are, and what the business’s short-term objectives are.
Services and Products
This is the exciting part of the plan where you get to explain what new and improved services or products you are offering. On top of describing the product or service itself, include in the plan what is currently in the market in this area, what problems there are in this area and how your product is the solution. For example, in a business plan for a food truck, perhaps there are numerous other food trucks in the area, but they are all fast –food style and unhealthy so, you want to introduce fast food that serves only organic and fresh ingredients every day. This is where you can also list your price points and future products or services you anticipate.
The market analysis section will take time to write and research as a lot of effort and research need to go into it. Here is where you have the opportunity to describe what trends are showing up, what the growth rate in this sector looks like, what the current size of this industry is and who your target audience is. A cleaning business plan, for example, may include how this sector has been growing by 10% every year due to an increase in large businesses being built in the city.
Organization and Management
Marketing and sales are the part of the business plan where you explain how you will attract and retain clients. How are you reaching your target customers and what incentives do you offer that will keep them coming back? For a dry cleaner business plan, perhaps if they refer customers, they will get 10% off their next visit. In addition, you may want to explain what needs to be done in order for the business to be profitable. This is a great way of showing that you are conscious about what clear steps need to be taken to make a business successful.
Financial Projections & Appendix
The financial business plan section can be a tricky one to write as it is based on projections. Usually what is included is the short-term projection, which is a year broken down by month and should include start-up permits, equipment, and licenses that are required. This is followed by a three-year projection broken down by year and many often write a five-year projection, but this does not need to be included in the business plan.
The appendix is the last section and contains all the supporting documents and/or required material. This often includes resumes of those involved in the company, letters of reference, product pictures and credit histories. Keep in mind that your business plan is always in development and should be adjusted regularly as your business grows and changes.
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Your Guide to Writing a Business Plan
If you’re starting a new business, then you need an effective plan. Not only does this enable you to plan your company, but it also gives potential clients an insight into how your business works. A business plan is also vital if you want to attract investors or secure a loan from the bank. Drafting a business plan is a complex process, but it doesn’t have to be. This guide will ensure you create a definite plan to impress investors and clients.
When creating your business plan, there are some essential elements you must include. The Executive Summary provides a description of your business, and what you hope to achieve. People usually write at least one page, but leave their Executive Summary until last.
You’ll also need to detail what your business offers and define your target audience. This makes it easier for people to see whether your company has a chance of succeeding. The opportunity section is also an excellent way for you to see what competitors offer and how you can create a USP to stand out from the competition.
Appealing to Investors
Every business that wants growth and prosperity must ensure they promote themselves to potential investors. Business plans aren’t just about what the business is, but who is part of it too. Detail your current team members and explain what they bring to the company. Investors want to know they’re making a wise investment.
Your current finances and financial forecast are also essential aspects of your business plan. Look at your products, how much you’re selling them for and what kind of profit margin you expect to gain. It’s also vital you detail your outgoings and look at how various economic situations could affect your finances.
Writing a Winning Executive Summary
There are problems in every market, and a successful business solves that problem. If you can show how you’ll be able to offer solutions in your business plan, you’ll appeal to investors. Choose your target audience based on research and ensure you show your research. There are many ways to conduct market research including defining SOMs, SAMs and TAMs.
TAM stands for Total Available Market and comprises everyone you want your product to reach. Your Segmented Addressable Market (SAM) is a specific portion of the market you’ll target. This is important because it shows you’re able to direct your product at the right people and not just everyone. Your SOM (Share of the Market) is what you feel you’ll gain with your product.
How to Determine Pricing
Pricing your product is one of the most challenging things you’ll have to do. There are many things to consider, such as how much it’s worth and making sure you don’t charge unrealistically. Many new businesses believe undercharging is the best way to go, but doing this can undermine your company’s authority and cause fewer people to be interested in investing.
Market-based pricing involves looking at your competitors and evaluating their prices. Which company has the most customers? How does their pricing match others? These are all vital aspects you should consider. Remember, customers expect quality and a fair price, so make sure you combine the two.
Investors and banks want to know that you’ve considered what the future will hold for your company. When you write your business plan, be sure to take into account how you see the company growing, what you’ll do to ensure it thrives and that you understand the potential risks. Banks and investors want to know that you can build a business and are aware of the obstacles you’ll have to overcome.
Starting your own business doesn’t have to be difficult. If you ensure you produce a robust business plan, it can be an exciting process. Your business is part of your future, so start by outlining your goals and look forward to seeing results.
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BUSINESS PLAN MAKING RUBRIC FOR BUSINESS PLAN MAKING 15 The content was well-thought, CONTENT guide questions were thoroughly answered. The paper was well-written ORGANIZATION with ideas easily conveyed to readers. Points are thoroughly DEVELPOMENT developed. TOTAL 10 5 30
Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas, which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup.48 His version is basically an extension of a napkin sketch (see the “Are You Ready?” activity in Designing the Business Model), without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.
As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.
Business Plan Overview
Most business plans have several distinct sections (Figure 11.16). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.
Figure 11.16 Most business plans include the same important sections. (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)
Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.
New questions in Economics
- Center for Innovative Teaching and Learning
- Instructional Guide
- Rubrics for Assessment
A rubric is an explicit set of criteria used for assessing a particular type of work or performance (TLT Group, n.d.) and provides more details than a single grade or mark. Rubrics, therefore, will help you grade more objectively.
Have your students ever asked, “Why did you grade me that way?” or stated, “You never told us that we would be graded on grammar!” As a grading tool, rubrics can address these and other issues related to assessment: they reduce grading time; they increase objectivity and reduce subjectivity; they convey timely feedback to students and they improve students’ ability to include required elements of an assignment (Stevens & Levi, 2005). Grading rubrics can be used to assess a range of activities in any subject area
Elements of a Rubric
Typically designed as a grid-type structure, a grading rubric includes criteria, levels of performance, scores, and descriptors which become unique assessment tools for any given assignment. The table below illustrates a simple grading rubric with each of the four elements for a history research paper.
Criteria identify the trait, feature or dimension which is to be measured and include a definition and example to clarify the meaning of each trait being assessed. Each assignment or performance will determine the number of criteria to be scored. Criteria are derived from assignments, checklists, grading sheets or colleagues.
Examples of Criteria for a term paper rubric
- Grammar and punctuation
- Internal citations
Levels of performance
Levels of performance are often labeled as adjectives which describe the performance levels. Levels of performance determine the degree of performance which has been met and will provide for consistent and objective assessment and better feedback to students. These levels tell students what they are expected to do. Levels of performance can be used without descriptors but descriptors help in achieving objectivity. Words used for levels of performance could influence a student’s interpretation of performance level (such as superior, moderate, poor or above or below average).
Examples to describe levels of performance
- Excellent, Good, Fair, Poor
- Master, Apprentice, Beginner
- Exemplary, Accomplished, Developing, Beginning, Undeveloped
- Complete, Incomplete
Levels of performance determine the degree of performance which has been met and will provide for consistent and objective assessment and better feedback to students.
Scores make up the system of numbers or values used to rate each criterion and often are combined with levels of performance. Begin by asking how many points are needed to adequately describe the range of performance you expect to see in students’ work. Consider the range of possible performance level.
Example of scores for a rubric
1, 2, 3, 4, 5 or 2, 4, 6, 8
Descriptors are explicit descriptions of the performance and show how the score is derived and what is expected of the students. Descriptors spell out each level (gradation) of performance for each criterion and describe what performance at a particular level looks like. Descriptors describe how well students’ work is distinguished from the work of their peers and will help you to distinguish between each student’s work. Descriptors should be detailed enough to differentiate between the different level and increase the objectivity of the rater.
Descriptors...describe what performance at a particular level looks like.
Developing a Grading Rubric
First, consider using any of a number of existing rubrics available online. Many rubrics can be used “as is.” Or, you could modify a rubric by adding or deleting elements or combining others for one that will suit your needs. Finally, you could create a completely customized rubric using specifically designed rubric software or just by creating a table with the rubric elements. The following steps will help you develop a rubric no matter which option you choose.
- Select a performance/assignment to be assessed. Begin with a performance or assignment which may be difficult to grade and where you want to reduce subjectivity. Is the performance/assignment an authentic task related to learning goals and/or objectives? Are students replicating meaningful tasks found in the real world? Are you encouraging students to problem solve and apply knowledge? Answer these questions as you begin to develop the criteria for your rubric.
Begin with a performance or assignment which may be difficult to grade and where you want to reduce subjectivity.
- List criteria. Begin by brainstorming a list of all criteria, traits or dimensions associated task. Reduce the list by chunking similar criteria and eliminating others until you produce a range of appropriate criteria. A rubric designed for formative and diagnostic assessments might have more criteria than those rubrics rating summative performances (Dodge, 2001). Keep the list of criteria manageable and reasonable.
- Write criteria descriptions. Keep criteria descriptions brief, understandable, and in a logical order for students to follow as they work on the task.
- Determine level of performance adjectives. Select words or phrases that will explain what performance looks like at each level, making sure they are discrete enough to show real differences. Levels of performance should match the related criterion.
- Develop scores. The scores will determine the ranges of performance in numerical value. Make sure the values make sense in terms of the total points possible: What is the difference between getting 10 points versus 100 points versus 1,000 points? The best and worst performance scores are placed at the ends of the continuum and the other scores are placed appropriately in between. It is suggested to start with fewer levels and to distinguish between work that does not meet the criteria. Also, it is difficult to make fine distinctions using qualitative levels such as never, sometimes, usually or limited acceptance, proficient or NA, poor, fair, good, very good, excellent. How will you make the distinctions?
It is suggested to start with fewer [score] levels and to distinguish between work that does not meet the criteria.
- Write the descriptors. As a student is judged to move up the performance continuum, previous level descriptions are considered achieved in subsequent description levels. Therefore, it is not necessary to include “beginning level” descriptors in the same box where new skills are introduced.
- Evaluate the rubric. As with any instructional tool, evaluate the rubric each time it is used to ensure it matches instructional goals and objectives. Be sure students understand each criterion and how they can use the rubric to their advantage. Consider providing more details about each of the rubric’s areas to further clarify these sections to students. Pilot test new rubrics if possible, review the rubric with a colleague, and solicit students’ feedback for further refinements.
