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.

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
Appendices

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.)

Ultimate Book on Forming Corporations LLC's, Sole Proprietorships, Partnerships book jacket

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.

Customers
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 ReferenceUSA, American FactFinder, USA Counties, MO Census Data Center, Mid-America Regional Council (MARC), and books such as Community Sourcebook of Zip Code Demographics and 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, ReferenceUSA, and Sorkins' Directory of Business & Government.

Competitors
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. Some of the research you employ in this section will need to be primary research.

Identify your competitors and their market size by using the ReferenceUSA database. 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 ReferenceUSA database. Learn about this database.

Industry
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.

Marketing Plan
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:

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. The many ways in which these can be employed effectively can be learned by reading:

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.

Location
Building/office description and size
Customer/supplier access (parking, highways, airports, warehouses)
Suppliers: ReferenceUSA, print directories
Permits, licenses
Federal regulations
Staff and compensation: Salary Facts Handbook and Bureau of Labor Statistics

7. Financial plans and projections

Your finances:

Balance sheet
Income statement
Projections

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.

The following books can provide you with a more complete understanding of financial reports.

Streetwise Finance and Accounting for Entrepreneurs

Keeping the Books

Financial Management 101

8. Appendices

Copies of contracts
Prepared promotional information
Photographs and/or maps of operating locations

There are 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 following books will give you additional information about business plans: