If you’re considering starting a business, writing a business plan is essential to help you meet your goals. Most traditional lenders also require it if you plan to apply for a small business financing loan. Investors are interested in this document as well. When you write a business plan, it allows you to pull several pieces of your planning strategy together in one place. It also gives you a concrete idea of the resources and working capital you require to launch your new business.
While preparing this written documentation is no guarantee of business success, it is often a great predictor of it. As you have undoubtedly heard many times, lack of planning is the biggest reason that most small businesses fail within the first two years of operation.
What the Small Business Administration (SBA) Recommends
The SBA offers numerous free resources for people interested in starting a small business, including how to write a business plan. Ideally, you should start the plan with an executive summary that gives a big picture outline of your new company. It should include a mission statement, information on how you started the company, financial goals and projections, products and services, and future growth plans. After the summary, you should include the following detailed sections:
Company Description: This highlights what your company does, the market it serves, and most importantly, how you stand out from the competition.
Market Analysis: You need to demonstrate that you have spent considerable time researching your specific industry as well as the market and your direct competitors.
Chart of Organization & Management: Your lenders and investors want to know the names and official titles of the people operating your company. You should also select an organizational status and describe the qualifications of your staff.
Products & Services: Here you should give an in-depth description of what you intend to offer along with copyright information and research and development activities.
Marketing & Sales: Describe how you intend to market your products and services as well as your specific sales strategy.
Funding Request: This section is only necessary if you plan to apply for traditional methods of business financing, such a bank loan or line of credit.
Financial Projections: In order to demonstrate your ability to repay any business loans, you should include a realistic forecast of your profit expectations.
Although not essential, the SBA recommends ending your business plan with an appendix that includes hard copies of your resume, bank statements, tax returns, and related documentation.