Types of Rubrics
Determining which type of rubric to use depends on what and how you plan to evaluate. There are several types of rubrics including holistic, analytical, general, and task-specific. Each of these will be described below.
All criteria are assessed as a single score. Holistic rubrics are good for evaluating overall performance on a task. Because only one score is given, holistic rubrics tend to be easier to score. However, holistic rubrics do not provide detailed information on student performance for each criterion; the levels of performance are treated as a whole.
- “Use for simple tasks and performances such as reading fluency or response to an essay question . . .
- Getting a quick snapshot of overall quality or achievement
- Judging the impact of a product or performance” (Arter & McTighe, 2001, p 21)
Each criterion is assessed separately, using different descriptive ratings. Each criterion receives a separate score. Analytical rubrics take more time to score but provide more detailed feedback.
- “Judging complex performances . . . involving several significant [criteria] . . .
- Providing more specific information or feedback to students . . .” (Arter & McTighe, 2001, p 22)
A generic rubric contains criteria that are general across tasks and can be used for similar tasks or performances. Criteria are assessed separately, as in an analytical rubric.
- “[Use] when students will not all be doing exactly the same task; when students have a choice as to what evidence will be chosen to show competence on a particular skill or product.
- [Use] when instructors are trying to judge consistently in different course sections” (Arter & McTighe, 2001, p 30)
Assesses a specific task. Unique criteria are assessed separately. However, it may not be possible to account for each and every criterion involved in a particular task which could overlook a student’s unique solution (Arter & McTighe, 2001).
- “It’s easier and faster to get consistent scoring
- [Use] in large-scale and “high-stakes” contexts, such as state-level accountability assessments
- [Use when] you want to know whether students know particular facts, equations, methods, or procedures” (Arter & McTighe, 2001, p 28)
Grading rubrics are effective and efficient tools which allow for objective and consistent assessment of a range of performances, assignments, and activities. Rubrics can help clarify your expectations and will show students how to meet them, making students accountable for their performance in an easy-to-follow format. The feedback that students receive through a grading rubric can help them improve their performance on revised or subsequent work. Rubrics can help to rationalize grades when students ask about your method of assessment. Rubrics also allow for consistency in grading for those who team teach the same course, for TAs assigned to the task of grading, and serve as good documentation for accreditation purposes. Several online sources exist which can be used in the creation of customized grading rubrics; a few of these are listed below.
Arter, J., & McTighe, J. (2001). Scoring rubrics in the classroom: Using performance criteria for assessing and improving student performance. Thousand Oaks, CA: Corwin Press, Inc.
Stevens, D. D., & Levi, A. J. (2005). Introduction to rubrics: An assessment tool to save grading time, convey effective feedback, and promote student learning. Sterling, VA: Stylus.
The Teaching, Learning, and Technology Group (n.d.). Rubrics: Definition, tools, examples, references. http://www.tltgroup.org/resources/flashlight/rubrics.htm
Dodge, B. (2001). Creating a rubric on a given task. http://webquest.sdsu.edu/rubrics/rubrics.html
Wilson, M. (2006). Rethinking rubrics in writing assessment. Portsmouth, NH: Heinemann.
Rubric Builders and Generators
eMints.org (2011). Rubric/scoring guide. http://www.emints.org/webquest/rubric.shtml
General Rubric Generator. http://www.teach-nology.com/web_tools/rubrics/general/
RubiStar (2008). Create rubrics for your project-based learning activities. http://rubistar.4teachers.org/index.php
Northern Illinois University Center for Innovative Teaching and Learning. (2012). Rubrics for assessment. In Instructional guide for university faculty and teaching assistants. Retrieved from https://www.niu.edu/citl/resources/guides/instructional-guide
- Active Learning Activities
- Assessing Student Learning
- Direct vs. Indirect Assessment
- Examples of Classroom Assessment Techniques
- Formative and Summative Assessment
- Peer and Self-Assessment
- Reflective Journals and Learning Logs
- The Process of Grading
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- 11.4 The Business Plan
- 1.1 Entrepreneurship Today
- 1.2 Entrepreneurial Vision and Goals
- 1.3 The Entrepreneurial Mindset
- Review Questions
- Discussion Questions
- Case Questions
- Suggested Resources
- 2.1 Overview of the Entrepreneurial Journey
- 2.2 The Process of Becoming an Entrepreneur
- 2.3 Entrepreneurial Pathways
- 2.4 Frameworks to Inform Your Entrepreneurial Path
- 3.1 Ethical and Legal Issues in Entrepreneurship
- 3.2 Corporate Social Responsibility and Social Entrepreneurship
- 3.3 Developing a Workplace Culture of Ethical Excellence and Accountability
- 4.1 Tools for Creativity and Innovation
- 4.2 Creativity, Innovation, and Invention: How They Differ
- 4.3 Developing Ideas, Innovations, and Inventions
- 5.1 Entrepreneurial Opportunity
- 5.2 Researching Potential Business Opportunities
- 5.3 Competitive Analysis
- 6.1 Problem Solving to Find Entrepreneurial Solutions
- 6.2 Creative Problem-Solving Process
- 6.3 Design Thinking
- 6.4 Lean Processes
- 7.1 Clarifying Your Vision, Mission, and Goals
- 7.2 Sharing Your Entrepreneurial Story
- 7.3 Developing Pitches for Various Audiences and Goals
- 7.4 Protecting Your Idea and Polishing the Pitch through Feedback
- 7.5 Reality Check: Contests and Competitions
- 8.1 Entrepreneurial Marketing and the Marketing Mix
- 8.2 Market Research, Market Opportunity Recognition, and Target Market
- 8.3 Marketing Techniques and Tools for Entrepreneurs
- 8.4 Entrepreneurial Branding
- 8.5 Marketing Strategy and the Marketing Plan
- 8.6 Sales and Customer Service
- 9.1 Overview of Entrepreneurial Finance and Accounting Strategies
- 9.2 Special Funding Strategies
- 9.3 Accounting Basics for Entrepreneurs
- 9.4 Developing Startup Financial Statements and Projections
- 10.1 Launching the Imperfect Business: Lean Startup
- 10.2 Why Early Failure Can Lead to Success Later
- 10.3 The Challenging Truth about Business Ownership
- 10.4 Managing, Following, and Adjusting the Initial Plan
- 10.5 Growth: Signs, Pains, and Cautions
- 11.1 Avoiding the “Field of Dreams” Approach
- 11.2 Designing the Business Model
- 11.3 Conducting a Feasibility Analysis
- 12.1 Building and Connecting to Networks
- 12.2 Building the Entrepreneurial Dream Team
- 12.3 Designing a Startup Operational Plan
- 13.1 Business Structures: Overview of Legal and Tax Considerations
- 13.2 Corporations
- 13.3 Partnerships and Joint Ventures
- 13.4 Limited Liability Companies
- 13.5 Sole Proprietorships
- 13.6 Additional Considerations: Capital Acquisition, Business Domicile, and Technology
- 13.7 Mitigating and Managing Risks
- 14.1 Types of Resources
- 14.2 Using the PEST Framework to Assess Resource Needs
- 14.3 Managing Resources over the Venture Life Cycle
- 15.1 Launching Your Venture
- 15.2 Making Difficult Business Decisions in Response to Challenges
- 15.3 Seeking Help or Support
- 15.4 Now What? Serving as a Mentor, Consultant, or Champion
- 15.5 Reflections: Documenting the Journey
- A | Suggested Resources
By the end of this section, you will be able to:
- Describe the different purposes of a business plan
- Describe and develop the components of a brief business plan
- Describe and develop the components of a full business plan
Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas , which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.
Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup . 48 His version is basically an extension of a napkin sketch without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.
As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.
Business Plan Overview
Most business plans have several distinct sections ( Figure 11.16 ). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.
Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.
The full business plan is aimed at executing the vision concept, dealing with the proverbial devil in the details. Developing a full business plan will assist those of you who need a more detailed and structured roadmap, or those of you with little to no background in business. The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs.
Purposes of a Business Plan
A business plan can serve many different purposes—some internal, others external. As we discussed previously, you can use a business plan as an internal early planning device, an extension of a napkin sketch, and as a follow-up to one of the canvas tools. A business plan can be an organizational roadmap , that is, an internal planning tool and working plan that you can apply to your business in order to reach your desired goals over the course of several years. The business plan should be written by the owners of the venture, since it forces a firsthand examination of the business operations and allows them to focus on areas that need improvement.
Refer to the business venture throughout the document. Generally speaking, a business plan should not be written in the first person.
A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.
You can also use your business plan as a contingency plan by outlining some “what-if” scenarios and exploring how you might respond if these scenarios unfold. Pretty Young Professional launched in November 2010 as an online resource to guide an emerging generation of female leaders. The site focused on recent female college graduates and current students searching for professional roles and those in their first professional roles. It was founded by four friends who were coworkers at the global consultancy firm McKinsey. But after positions and equity were decided among them, fundamental differences of opinion about the direction of the business emerged between two factions, according to the cofounder and former CEO Kathryn Minshew . “I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out,” Minshew said. Minshew went on to found a different professional site, The Muse , and took much of the editorial team of Pretty Young Professional with her. 49 Whereas greater planning potentially could have prevented the early demise of Pretty Young Professional, a change in planning led to overnight success for Joshua Esnard and The Cut Buddy team. Esnard invented and patented the plastic hair template that he was selling online out of his Fort Lauderdale garage while working a full-time job at Broward College and running a side business. Esnard had hundreds of boxes of Cut Buddies sitting in his home when he changed his marketing plan to enlist companies specializing in making videos go viral. It worked so well that a promotional video for the product garnered 8 million views in hours. The Cut Buddy sold over 4,000 products in a few hours when Esnard only had hundreds remaining. Demand greatly exceeded his supply, so Esnard had to scramble to increase manufacturing and offered customers two-for-one deals to make up for delays. This led to selling 55,000 units, generating $700,000 in sales in 2017. 50 After appearing on Shark Tank and landing a deal with Daymond John that gave the “shark” a 20-percent equity stake in return for $300,000, The Cut Buddy has added new distribution channels to include retail sales along with online commerce. Changing one aspect of a business plan—the marketing plan—yielded success for The Cut Buddy.
Link to Learning
Watch this video of Cut Buddy’s founder, Joshua Esnard, telling his company’s story to learn more.
If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary “box,” but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure agreement (NDA) . The full business plan is aimed at executing the vision concept, providing supporting details, and would be required by financial institutions and others as they formally become stakeholders in the venture. Both are aimed at providing a picture and roadmap to go from conception to creation.
Types of Business Plans
The brief business plan is similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so. You can think of a brief business plan as a scene setter or—since we began this chapter with a film reference—as a trailer to the full movie. The brief business plan is the commercial equivalent to a trailer for Field of Dreams , whereas the full plan is the full-length movie equivalent.
Brief Business Plan or Executive Summary
As the name implies, the brief business plan or executive summary summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. The executive summary version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.
A typical executive summary is generally no longer than a page, but because the brief business plan is essentially an extended executive summary, the executive summary section is vital. This is the “ask” to an investor. You should begin by clearly stating what you are asking for in the summary.
In the business concept phase, you’ll describe the business, its product, and its markets. Describe the customer segment it serves and why your company will hold a competitive advantage. This section may align roughly with the customer segments and value-proposition segments of a canvas.
Next, highlight the important financial features, including sales, profits, cash flows, and return on investment. Like the financial portion of a feasibility analysis, the financial analysis component of a business plan may typically include items like a twelve-month profit and loss projection, a three- or four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a breakeven calculation. You can explore a feasibility study and financial projections in more depth in the formal business plan. Here, you want to focus on the big picture of your numbers and what they mean.
The current business position section can furnish relevant information about you and your team members and the company at large. This is your opportunity to tell the story of how you formed the company, to describe its legal status (form of operation), and to list the principal players. In one part of the extended executive summary, you can cover your reasons for starting the business: Here is an opportunity to clearly define the needs you think you can meet and perhaps get into the pains and gains of customers. You also can provide a summary of the overall strategic direction in which you intend to take the company. Describe the company’s mission, vision, goals and objectives, overall business model, and value proposition.
Rice University’s Student Business Plan Competition, one of the largest and overall best-regarded graduate school business-plan competitions (see Telling Your Entrepreneurial Story and Pitching the Idea ), requires an executive summary of up to five pages to apply. 51 , 52 Its suggested sections are shown in Table 11.2 .
Are You Ready?
Create a brief business plan.
Fill out a canvas of your choosing for a well-known startup: Uber, Netflix, Dropbox, Etsy, Airbnb, Bird/Lime, Warby Parker, or any of the companies featured throughout this chapter or one of your choice. Then create a brief business plan for that business. See if you can find a version of the company’s actual executive summary, business plan, or canvas. Compare and contrast your vision with what the company has articulated.
- These companies are well established but is there a component of what you charted that you would advise the company to change to ensure future viability?
- Map out a contingency plan for a “what-if” scenario if one key aspect of the company or the environment it operates in were drastically is altered?
Full Business Plan
Even full business plans can vary in length, scale, and scope. Rice University sets a ten-page cap on business plans submitted for the full competition. The IndUS Entrepreneurs , one of the largest global networks of entrepreneurs, also holds business plan competitions for students through its Tie Young Entrepreneurs program. In contrast, business plans submitted for that competition can usually be up to twenty-five pages. These are just two examples. Some components may differ slightly; common elements are typically found in a formal business plan outline. The next section will provide sample components of a full business plan for a fictional business.
The executive summary should provide an overview of your business with key points and issues. Because the summary is intended to summarize the entire document, it is most helpful to write this section last, even though it comes first in sequence. The writing in this section should be especially concise. Readers should be able to understand your needs and capabilities at first glance. The section should tell the reader what you want and your “ask” should be explicitly stated in the summary.
Describe your business, its product or service, and the intended customers. Explain what will be sold, who it will be sold to, and what competitive advantages the business has. Table 11.3 shows a sample executive summary for the fictional company La Vida Lola.
This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition. Consider including the Standard Industrial Classification/North American Industry Classification System (SIC/NAICS) code to specify the industry and insure correct identification. The industry extends beyond where the business is located and operates, and should include national and global dynamics. Table 11.4 shows a sample business description for La Vida Lola.
Industry Analysis and Market Strategies
Here you should define your market in terms of size, structure, growth prospects, trends, and sales potential. You’ll want to include your TAM and forecast the SAM . (Both these terms are discussed in Conducting a Feasibility Analysis .) This is a place to address market segmentation strategies by geography, customer attributes, or product orientation. Describe your positioning relative to your competitors’ in terms of pricing, distribution, promotion plan, and sales potential. Table 11.5 shows an example industry analysis and market strategy for La Vida Lola.
The competitive analysis is a statement of the business strategy as it relates to the competition. You want to be able to identify who are your major competitors and assess what are their market shares, markets served, strategies employed, and expected response to entry? You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities Threats) and complete a competitive-strength grid or competitive matrix. Outline your company’s competitive strengths relative to those of the competition in regard to product, distribution, pricing, promotion, and advertising. What are your company’s competitive advantages and their likely impacts on its success? The key is to construct it properly for the relevant features/benefits (by weight, according to customers) and how the startup compares to incumbents. The competitive matrix should show clearly how and why the startup has a clear (if not currently measurable) competitive advantage. Some common features in the example include price, benefits, quality, type of features, locations, and distribution/sales. Sample templates are shown in Figure 11.17 and Figure 11.18 . A competitive analysis helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage. When creating a competitor analysis, it is important to focus on the key features and elements that matter to customers, rather than focusing too heavily on the entrepreneur’s idea and desires.
Operations and Management Plan
In this section, outline how you will manage your company. Describe its organizational structure. Here you can address the form of ownership and, if warranted, include an organizational chart/structure. Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of members of the management team. This is also the place to mention any other stakeholders, such as a board of directors or advisory board(s), and their relevant relationship to the founder, experience and value to help make the venture successful, and professional service firms providing management support, such as accounting services and legal counsel.
Table 11.6 shows a sample operations and management plan for La Vida Lola.
Here you should outline and describe an effective overall marketing strategy for your venture, providing details regarding pricing, promotion, advertising, distribution, media usage, public relations, and a digital presence. Fully describe your sales management plan and the composition of your sales force, along with a comprehensive and detailed budget for the marketing plan. Table 11.7 shows a sample marketing plan for La Vida Lola.
A financial plan seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections. This section should present an accurate, realistic, and achievable financial plan for your venture (see Entrepreneurial Finance and Accounting for detailed discussions about conducting these projections). Include sales forecasts and income projections, pro forma financial statements ( Building the Entrepreneurial Dream Team , a breakeven analysis, and a capital budget. Identify your possible sources of financing (discussed in Conducting a Feasibility Analysis ). Figure 11.19 shows a template of cash-flow needs for La Vida Lola.
Entrepreneur In Action
Laughing man coffee.
Hugh Jackman ( Figure 11.20 ) may best be known for portraying a comic-book superhero who used his mutant abilities to protect the world from villains. But the Wolverine actor is also working to make the planet a better place for real, not through adamantium claws but through social entrepreneurship.
A love of java jolted Jackman into action in 2009, when he traveled to Ethiopia with a Christian humanitarian group to shoot a documentary about the impact of fair-trade certification on coffee growers there. He decided to launch a business and follow in the footsteps of the late Paul Newman, another famous actor turned philanthropist via food ventures.
Jackman launched Laughing Man Coffee two years later; he sold the line to Keurig in 2015. One Laughing Man Coffee café in New York continues to operate independently, investing its proceeds into charitable programs that support better housing, health, and educational initiatives within fair-trade farming communities. 55 Although the New York location is the only café, the coffee brand is still distributed, with Keurig donating an undisclosed portion of Laughing Man proceeds to those causes (whereas Jackman donates all his profits). The company initially donated its profits to World Vision, the Christian humanitarian group Jackman accompanied in 2009. In 2017, it created the Laughing Man Foundation to be more active with its money management and distribution.
- You be the entrepreneur. If you were Jackman, would you have sold the company to Keurig? Why or why not?
- Would you have started the Laughing Man Foundation?
- What else can Jackman do to aid fair-trade practices for coffee growers?
What Can You Do?
Textbooks for change.
Founded in 2014, Textbooks for Change uses a cross-compensation model, in which one customer segment pays for a product or service, and the profit from that revenue is used to provide the same product or service to another, underserved segment. Textbooks for Change partners with student organizations to collect used college textbooks, some of which are re-sold while others are donated to students in need at underserved universities across the globe. The organization has reused or recycled 250,000 textbooks, providing 220,000 students with access through seven campus partners in East Africa. This B-corp social enterprise tackles a problem and offers a solution that is directly relevant to college students like yourself. Have you observed a problem on your college campus or other campuses that is not being served properly? Could it result in a social enterprise?
Work It Out
Franchisee set out.
A franchisee of East Coast Wings, a chain with dozens of restaurants in the United States, has decided to part ways with the chain. The new store will feature the same basic sports-bar-and-restaurant concept and serve the same basic foods: chicken wings, burgers, sandwiches, and the like. The new restaurant can’t rely on the same distributors and suppliers. A new business plan is needed.
- What steps should the new restaurant take to create a new business plan?
- Should it attempt to serve the same customers? Why or why not?
This New York Times video, “An Unlikely Business Plan,” describes entrepreneurial resurgence in Detroit, Michigan.
- 48 Chris Guillebeau. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future . New York: Crown Business/Random House, 2012.
