How to write a business plan
A business plan is a multi-purpose document. It will:
- Show whether your business idea is feasible (and can make a profit)
- Help you to think through your business and stay on track
- Help you communicate your ideas to others, such as bankers, suppliers, partners, etc.
A business plan outlines your business and should include:
- The goals you have for your business and your strategy for accomplishing the goals.
- An explanation of the day-to-day operations of your business.
- Your reasons for believing your business will be a success.
Your business plan should be read and reviewed frequently so that you can update it as conditions in your business, industry, and/or economy change.
The website Bplans has many sample business plans. There are also many sources in the library that can assist you in the writing of your plan. You can read actual successful business plans in the Business Plans Handbook. The Business Plans Handbook is now available online via the database Gale Virtual Reference Library. Access Gale Virtual Reference Library from our database page.
Most business plans include six to eight key sections:
- Executive summary
- Business/company description
- Products and/or services
- Market analysis and marketing plan
- Management team/key personnel
- Operation plan/strategy and implementation
- Financial plan/projections
Let's look briefly at each of these sections.
1. Executive summary
The executive summary is a brief (2-3 pages) overview of your company. It should contain:
- Your mission statement
- Goals and objectives
- A synopsis of all of the other sections of your business plan
2. Business / company description
The business / company description section is where you describe the structure of your business. Include:
- Company name
- Check to see if the name you have selected for your business is currently being used by an incorporated company in Missouri by going to the Missouri Secretary of State’s Business Entity Database.
- You can also check to see if the URL address you would like to use for your business's web page has already been claimed by going to a WhoIs service
- Legal form of ownership (sole proprietorship, LLC, etc.)
- Basic description of the industry in which you operate
- Your company strengths
- Niche or problem your company will fill
- Your reasons for starting the company
3. Products and/or services
The products and/or services section is where you explain what your company will do.
- Detailed description about your product or service
- Pricing information
- Your product's competitive advantage
4. Market analysis and marketing plan
Outline who your customers are, where they are located, the current and projected state of the industry and your competitors. Describe how you plan to market, promote, and encourage growth in the demand for your product. Think of this section as the place to justify the need for your product and to explain why your company will be successful.
Describe in detail who your customer is:
- Consumers or individuals are defined in terms of demographic characteristics: age, sex, race, ethnicity, education, income, etc.
Identify how large this population is and where it is located by using A to Z, American FactFinder, USA Counties, MO Census Data Center, Mid-America Regional Council's Metro Dataline, and books such as CEDDS: The Complete Economic and Demographic Data Source.
- Business customers are defined by industry, size, and location. Obtain data on the potential size of your business customer base by using the Economic Census, A to Z, and Sorkins' Directory of Business & Government.
Your business plan needs to include information on your competition: highlighting specifics on your major competitors, including their size, pricing, advertising methods, and quality of goods.
- Identify your competitors and their market size by using A to Z. Our Researching a Company guide will provide you with additional sources.
- Identify indirect competitors. The MONASH Marketing Dictionary defines indirect competition as: "a product that is in a different category altogether but which is seen as an alternative purchase choice; for example, coffee and mineral water are indirect competitors." You can find your indirect competitors through the Reference USA database.
Create a SWOT analysis of the industry that you are operating in. A SWOT analysis looks at the Strengths, Weaknesses, Opportunities, and Threats to the industry. Identify the maturity of the industry, the growth potential, the underserved population, your niche, changes in the industry that will provide opportunities and/or threats, and consumer trends. Reveal what might impact the industry for good or bad, be it the economic climate, growth in competitors (domestic and international), change in governmental regulations, advances in technology, and lifestyle changes.
Now that you have outlined your customer base, your competition and the industry arena, explain the strategy for marketing your product or service.
- Word of mouth is often stated as a primary method as it appears to be inexpensive and not time-consuming. However, to be effective, you need to be proactive in guiding this approach. You might want to read some books about word of mouth marketing.
- Network with people in your business, other entrepreneurs, and potential customers or clients.
- Paid advertisements is another common approach. Newspapers, radio, magazines, billboard signs are all locations where ads can be placed. Check out these books for rates and outlets:
- Standard Rate & Data Service
- Gale Directory of Publications and Broadcast Media
- If you wish to hire someone to write and place your ads you might want to consult the Advertising Red Books as a way of learning about advertising agencies.
- Websites, blogs, podcasts, MySpace, YouTube, Twitter are all inexpensive ways to present your product and/or service.
5. Management team / key personnel
- Name key employees/advisors, their backgrounds and qualifications
- List professional services you have employed (lawyers, insurance agents, accountants)
6. Operation plan / strategy
This is where you describe the details of the daily operation of your business.
- Building/office description and size
- Customer/supplier access (parking, highways, airports, warehouses)
- Suppliers: A to Z, print directories
- Permits, licenses
- Federal regulations
- Staff and compensation: Salaries (Block Center website), Bureau of Labor Statistics
7. Financial plans and projections
- Balance sheet
- Income statement
A key source to use when evaluating your financial statements is Annual Statement Studies. This source gives the ratios that are average in your industry and is used by bankers when evaluating loan prospects. A similar source is Dun & Bradstreet's Industry Norms and Key Business Ratios.
- Copies of contracts
- Prepared promotional information
- Photographs and/or maps of operating locations
The following books will give you additional information about business plans:
For additional information, contact an H&R Block Business & Career Center librarian by phone, 816.701.3717, or by e-mail, firstname.lastname@example.org.