- 49 Jonathan Chan. “What These 4 Startup Case Studies Can Teach You about Failure.” Foundr.com . July 12, 2015. https://foundr.com/4-startup-case-studies-failure/
- 50 Amy Feldman. “Inventor of the Cut Buddy Paid YouTubers to Spark Sales. He Wasn’t Ready for a Video to Go Viral.” Forbes. February 15, 2017. https://www.forbes.com/sites/forbestreptalks/2017/02/15/inventor-of-the-cut-buddy-paid-youtubers-to-spark-sales-he-wasnt-ready-for-a-video-to-go-viral/#3eb540ce798a
- 51 Jennifer Post. “National Business Plan Competitions for Entrepreneurs.” Business News Daily . August 30, 2018. https://www.businessnewsdaily.com/6902-business-plan-competitions-entrepreneurs.html
- 52 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition . March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf
- 53 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition. March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf; Based on 2019 RBPC Competition Rules and Format April 4–6, 2019. https://rbpc.rice.edu/sites/g/files/bxs806/f/2019-RBPC-Competition-Rules%20-Format.pdf
- 54 Foodstart. http://foodstart.com
- 55 “Hugh Jackman Journey to Starting a Social Enterprise Coffee Company.” Giving Compass. April 8, 2018. https://givingcompass.org/article/hugh-jackman-journey-to-starting-a-social-enterprise-coffee-company/
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Practical example of a business plan outline
This article provides a detailed business plan outline as well as a step by step guide to writing a business plan.
I encourage you to read this article in relation to our series of articles on how to write a business plan .
Business plan outline
Below is our recommended business plan outline. Every company is different and the business plan needs to be tailored to reflect that, therefore this is more a guideline than a strict template.
Our business plan outline is structured so that each section answers a specific set of investor questions about your business. It also offers a natural progression making it suitable for both the investor who wants to read the plan cover to cover and the one who wants to simply jump into specific parts to clarify particular points.
- Business Overview
- Market Overview
- Financial Highlights
Structure & Ownership
- Products and Services
Demographics and Segmentation
Target market, market need, competition, barriers to entry, competitive edge, marketing plan.
- Risks and Mittigants
Key assets and ip, start-up funding, important assumptions, sales forecast, cost structure.
Let me walk you through each section and get into the details of what to write and where to find the information.
1. Executive Summary
The first section, the executive summary, is the most important one. It is only if they find this section attractive enough that potential investors will dive into the other sections of your plan to get more details.
Because this section is a summary of the rest of the plan this is the one you will write last.
The executive summary is all about getting your investor excited in 5 minutes. Do not try to tell everything about your business. Keep it short and to the point.
There are four things that you must cover:
- who you are
- what you sell
- how big and profitable it can get
- how much you need
The objective of this section is to introduce the company and its management. The content of this section will vary slightly depending on if you already have a business or if you are starting a new venture.
This is a purely descriptive part, the key questions you need to answer here are:
- who are the shareholders: as part of the anti-money laundering regulation, investors have the legal obligation to check the identity of the shareholders of any business they invest in or lend money to. Giving them the full list enables them to do a quick sanity check and gives them the opportunity to raise any concern they might have. If your reader is an equity investor it also gives him a grasp of who the other shareholders are. It is also important that you mention if any of your co-shareholders brings more than just money to the company (for example if one of your shareholders is an expert in your industry and also brings advice and credibility to the company).
- where is the company registered and what is the legal structure: this is also one of the anti-money laundering requirements. But it also gives the reader an indication of the size of the business and the applicable tax system. Some investors also have geographical restrictions on investments, hence this is also where they will check if you are eligible.
If you are writing a business plan for an existing company this is where you would present the key highlights to date. The idea here is to build your credibility and show to your reader that you have a viable business. The main points you want to touch on are:
- how long you have been in business: this is a real reassuring factor for any investor as it proves that your business is a viable one.
- company milestones: you want to show what has been achieved so far in terms of growth, product launches, internationalisation. If you are seeking growth capital this will build your credibility and show that you have the ability to execute your plan.
- past difficulties: if there have been periods when the company was in danger (for example because of a new entrant in the market, or a sudden drop in demand) and you managed to turn things around and stay in business.
If you are writing a plan for a business for which location is important (for example a shop or a restaurant) or if you are managing a large business with multiple stores or factories this is where you would describe (ideally using a map) the main location(s) of your business.
This is one of the most important section of your business plan. You must demonstrate that your team has strong experience in your sector and the skills to run this business.
If there are any important skill gaps in your team, you need to address them and mitigate them here. It could be that you are looking for someone with these skills or that you have a board member or a non-executive director that can fill the gap.
Try to put some pictures if you can. It is always better when one can put a face on a name! And it helps if you are due to meet your investors at some point.
Now that you have introduced the company it is time to dive into what it does.
3. Products and Services
The key to writing a good product and services section is to be precise about the product or service you sell, the client you are targeting, and the channel you are targeting him through.
After this section, your reader will start thinking about how big, how crowded and how profitable your market is and try to guess what the overall strategy is going to be. You want to send him in the right direction! So be ultra-precise, don't say for example "I sell shoes" but "I sell leather boots targeted at women aged 16-25 who buy online".
If you can try to include pictures of your products.
By now your reader knows who you are and what business you are in. It is time you show him why this is a good opportunity.
4. Market Analysis
This part is a summary of our article on how to do a market analysis, please refer to the article for more details
The objectives of the market analysis section are to show the investors that:
- the market is large enough to build a sustainable business
- you know who your customers are and why they buy
- despite the competition, it exists a gap in the market where your business will fit
The first step of the analysis consists of assessing the size of the market.
The way you look at the market will depend on your type of business. If it is a small business, such as a coffee shop for example, then you need to look at the market on a local basis (your town, your street). If you are targeting a wider audience, then you need to evaluate the market at a national or an international level.
When assessing the size of your market, you need to come up with two variables: the number of potential customers and the value of the market.
The idea here is to get a sense of how atomised your market is. If you are in a market where there is a small set of high-value customers then it might be complicated to compete against more established players and your business is likely to be dependent on a handful of customers meaning that losing one would potentially threaten your business. Now if you are in a market with lots of low-value customers it might be complicated and costly to reach enough of them to get to the minimum volume for your business to be profitable. Ideally, you want to be in a market with a high number of medium value customers meaning that there are enough customers to leave room for a few players and that each customer brings a decent amount of revenues.
Once you have estimated the market size you need to explain to your reader which segment(s) of the market you view as your target market.
The target market is the type of customers you target within the market. You need to identify the different segments in your market and explain who you are going after and why. One way to identify the segments is to group customers by buying pattern or demographics. For example in the fashion market you could have:
- men vs. women
- low price vs. premium clothing
- online vs. in-store
- shoes, accessories, and outfit
This section is where you demonstrate that you have insight into your market. You know what makes people buy!
You need to describe the buying pattern of your target customers. What triggers a purchase? Is it something they need such as food? Is it a value associated with the product or a brand perception? Etc.
Later in your plan, you will use this analysis to justify your market positioning.
Here you have to explain who your competitors are, how they are positioned on the market, and what their strength and weaknesses are. Some of the items you need to cover are
- who are they? (name, brand, independent vs. part of a larger group, location)
- how big are they? (turnover, number of staff, etc.)
- which customer do they target? (segments)
- what are the key characteristics of their offerings? (price, associated services, etc.)
You should write this part in parallel with the Competitive Edge part of the Strategy section, as the idea here is to find a weakness in your competitors' positioning that your company will be able to use in its own market positioning.
Here, the objective is to show to investors that the risk of having new competitors entering the market is fairly remote. Hence if you are writing your business plan for a start-up then this section is a bit tricky as you need to show that you will succeed where others will fail!
Once again, you can find more details on this section in our market analysis article .
In this section, you need to details which regulation is applicable to your sector and how you are going to comply with it.
Until now all the sections of the business plan outline we covered were very descriptive, this is where things get a bit more interesting.
Strategy is a big word for what is really just explaining your view of the market, how you want to attack it, and why it should work.
The first part of the strategy section is the Competitive Edge sub-section which is where you explain your market positioning.
The competitive edge part is where you answer investors' favourite question: "what makes you different from the competition?"
Hopefully, you will have laid the groundwork for this section in the previous ones and orientated your analysis of the market in a way that prepares the reader to embrace your positioning.
In order to explain and justify your pricing strategy you must touch on the following points:
- Compare it to your competitor's pricing
- Show that you are profitable at that level
- Explain the rationale behind your price
I won't touch on the two first points which are pretty obvious but I think the third one deserves a bit more explanation. Setting a price is not easy but there are a couple of techniques you can use to guide you.
The first thing to do is to assess if you have control over your prices. It could very well be that you have limited control over your prices. If you are in a price a driven market where all your competitor's price at £9.90 it can be complicated to justify a higher price to your customers.
Now if you have control over your prices you then need to come up with a figure. Here are the two main strategies that you can use to do so:
Cost-plus pricing: this consist of adding a percentage margin to the cost of the good or service you are selling. The advantage of this strategy is that you are guaranteed to earn your margin on every sale. The disadvantage is that your price could be below or above what customers are willing to pay for a product or service.
Benefit driven pricing: this consist of estimating the gain procured by your good or service to the customer and set the price as a fraction of this gain. It is easier to do when your product or service procure a hard benefit (i.e. when you can quantify the money your customer will save) than when your product procures a soft benefit (i.e. when you cannot easily quantify the value of the benefit as for example if it makes your customer save time). The advantage of this technique is that it allows you to maximise the price of your goods and services. The disadvantage is that it usually requires trying different price points in order to find the right market price.
It is always a good thing to test different prices. Do one week with price A and one week with price B and compare the results in terms of sales and volume.
Ok, so now we know who you will target and how you will price your products. It is time to explain how you are going to reach those customers.
This is the first section where we start to leave aside the helicopter view of the market to really dive into the implementation and execution strategy of your plan. Therefore you need to show your investor that not only you know your market inside-out but that you also have a credible plan to conquer that market.
The best way to show that your business plan is realistic is to get into the specifics of the implementation. Your reader needs to feel that you are ready to go and that he just has to push on a button (write you a check) to make it happen.
In the marketing plan section, you need to show that you have identified the best channels to use to target your customers.
By channel, I mean both the distribution network (online, owned stores, third party network, door to door, etc.) and the means of communication (flyers, print advertising, online marketing, etc.).
You want to start by listing all the different options and then start diving into the ones you picked and explain why you think they are the most relevant in terms of:
- reach: why do you think you will be able to touch most of your potential customers through that channel?
- cost: why do you think this will be cost-effective? What is the budget allocated in your plan?
- competition: why do you think you stand a better chance against your competitors by using this channel?
- implementation: who is going to be responsible for that? What makes him relevant? Which partners/suppliers have you approached so far?
This section is where you set the goals for your company. This is a commitment you are making to your investors and you will be judged on your ability to achieve these goals. It is therefore important that you take time to identify goals that are:
- relevant: i.e. objectives that will make a real difference to the business
- achievable: you don't want to get labelled as a dreamer but rather want to be perceived as an entrepreneur who delivers his business plan
- measurable: you want to be able to get back to your investors and say "we said we'll get 1,000 customers by year-end and we delivered 1,200!".
Here you will be judged on your ability to identify and focus on the key objectives to bring your business to the next level. This will help build your credibility towards your investor and ultimately play a part in his investment decision.
From a relationship perspective, being able to over-achieve these objectives will be key if you are to raise more money in the future.
Risks and Mitigants
The risks and mitigants section has one key objective: enable you to anticipate any objection or doubt an investor might have on your plan or your ability to deliver it and give you an opportunity to show that:
- you know this is a key risk,
- you thought about it,
- you have a contingency measure in place.
It is very important to be transparent in this section. If an investor spots a key risk in your plan that you haven't disclosed he is going to think "well I am not sure he knows this market as well as he claims", and that looks bad. You want to do everything to build credibility and trust with your investors because the moment they start doubting you they will start doubting the investment.
This section is where you get into the details of how your company will operate. It usually starts with the personnel plan.
In the personnel plan section, you must explain how many people you will employ and what will be their roles. If your staff is planned to increase over the duration of your business plan, it is recommended to explain what will be the driver. It could be that you plan a new shop opening or that you will increase support staff with sales.
If you have a shop or a restaurant it is also recommended to put the staff plan in perspective with the opening hours.
The idea behind this section is to identify or dismiss any operational risks that could arise on the asset side.
You need to explain which are the assets and intellectual property without which the company could not operate (for example a delivery truck or a licence) and the steps you took to protect them.
In this section, your investor will want to check that you intend to do business with respectable counterparties and that you are not dependent on a single supplier. Therefore you need to explain who will be your main suppliers, the relationship you have with them (if any) and what is your backup plan if one was to be replaced.
You also need to mention the main terms you have negotiated with your suppliers (price, days of credit, delivery schedule, etc.).
Now that you have explained how your company will be operated it is time to dive into the numbers.
7. Financial Plan
This is the most crucial part of your business plan. The tone of this section will depend on who the recipient of your business plan is.
If the recipient of your business plan is a lender you need to show that your business is going to be stable, profitable and cash generative and that you are not going to take too many risks. If it is an equity investor you need to show that your business can become big and cash generative enough to make it easy to sell and enable him to reach his target return.
As a minimum, you will need to show a full set of financial statements (P&L, cash flow statement and balance sheet) over three years and a monthly cash flow statement. It is also good practice to show a monthly P&L and balance sheet for the first year.
The reason why investors like to see monthly numbers for the first year is that it is going to be the most critical year as:
- it is the year you are the most vulnerable
- any delay or underperformance will have some repercussions over the year 2 and 3
If you don't have a finance background it is recommended that you use a professional tool to help you with the financial forecast. The Business Plan Shop offers an easy to use online solution that can help you easily produce your financial statements as well as a professional-looking business plan exportable in PDF. In our application, you will find most of the tips included in this guide along with precise examples for each section of the plan. You can learn more about our solution here .
In this section, you will list the sources and uses of funds required to start your business.
The investor will look at how much is needed and how much money is brought to the table by the shareholders. If you are writing your plan for a retail bank it is important that you isolate the assets, inventory and VAT on a separate line as they often offer specific loans adapted to each of these categories.
This section is a disclaimer section. You must identify the key assumptions underlying your financial forecasts. These are the assumptions the investor will stress (i.e. run scenarios on) to test the viability of your plan and estimate the potential downsides and upsides.
Try to identify both assumptions on the revenue and on the cost side of the business. Let's take an example and look at an e-commerce site.
If you are operating an e-commerce site there are usually two main things your business profitability will depend on:
- the average basket: which is how much one customer is expected to spend in average
- the customer acquisition cost: which is how much you need to spend in marketing to acquire one customer
The first item is revenue related and has the most significant impact on your plan. This assumption has a 1:1 impact on your sales forecast and even a greater impact on your profit. The second one is also crucial as it impacts your profitability and your ability to scale.
Let's look at a numerical example in order to get a better understanding of the impacts of these two drivers:
As you can see from the table above a 10% deviation on price will have a 30% impact on profit, a 10% deviation in the customer acquisition cost would cost you 20% of your profit and both impacts would reduce your profit by 50%!
And these are not remote possibilities. Let's say that your acquisition costs are related to pay per click advertising on the internet and that your average cost per click is £0.4. An £8 cost per customer means that you have a conversion rate of 5%: it takes 20 clicks to make one sale. Now a £8.8 cost per customer means that it takes you 22 clicks to make one sale. As little as 2 more clicks can cost you 20% of your profit!
Now the positive thing is that if you built a complete financial model and identified these key drivers you can closely monitor these two elements. Chances are that you will get these wrong in your first plan but if you monitor them you will be able to quickly update your plan and get a revised financial projection. This will enable you to get a better view of how much cash your business will generate or need. And give you the ability to anticipate any upcoming difficulties with your investors or plan what to do with the excess cash flow if things go better than expected.
Note that in my example I did not take the number of customers as a key assumption. This is because I made the assumption that 100% of the traffic was coming from advertising. This is specific to e-commerce sites: chances are your site in its first year will rank on page 20 of Google and that you will have to acquire the main part of your traffic.
The sales forecast section is probably the second most important one in your business plan. This section relates directly to the market analysis, competitive edge, marketing plan and pricing sections. The objective here is to build and justify your sales estimate for the next three years.
Building a sales forecast is a double exercise. You first need to build the numbers using a bottom-up approach and then sanity checks them using a top-down approach. For a complete how-to guide, we encourage you to read our sales forecast article .
Once you have built a realistic top line, you need to focus on the costs.
This part is all about analysing the operational risk of a business. The analysis resides in two fundamental notions: operating leverage and breakeven point.
Let's start with the breakeven point which is the level of sales required to reach profitability.
Every business has 2 types of costs: fixed and variable costs. The fixed costs as their name indicates are the costs that will be incurred independently from the level of sales. For example the rent of a shop. The variable costs are the costs that depend on the level of activity. For example the cost of the goods sold in a shop.
The breakeven point is then computed by dividing the total amount of fixed costs by the margin of variable costs.
Let's take an example. If the only fixed cost of a shop is its rent of £2,000/month and if the shop sells goods it buys at £30/item at a price of £50/item. Then the shops make 50 - 30 = £20 of profit over variable costs per item. This means it needs to sell 2,000 / 20 = 100 items to cover the cost of the rent. The breakeven point of this shops is therefore 100 items.
The direct conclusion of this is that the higher the fixed costs, the more sales are required to cover them, and therefore the higher the risk of the business is. In plain English variable costs are great fixed costs are bad!
What about operating leverage then? Well, operating leverage has to do with operating profit elasticity, which is the impact of a difference of 1% in sales on the operating profit. This seems complex but it is in fact really simple. There are two dimensions in the operating leverage: the level of fixed vs. variable costs and the margin on variable costs.
As we just saw above the more fixed costs a business has the more sales it needs in order to start making a profit. But this is not the whole story. Consider two businesses in the same industry. Business A is manufacturing its goods in the house while business B is outsourcing the manufacture to a supplier. As a result business A has higher fixed costs than business B (the cost of the factory), but at the same time business A is earning more on each sale than business B because it doesn't have to pay the supplier's margin. Therefore there is an expectation that a more operationally leveraged business will generate higher returns past its breakeven point.
The second aspect of operating leverage is the level of contribution (or margin on variable costs). If your contribution is high then it takes only a few sales to cover your fixed costs and start making a profit. The flip side of this is that a small forecasting error will have a huge impact on your level of profit and cash flows.
The key takeaways here are that investors will look at the level of fixed vs. variable costs in your business to evaluate its operating risk. They will expect to see the calculation of your breakeven point either expressed in units or days of sales.
Investors will also judge you on your ability to use operating leverage to your advantage. If you are starting up in a niche where the market is uncertain they will expect you to focus on sales and to have outsourced as many services as possible. You will make less profit but will require fewer sales to make a profit hereby de-risking the cost side of your business to balance with the risks on the revenue side. Now if you are an established business in a price-driven market, investors will expect you to do the exact opposite: outsource services only if it makes you save money and try to limit margin frictions to the maximum by using economies of scale to either increase your margin or reduce your price to increase market share.
This section is where you present your financial statements. You can have the yearly statements here along with the monthly cash flow projections and put the monthly balance sheet and P&L in the appendix.
You need to walk the reader through the key items of each statement:
- P&L: revenues, growth, EBITDA, EBITDA margin and any unusual or one-off items
- Cash flow statement: operating cash flow, operating cash flow conversion (% of EBITDA), any major investments, main debt repayments if any, and any unusual items.
- Monthly cash flow statement: any working capital swings or seasonal peaks or troughs.
- Balance sheet: level of cash, debt and equity.
Your funding needs to be balanced (positive cash position) and you need to break even during the course of your plan. You might also want to touch on some additional ratios. In particular, if your business has a significant working capital requirement, you can mention the working capital ratios (WC / sales, days of payables and receivables). You can also mention either some credit ratios if the plan is for a bank (debt/EBITDA, net debt/EBITDA, interest coverage ratio) or some more equity-focused ratios (operating cash flow / capital employed, revenues / total assets, dividend yield and dividend per share if relevant).
This is where you add any detailed piece of data or backup materials you might have. The objective of the appendix section is to serve as a reserve of materials that the investor can use either to investigate certain areas of your business plan in more details or as a starting point to do his due diligence.
Congratulations, you now know the basics of writing a business plan. Now let's get to work!
Also on The Business Plan Shop
- Free business plan template
- How investors analyse business plans
- TAM SAM SOM - what it means and why does it matter
- The difference between business case and business plan
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How to Write a Business Plan
Now that you understand why you need a business plan and you've spent some time doing your homework gathering the information you need to create one, it's time to roll up your sleeves and get everything down on paper.
Oct 17, 2017
No business can be successful without a solid business plan. In fact, a business plan could be the thing that makes or breaks your entrepreneurial enterprise, especially if you haven't started a successful business in the past.
Let's break down what a business plan is, why it's important, and a step-by-step guide on how to write one in detail.
What Is a Business Plan?
Put simply, a business plan is a detailed outline explaining what a business will be, how it will work, and how it will bring in money. Business plans can range heavily in terms of length and complexity, but they all include an explanation of what the business will do and how it will turn a profit, dealing with everything from financial statements and pricing to potential customer segments and business development.
Think of business plans as the guiding documents for for-profit organizations. A business plan guides business owners and employees or other executives at existing businesses and helps inspire investor confidence when seeking financing in the earliest days of a business's life. There are a few types of business plans, but they all do the same things.
Related: An Introduction to Business Plans
Why Is a Business Plan Important?
A small business plan is important for any new enterprise, regardless of industry or niche. Why?
By far, the most crucial thing a good business plan does is improve investor confidence. When an entrepreneur or startup executive needs to secure funding and business loans, they have to convince investors that their business is worth investing in. It's impossible to do that without a solid business plan explaining:
- What the business will provide or make
- How the business will make money (i.e., financial projections for a new business)
- Who the business will advertise to
- And similar forecasts or discussions lenders need to see
By looking through a business plan, investors (both individuals and large firms) can tell whether a business owner (or would-be entrepreneur) has a good idea or is merely flailing in the wind.
In addition, a business plan is important since it will help guide your actions as a business owner and executive. With a business plan to keep your head on straight, you'll know what to do, how to scale your business, and what objectives you need to meet in order to achieve the goals outlined in your business plan.
Elements of a Traditional Business Plan
Business plans are usually comprised of several key elements. These include:
- A title page , which breaks down a rough overview of the startup business and its name
- An executive summary, which essentially describes what you want the business to achieve as its owner
- The business description, which describes the business, its structure, what it sells or produces, and related information. It should also include the value proposition and any intellectual property you have for your business idea
- Market research and strategies, which will help convince potential investors that you know how you will market and sell your products to your target audience
- Management and personnel, which should outline your projections for the employees or labor force you'll need to achieve your business goals. If you plan to hire team members, don't worry about stating too much about them here
- Financial documents, including any capital you have already raised, the funding you need to get your business off the ground, and so on. This can include a balance sheet or cash flow statements if you already have a financial plan or have operated your business for some time
- A competitive analysis page , breaking down the status of your competitors in the same industry. This can include company descriptions or business models based on what you know
- A design and development plan, exploring how you will design and develop your business for ultimate success. Think of this as a roadmap or mission statement for how your brand will hit milestones and gain a competitive advantage over other brands
- An operations and management plan , which should explore and explain how you will run and operate your business as its owner or chief executive
With each section of your business plan, an investor or venture capitalist can determine the viability of your sole proprietorship, LLC, or other business.
Related: How to Write a Business Plan
Now that you understand why you need a business plan and you've spent some time doing your homework gathering the information you need to create one, it's time to roll up your sleeves and get everything down on paper. The following pages will describe in detail the seven essential sections of a business plan: what you should include, what you shouldn't include, how to work the numbers and additional resources you can turn to for help. With that in mind, jump right in.
Within the overall outline of the business plan, the executive summary will follow the title page. The summary should tell the reader what you want. This is very important. All too often, what the business owner desires is buried on page eight. Clearly state what you're asking for in the summary.
Related: How to Start a Business With (Almost) No Money
The business description usually begins with a short description of the industry. When describing the industry, discuss the present outlook as well as future possibilities. You should also provide information on all the various markets within the industry, including any new products or developments that will benefit or adversely affect your business.
Business Plan Guide "
Before writing your plan.
- How Long Should Your Plan Be?
- When Should You Write It?
- Who Needs A Business Plan?
- Why Should You Write A Business Plan?
- Determine Your Goals and Objectives
- Outline Your Financing Needs
- Plan What You'll Do With Your Plan
- Don't Forget About Marketing
Writing Your Business Plan
- How To Write A Business Plan
- The Ingredients of a Marketing Plan
- Updating Your Business Plan
- Enhancing Your Business Plan
Business Plan Tools
- Business Plan Software
- Books and How-to Manuals
Business Plan Templates
- Sample Business Plans
Market strategies are the result of a meticulous market analysis. A market analysis forces the entrepreneur to become familiar with all aspects of the market so that the target market can be defined and the company can be positioned in order to garner its share of sales.
The purpose of the competitive analysis is to determine the strengths and weaknesses of the competitors within your market, strategies that will provide you with a distinct advantage, the barriers that can be developed in order to prevent competition from entering your market, and any weaknesses that can be exploited within the product development cycle.
Design & Development Plan
The purpose of the design and development plan section is to provide investors with a description of the product's design, chart its development within the context of production, marketing and the company itself, and create a development budget that will enable the company to reach its goals.
Operations & Management Plan
The operations and management plan is designed to describe just how the business functions on a continuing basis. The operations plan will highlight the logistics of the organization such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.
Financial data is always at the back of the business plan, but that doesn't mean it's any less important than up-front material such as the business concept and the management team.
Want to see some of these principles in action? You can check out business plan templates in this detailed guide . Feel free to use some of these templates when drawing up business plans for your organization in the future!
As you can see, business plans aren't as complex as you may have initially thought. Furthermore, they are important parts of any business enterprise. Don't forget to write a business plan for your upcoming endeavor before seeking funding!
For more guides, resources, and information, check out Entrepreneur !
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Simple Rubric Examples for Teachers
- DESCRIPTION teacher grading A+ on essay paper
- SOURCE Pixsooz / iStock / Getty Images Plus
- PERMISSION Used under Getty Images license
A rubric is a performance-based assessment tool. Teachers use rubrics to gather data about their students’ progress on a particular assignment or skill. Simple rubrics allow students to understand what is required in an assignment, how it will be graded, and how well they are progressing toward proficiency .
Rubrics can be both formative (ongoing) and summative (final) assessment tools for evaluating written work, projects, oral presentations, or any other class assignment. There are four types of rubrics: checklists, holistic rubrics, analytic rubrics, and developmental rubrics. Teachers, including homeschool parents, can refer to these simple rubric examples to formulate their own.
Rubrics as Checklists
These basic rubric examples ensure that all parts of the assignment are present. They help students keep track of each element of a project. Checklists also let teachers see whether a student fully participated in an assignment, but they aren’t as informative as other rubrics.
Example of a Checklist Rubric
Checklists are useful in all subject areas because they’re versatile and easy to understand. As long as each part of an assignment is present, the student receives full credit. An example of a science project checklist includes a column for students to check their work before turning it in.
Checklists are handy to use and easy to grade. They measure participation and completion of a project rather than skills achieved, unlike holistic rubrics.
A general rubric that lists a few levels of performance is a holistic rubric. These rubrics usually combine criteria for a certain score into one level. Holistic rubrics include more information than a checklist and make good formative assessment tools.
Example of a Holistic Rubric
The typical A-F grading system is one example of a holistic rubric in which many skills are combined for one score. Here is another example of a holistic rubric for an oral presentation in social studies.
Although holistic rubrics are more complex than checklists, they aren’t as helpful for assessing specific skills within a project. It’s possible for students to score between two levels if they achieve some criteria but not others.
An analytic rubric assesses each aspect of an assignment. It awards a designated number of points to each part which adds up to the student’s final score. Projects with analytic rubrics take longer to grade, but they are informative to teachers as summative assessment tools.
Example of an Analytic Rubric
Analytic rubrics are useful in any subject in which the teacher needs to monitor discrete skills. Check out an example of an analytic essay for a language arts literary essay .
Analytic rubrics are an effective form of communication between teacher and student. Expectations are clear and results are easy to understand. However, if you want to measure a student’s progress over the long term, you’ll need a developmental rubric.
While other types of rubrics measure one assignment or project, a developmental rubric tracks a student’s overall progress toward proficiency. These continuum rubrics can span one standard, one subject, or one skill. Developmental rubrics are more time-consuming for teachers than analytic rubrics, but they are the most informative type of assessment tool.
Example of a Developmental Rubric
The Common Core standards are an example of a developmental rubric with benchmarks over each grade level. Standards-based grading systems are becoming more common in modern classrooms. Check out an example of a developmental rubric designed to keep track of elementary math skills in operations and algebraic thinking.
Unlike other rubrics, developmental rubrics indicate an ongoing learning process. They measure skill rather than participation and effort levels. Students will ideally start at the Progressing level at the beginning of the unit or school year and will end at the Proficient level.
Making Your Own Rubric
No matter which type of rubric you use, there are several ways to ensure that it’s an effective learning tool. Here are some tips for creating a rubric:
- Be detailed. Students are more likely to meet requirements when they know exactly what you’re expecting.
- Provide rubrics at the very beginning of the project. No one likes surprises.
- No rubric can replace your own comments. While rubrics allow you to measure skills, students still need positive reinforcement about their work.
- Make rubric scores align directly with student grades. Parents and students can easily see why they lost a specific number of points.
- Use student-friendly language. Some academic language is helpful, but rubrics are just as valuable for students as they are for you.
Simple rubric example
If you’re ready to design your own rubric, start with the customizable rubric template we’ve provided here. You can add your own requirements, point system, and objectives. Happy grading!
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Whether you’re a seasoned business owner or just beginning to think about starting a business , demands come at you fast. Amidst the rush of to-do lists and meetings, determining how to write a business plan—much less following a business plan template—often feels time-consuming and intimidating.
But nearly 70% of business owners who have been there and done that recommend writing a business plan before you start a business, according to a recent QuickBooks survey . After all, when done right, business plans have enormous payoffs.
And yet, more than 10% of prospective business owners said they do not intend to write a business plan. Another 10% aren’t sure if they need a plan.
It’s more than the old cliche: A failure to plan is a plan to fail. In fact, a wealth of data now exists on the difference a written business plan makes, especially for small or growing companies.
In this post, we’ll cover everything you need to write a successful business plan, step-by-step, and turn your idea into a reality. Even better, if you’re pressed for time, we’ve compiled the 10 steps and examples into a downloadable (PDF) template . The 10 steps to write a business plan are:
- Create an executive summary
- Compose your company description
- Summarize market research and potential
- Conduct competitive analysis
- Describe your product or service
- Develop a marketing and sales strategy
- Compile your business financials
- Describe your organization and management
- Explain your funding request
- Compile an appendix for official documents
But, first things first.
What is a business plan?
A business plan is a comprehensive road map for your small business’s growth and development. It communicates who you are, what you plan to do, and how you plan to do it. It also helps you attract talent and investors.
But remember that a business idea or business concept is not a plan.
Investors want to know you have:
- Product-market fit: Have you done the research to determine the demand for your product or service?
- A solid team in place: Do you have the people you need to support your goals and objectives?
- Scalability: Can you grow sales volume without proportional growth in headcount and fixed costs?
A templated business plan gives investors a blueprint of what to expect from your company and tells them about you as an entrepreneur.
Why do you need a business plan?
You need a business plan because the majority of venture capitalists (VCs) and all banking institutions will not invest in a startup or small business without a solid, written plan. Not only does a business plan help you focus on concrete objectives, but it gives outside parties reassurance that you’ve thought ahead.
In 2018, entrepreneurial resource center Bplans worked with the University of Oregon to compile and analyze research around the benefits of business planning . Here’s what they found:
- Businesses with a business plan grow 30% faster than those without.
- Owners with business plans are twice as likely to grow, get investments, or secure loans than those without.
- Entrepreneurs with a business plan have a 129% increased likelihood of growing beyond the startup phase and a 260% increased likelihood of growing from “idea” to “new business.”
Perhaps the strongest evidence comes from the Journal of Business Venturing’s 2010 meta-analysis of 46 separate studies on 11,046 organizations: Its findings confirm that “business planning increases the performance of both new and established small firms.”
When do you need a business plan?
Before you leave a nine-to-five income, your business plan can tell you if you’re ready. Over the long term, it’ll keep you focused on what needs to be accomplished.
It’s also smart to write a business plan when you’re:
- Seeking funding, investments, or loans
- Searching for a new partner or co-founder
- Attracting, hiring, and retaining top talent
- Experiencing slow growth and need a change
Feel confident from day one
You're never too small, and it's never too soon to know you're on track for success.
How to write a business plan in 10 steps
Start with a clear picture of the audience your plan will address. Is it a room full of angel investors? Your local bank’s venture funding department? Or is it you, your leaders, and your employees?
Defining your audience helps you determine the language you’ll need to propose your ideas as well as the depth to which you need to go to help readers conduct due diligence.
Now, let’s dive into the 10 key elements of your business plan.
1. Create an executive summary
Even though it appears first in the plan, write your executive summary last so you can condense essential ideas from the other nine sections. For now, leave it as a placeholder.
What is an executive summary?
The executive summary lays out all the vital information about your business within a relatively short space. An executive summary is typically one page or less. It’s a high-level look at everything and summarizes the other sections of your plan. In short, it’s an overview of your business.
How do I write an executive summary?
Below, you’ll find an example from a fictional business, Laura’s Landscapers. (We’ll use that same company throughout this guide to make each step practical and easy to replicate.)
This executive summary focuses on what’s often called the value proposition or unique selling point: an extended motto aimed at customers, investors, and employees.
You can follow a straightforward “problem, solution” format, or a fill-in-the-blanks framework:
- For [target customers]
- Who are dissatisfied with [current solutions]
- Our [product or service] solves [key customer problems]
- Unlike [competing product], we have [differentiating key features]
This framework isn’t meant to be rigid, but instead to serve as a jumping-off point.
Example of an executive summary
Market research indicates that an increasing number of wealthy consumers in Richmond are interested in landscape architecture based on sustainable design. However, high-end firms in the area are scarce. Currently, only two exist—neither of which focus on eco-friendly planning nor are certified by green organizations.
Laura’s Landscapers provides a premium, sustainable service for customers with disposable incomes, large yards, and a love of nature.
2. Compose your company description
Within a business plan, your company description contains three elements:
- Mission statement
These elements give context to the bigger picture in your business plan, letting investors know the purpose behind your company so the goals make sense as well.
What is a mission statement?
A mission statement is your business’s reason for existing. It’s more than what you do or what you sell, it’s about why exactly you do what you do. Effective mission statements should be:
- Inspirational to make others believe in your vision
- Emotional to captivate readers and grab their interest
Throughout every part of your plan, less is more. Nowhere is that truer than your mission statement. Think about what motivates you, what causes and experiences led you to start the business, the problems you solve, the wider social issues you care about, and more.
Tip: Review your mission statement often to make sure it matches your company’s purpose as it evolves. A statement that doesn’t fit your core values or what you actually do can undermine your marketing efforts and credibility.
How do you describe a company’s history?
Don’t worry about making your company history a dense narrative. Instead, write it like you would a profile:
- Founding date
- Major milestones
- Number of employees
- Executive leadership roles
- Flagship products or services
Then, translate that list into a few short paragraphs (like the example below).
Why do business objectives matter?
Business objectives give you clear goals to focus on, like the North Star. These goals must be SMART, which stands for:
They must also be tied to key results. When your objectives aren’t clearly defined, it’s hard for employees and team members to work toward a common purpose. What’s worse, fuzzy goals won’t inspire confidence from investors, nor will they have a profitable impact on your business.
Example of a company description
Laura’s Landscapers’ mission is to change the face of our city through sustainable landscaping and help you create the outdoor living space of your dreams.
Founded in 2021 by sisters Laura and Raquel Smith, we have over 25 years of combined landscape architecture experience. Our four employees work in teams of two and have already completed 10 projects for some of Richmond’s most influential business and community leaders.
Our objectives over the next three years are to:
- Solidify a glowing reputation as a service-based business that always exceeds customers’ expectations and honors the environment
- Complete at least 18 projects during year one, 24 in year two, and 36 in year three generated through word of mouth, referrals, and home shows
- Increase revenue from $360,000 in FY2021 to $972,000 in FY2023 based upon 10 completed projects in the last nine months
3. Summarize market research and potential
The next step is to outline your ideal potential customer as well as the actual and potential size of your market. Target markets—also known as personas—identify demographic information like:
By getting specific, you’ll illustrate expertise and generate confidence. If your target market is too broad, it can be a red flag for investors.
- Example: If your product is perfect for people with money to hire landscape architects, listing “anyone with a garden” as your target market might not go over so well.
The same is true with your market analysis when you estimate its size and monetary value. In addition to big numbers that encompass the total market, drill down into your business’s addressable market—meaning, local numbers or numbers that apply the grand total to your specific segments. You may even map your customer’s journey to get a better understanding of their wants and needs.
Example of market research and potential
Laura’s Landscapers’ ideal customer is a wealthy baby boomer, a member of Gen X, or a millennial between the ages of 35 and 65 with a high disposable income. He or she—though primarily, she—is a homeowner. They’re a working professional or have recently retired. In love with the outdoors, they want to enjoy the beauty and serenity of nature in their own backyard, but don’t have the time or skill to do it for themselves.
Market research shows the opportunity for Laura’s Landscapers has never been better:
- In the U.S., total revenue for landscaping services increased from $69.8 billion in 2013 to $99 billion in 2019. ( 1 )
- Among landscaping contractors, designing and building is the second fastest growing service offering. ( 2 )
- What’s more, landscape design and construction is the number one “new service” existing companies plan to add over the next year. ( 3 )
In Richmond, leading indicators for interest in green, eco-friendly, and sustainable landscaping have all increased exponentially over the last five years:
- Online search volume for those terms is up 467%
- 10 new community organizations have been formed
- 73 high-profile projects have been covered by local media
- And currently 13% of Richmond’s residents have a household income of $125,000 or more (compared to the U.S. average of 5%)
4. Conduct competitive analysis
Competitive research begins with identifying other companies that currently sell in the market you’re looking to enter. The idea of carving out enough time to learn about every potential competitor you have may sound overwhelming, but it can be extremely useful.
Answer these additional questions after you’ve identified your most significant competitors:
- Where do they invest in advertising?
- What kind of press coverage do they get?
- How good is their customer service?
- What are their sales and pricing strategies?
- How do they rank on third-party rating platforms?
Spend some time thinking about what sets you apart. If your idea is truly novel, be prepared to explain the customer pain points you see your business solving. If your business doesn’t have any direct competition, research other companies that provide a similar product or service.
Next, create a table or spreadsheet listing your competitors to include in your plan, often referred to as a competitor analysis table.
Example of competitive analysis
Within Richmond’s residential landscaping market, there are only two high-end architectural competitors: (1) Yukie’s Yards and (2) Dante’s Landscape Design. All other businesses focus solely on either industrial projects or residential maintenance.
- Average cost per project: $12,000
- Ongoing maintenance fee: $200 per month
- Google My Business: 3.1 stars from 163 reviews
- Environmental certifications: None
- Primary marketing channels: Google Ads
Dante’s Landscape Design
- Average cost per project: $35,000
- Ongoing maintenance fee: $500 per month
- Google My Business: 3.7 stars from 57 reviews
- Primary marketing channels: Home shows
5. Describe your product or service
This section describes the benefits, production process, and life cycle of your products or services, and how what your business offers is better than your competitors.
When describing benefits, focus on:
- Unique features
- Translating features into benefits
- Emotional and practical payoffs to your customers
- Intellectual property rights or any patents that protect differentiation
For the production process, answer how you:
- Create existing and new products or services
- Source raw materials or components
- Assemble them through manufacturing
- Maintain quality control and quality assurance
- Receive and deliver them (supply chain logistics)
- Manage your daily operations, like bookkeeping and inventory
Within the product life cycle portion, map elements like:
- Time between purchases
- Up-sells, cross-sells, and down-sells
- Future plans for research and development
Example of product or service description
Laura’s Landscapers’ service—our competitive advantage—is differentiated by three core features.
First, throughout their careers, Laura and Raquel Smith have worked at and with Richmond’s three leading industrial landscaping firms. This gives us unique access to the residents who are most likely to use our service.
Second, we’re the only firm certified green by the Richmond Homeowners Association, the National Preservation Society, and Business Leaders for Greener Richmond.
Third, of our 10 completed projects, seven have rated us a 5 out of 5 on Google My Business and our price points for those projects place us in a healthy middle ground between our two other competitors.
- Average cost per project: $20,000
- Ongoing maintenance fee: $250 per month
- Google My Business: 5 stars from 7 reviews
- Environmental certifications: Three (see Appendix)
- Primary marketing channels: Word of mouth, referrals, and home shows
6. Develop a marketing and sales strategy
Your marketing strategy or marketing plan can be the difference between selling so much that growth explodes or getting no business at all. Growth strategies are a critical part of your business plan.
You should briefly reiterate topics such as your:
- Value proposition
- Ideal target markets
- Existing customer segments
Then, add your:
- Launch plan to attract new business
- Growth tactics for established businesses to expand
- Retention strategies like customer loyalty or referral programs
- Advertising and promotion channels such as search engines, social media, print, television, YouTube, and word of mouth
You can also use this section of your business plan to reinforce your strengths and what differentiates you from the competition. Be sure to show what you’ve already done, what you plan to do given your existing resources, and what results you expect from your efforts.
Example of marketing and sales strategy
Laura’s Landscapers’ marketing and sales strategy will leverage, in order of importance:
- Word of mouth
- Reviews and ratings
- Local Google Ads
- Social media
- Direct mail
Reputation is the number one purchase influencer in high-end landscape design. As such, channels 1-4 will continue to be our top priority.
Our social media strategy will involve YouTube videos of the design process as well as multiple Instagram accounts and Pinterest boards showcasing professional photography. Lastly, our direct mail campaigns will send carbon-neutral, glossy brochures to houses in wealthy neighborhoods.
7. Compile your business financials
If you’re just starting out, your business may not yet have financial data , financial statements, or comprehensive reporting. However, you’ll still need to prepare a budget and a financial plan.
If your company has been around for a while and you’re seeking investors, be sure to include:
- Income statements
- Profit and loss statements
- Cash flow statements
- Balance sheets
Other figures that can be included are:
- How much of your revenue you retain as your net income
- Your ratio of liquidity to debt repayment ability
- How often you collect on your invoices
Ideally, you should provide at least three years’ worth of reporting. Make sure your figures are accurate and don’t provide any profit or loss projections before carefully going over your past statements for justification.
Avoid underestimating business costs
Costs, profit margins, and sale prices are closely linked, and many business owners set sale prices without accounting for all costs. New business owners are particularly at risk for this mistake. The cost of your product or service must include all of your costs, including overhead. If it doesn’t, you can’t determine a sale price to generate the profit level you desire.
Underestimating costs can catch you off guard and eat away at your business over time.
- Example: Insurance premiums tend to go up annually for most forms of coverage, and that’s especially true with business insurance. If an employee gets injured, Laura’s Landscapers’ workmen’s compensation insurance to cover this risk will increase.
Example of business financials
Given the high degree of specificity required to accurately represent your business’s financials, rather than create a fictional line item example for Laura’s Landscapers, we suggest using one of our free Excel templates and entering your own data:
- For new businesses: Start up budget template
- For existing businesses: Income statement template
Once you’ve completed either one, then create a big picture representation to include here as well as in your objectives in step two.
In the case of Laura’s Landscapers, this big picture would involve steadily increasing the number of annual projects and cost per project to offset lower margins:
Current revenue for FY2022: $200,000
- 10 completed projects
- ~$20,000 per project
- 15% profit margins
- $30,000 net
FY2022 projections: $360,000
- 18 completed projects
- $54,000 net
FY2023 projections: $552,000
- 24 completed projects
- ~$23,000 per project
- 12% profit margins
- $66,240 net
FY2024 projections: $972,000
- 36 completed projects
- ~$27,000 per project
- 10% profit margins
- $97,200 net
8. Describe your organization and management
Your business is only as good as the team that runs it. Identify your team members and explain why they can either turn your business idea into a reality or continue to grow it. Highlight expertise and qualifications throughout —this section of your business plan should show off your management team superstars.
You should also note:
- Roles you still need to hire to grow your company
- The cost of hiring experts to assist operations
To make informed business decisions, you may need to budget for a bookkeeper , a CPA, and an attorney. CPAs can help you review your monthly accounting transactions and prepare your annual tax return. An attorney can help with client agreements, investor contracts (like shareholder agreements), and with any legal disputes that may arise.
Ask your business contacts for referrals (and their fees), and be sure to include those costs in your business plan.
Example of organization and management
Laura Smith, Co-founder and CEO
- Professional background
- Awards and honors
- Notable clients
Raquel Smith, Co-founder and Chief Design Officer
Laura’s Landscapers’ creative crews
- Cumulative years of experience
9. Explain your funding request
When outlining how much money your small business needs, try to be as realistic as possible. You can provide a range of numbers if you don’t want to pinpoint an exact number. However, include a best-case scenario and a worst-case scenario.
Since a new business doesn’t have a track record of generating profits, it’s likely that you’ll sell equity to raise capital in the early years of operation. Equity means ownership—when you sell equity to raise capital, you are selling a portion of your company.
- Remember: An equity owner may expect to have a voice in company decisions, even if they do not own a majority interest in the business.
Most small business equity sales are private transactions. The investor may also expect to be paid a dividend, which is a share of company profits, and they’ll want to know how they can sell their ownership interest. Additionally, you can raise capital by borrowing money, but you’ll have to repay creditors both the principal amount borrowed and the interest on the debt.
If you look at the capital structure of any large company, you’ll see that most firms issue both equity and debt. When drafting your business plan, decide if you’re willing to accept the trade-off of giving up total control and profits before you sell equity in your business.
- Tip: Put together a timeline so your potential investors have an idea of what to expect. Some customers may not pay for 30 days or longer, which means the business needs a cash balance to operate.
The founder can access cash by contributing their own money into the business by securing a line of credit (LOC) at a bank or applying for QuickBooks Capital . If you raise cash through a LOC or some other type of loan, it needs to be paid off ASAP to reduce the interest cost on debt.
Example of a funding request
Laura’s Landscapers has already purchased all necessary permits, software, and equipment to serve our existing customers. Once scaled to $972,000 in annual revenue—over the next three years and at a 10% profit margin—our primary ongoing annual expenses (not including taxes) will total $874,800.
While already profitable, we are requesting $100,000 in the form of either a business loan or in exchange for equity to purchase equipment necessary to outfit two additional creative crews.
10. Compile an appendix for official documents
Finally, assemble a well-organized appendix for anything and everything readers will need to supplement the information in your plan. Consider any info that:
- Helps investors conduct due diligence
- Gives context and easy access to you or your employees
Useful details to cover in an appendix include:
- Deeds, local permits, and legal documents
- Certifications that bolster your credibility
- Business registries and professional licenses pertaining to your legal structure or type of business
- Patents and intellectual properties
- Industry associations and memberships
- State and federal identification numbers or codes
- Key customer contracts and purchase orders
Your appendix should be a living section of the business plan, whether the plan is a document for internal reference only or an external call for investors.
- Tip: As you include documents in the appendix, create a miniature table of contents and footnotes throughout the rest of the plan linking to or calling attention to them.
How to make a business plan that stands out
Investors have little patience for poorly written documents. You want your business plan to be as attractive and readable as possible.
- Keep it brief. A typical business plan can range from 10 to 20 pages. As long as you cover the essentials, less is more.
- Make it easy to read. Divide your document into distinct sections, so that investors can quickly flip between key pieces of information.
- Know your margins. List every cost your business incurs, and make sure that you’re assigning those costs to each product or service that you sell.
- Proofread. Double-check for typos and grammatical errors. Then, triple-check. Otherwise, you might risk your credibility.
- Invest in quality design and printing. Proper layout, branding, and decent printing or bookbinding give your business plan a professional feel.
- Be prepared in advance. Have everything ready to go at least two weeks ahead so you have time to make revisions in case of a last-minute change.
3 tips to update your business plan
It’s a good idea to periodically revisit your business plan, especially if you are looking to expand. Conducting new research and updating your plan could also provide answers when you hit difficult questions.
Mid-year is a good time to refocus and revise your original plans because it gives you the opportunity to refocus any goals for the second half of the year. Below are three ways to update your plan.
1. Refocus your productivity
When you wrote your original business plan, you likely identified your specific business and personal goals. Take some time now to assess if you’ve hit your targets.
- Example: If you planned to launch a new tips and trends video series and it hasn’t happened yet, what’s stopping you? Put a timeline together and set a launch date.
If you only want to work a set number of hours per week, you must identify the products and services that deliver the returns you need to make that a reality. Doing so helps you refocus your productivity on the most lucrative profit streams.
Also, use what you’ve achieved and the hard lessons you’ve learned to help you re-evaluate what is and isn’t working.
2. Realign with your goals
Do a gut check to determine whether all of your hard work is still aligned with your original goals and your mission statement. Ask yourself these questions:
- Are my goals still relevant?
- Am I still focused on the big picture?
- Where do I want to be a year from now?
- Will my existing plan still take me where I want to go?
These questions may be tough to answer at first glance, but they reveal your ties to your goals and what most likely needs to change to achieve new wins.
3. Repurpose your offerings
If your time has become more focused on small projects rather than tangible growth and building a valuable client list, consider packaging your existing products or services differently. Can you bundle a few things together?
- Example: Laura’s Landscapers might be able to offer a special pool and patio package. Doing so might help them bring in fewer yet higher-paying projects. Perhaps they can offer a maintenance package as well to keep that customer long term.
You must deliberately manage your revenue streams, and that might require shuffling things around a little to focus on what is working for you.
Business plan template
Even if you don’t plan on seeking investments early on, there are other important reasons to use a business plan template to write a great business plan:
- Clarifies what you’re trying to accomplish
- Identifies opportunities to understand your market, like demographics and behaviors
- Establishes the role of each team member
- Gives team members a benchmark to reference and stay on track
- Helps catch errors to make sure financial projections are accurate
- You’ll see the holes and blind spots that could cause future issues
Download the following template to build your business plan from the ground up, considering all the important questions that will help your investors and employees.
The old cliche is still true today: A failure to plan is a plan to fail. Your business plan is crucial to the growth of your business, from giving direction, motivation, and context to employees, to providing thoughtful reassurance and risk mitigation to financers. Before you get your small business up and running , put down a plan that instills confidence and sets you up for success.
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