The Executive Summary
The executive summary is arguably the most important section of the business plan It must be concise specific and well-written It summarizes the highlights of the completed business plan and provides a brief snapshot of the plan with sales spending and profit summary figures The summary emphasizes those factors that will make the business a success It must contain sound numbers for market size trends company goals spending return on investment capital expenditures and funding required
For new businesses or businesses seeking funding credibility and excitement are key elements of the executive summary Venture capitalists receive hundreds of plans each month and just a few are actually being read from cover to cover A quick 20-second scan of the executive summary is the basis for screening which plans to read and which companies to interview for investment When the plan is the vehicle used to attract financing or investment the executive summary should make it clear to the reader who is a
potential source of funds why this is a sound investment
Business Background
The business background section of your business plan generally consists of two to four sections that present information that is specific to your business You may have gathered substantial information about competitors and the industry in general in the
course of considering your business plans This is not the place for that information Instead concentrate solely on those characteristics of your business that are specific to your particular business
The business background generally includes the following
a document describing the business entity and its general operation
a document describing the product or service that your business will provide
a document describing your facilities if appropriate
a document describing the people in your organization if appropriate
The Business Entity
The business entity portion of the plan provides information that is specific to your business This document sets forth the current status of operations the management structure and organization and the identification of key personnel If the plan is being created for an existing business historical information is also included The business background provides the reader with information regarding the type of business eg wholesale retail manufacturing service etc type of legal entity eg corporation partnership sole proprietorship etc
when the business was established where it is located the type of facilities if any eg retail establishment manufacturing plant etc although you may need to devote a separate section to this subject if your facilities are very important to your business the number and type of employees the organizational structure table of organization showing who is responsible for what operational information such as a schedule of the hours the business is open identity of key employees including a description of their abilities that make them vital to the success of the business You may decide to devote a separate section to employees if you think they are key to your success
The information provided should go beyond a simple statement of facts For example if you chose to incorporate rather than to operate as a sole proprietor what factors influenced your decision Explaining why a particular decision was made goes a long way in helping the reader understand your decision-making process
Dont forget yourself when you think about key employees particularly if youre starting a new
business You need to present your educational background and prior business experience in a
way that establishes your ability to succeed While you probably wont include a copy of your
resume much of the information that appears on your resume will appear in the plan Dont be
afraid to present yourself in the most favorable light that you can honestly and objectively
portray
The business background is also the place to identify the goals and objectives of the business by explaining in general terms what business you are in or want to be in How is it unique and why will your goods or services appeal to customers This requires consideration of competitors who are appealing to the same customers Why will customers prefer your business to theirs
Note that startup businesses face a special challenge when drafting the business background In the absence of an existing business the background will be couched in terms of what the business will do not what it has done This makes it even more important to have a clear picture in mind of how your business will look and operate once its up and running When you have a track record its easy to point at the results youve achieved as an indication of your potential for success Without any history youll have to work a little harder to make sure that youve developed and presented a realistic idea of what it will take to make your business work
Product or Service Description
If you have reached the point where you are trying to write a description of what it is that your business actually does or sells youve probably been thinking about your product or service for quite some time Now is the time to take a step back and reflect Because of your familiarity with the idea after all it is your idea you will have to consciously avoid giving it short shrift in your plan Dont provide needless detail but remember that the product or service idea you have hasnt been kicking around in the heads of the people who might read your plan You may have to set the stage a little bit to make sure that a reader understands exactly what your product or service is
The starting point is a clear and simple statement of what the product is or what service your business will provide Avoid the temptation to compare your offering to similar services or products offered by others Reserve that analysis for the marketing plan where you will discuss competitors and potential competitors
Instead focus on those factors that make your offering unique and preferable to customers Explain what it does how it works how long it lasts what options are available etc Of particular importance is whether you are selling a stand alone product eg lunch or a product that must be used with other products eg computer software or peripheral devices Be sure to describe the requirements for any associated products especially vital for software And if there are special requirements for successful use or sale say so
Another issue to consider is whether you hope to sell items on a one-time or infrequent basis or whether repeat sales are the goal If youre opening a bakery or restaurant youre going to count on the same customers returning on a regular basis But a heating contractor installing a new furnace or a consultant helping to implement a new order processing system probably isnt going to do that for the same client again any time soon we hope A similar issue is how long the product or service will last and whether you intend to upgrade or supersede the product or service at some point in the future
A useful way to present some product or service information is to create a featuresbenefits analysis A feature is a specific product attribute or characteristic A benefit is the advantage a customer or user will derive from the product feature Consider the following table which illustrates this type of analysis for a theoretical high-tech wrist watch
Auto-Watch Features and Benefits Analysis
Feature Benefit – battery has an indefinite life – recharges whenever watch is exposed to light
consumer doesnt have to deal with time inconvenience and expense of periodic battery replacement time signal from National Institute of Standards and Technology updates time automatically by radio consumer never has to set the time and can rely on near absolute accuracy dial lights up at night when looked at consumer doesnt have to use two hands to see time in dark receives global positioning satellite signals and uses to determine time zone
consumer doesnt have to adjust watch while traveling
Timing is also an issue Be realistic about the time it will take to develop the product or service For example if youre writing the plan while the first prototype is being built provide a timetable for completion of development and estimate how long testing will take
before production in commercial quantities can begin Timing issues are also addressed in the financial projections that you prepare and in the market plan you create Both of those analyses however rest on the product or service being available on schedule
Business Facility Assessment
There are a number of issues you should address in your business plan regarding the choice of a facility Not surprisingly the most important consideration is usually one of location The first question to address is why you need a business facility At one extreme a consultant may perform most services in space provided by clients That consultant may not need a facility at all and may maintain a small home office to store reference materials and business records At the other extreme a manufacturing business may require for example access to rail transport room for manufacturing operations and storage parking facilities for a lot of employees etc
Once you have assessed your facility requirements youll also want to look at the cost There are numerous factors some unrelated to your business that will figure into your planning For example you may be faced with the choice of leasing property or buying it outright The trends in the local real estate market could have a big impact on your decision If real estate prices are rising quickly buying may provide some protection from the risk of escalating rent and afford a way to mitigate losses if the business doesnt work out
Your business plan should also describe the basic aspects of your facility age size general location as well as the important aspects of any equipment that you may need for operation
Planning for People
A business plan can help to organize the roles and responsibilities of all the people involved in your business Even if its just for your own benefit a checklist of all the different tasks performed by individuals or classes of individuals if you have many employees may be useful
In writing your plan show that youve considered options other than full-time employees In many cases a startup business or a business taking on a new product service or market will experience a short-term need for a lot of help How you fill that short-term need for help will be dictated in large part by your expectations regarding business direction and performance If you choose to use temporary help what you learn about various temporary help providers and any relationships you establish could be quite helpful if you have a need for temporary help again
At one extreme your business plan can make it clear that you wont ever have any employees What little you cant do youll contract out Many businesses built around performing services tend to be near this end of the spectrum At the other extreme your plan may reveal a need for an exponentially expanding sales force until you have reps in every major city in the US Your choice in filling short-term needs would be very different and in terms of building a sales force very important
It can be a little difficult to predict how many people your business is going to need particularly if youre in a new business The process of creating a business plan can help a lot As you consider each of the key areas youll develop a picture of all the activities that go into running your business Also consider the key person concept Is there anyone whose presence in the business is vital other than you If so it makes sense to consider what your business would do in the event that a key player is lost
Marketing Plans
A business plan is the blueprint for taking an idea for a product or service and turning it into a commercially viable reality The marketing portion of the business plan addresses four main topics
Product what is the good or service that your business will offer
How is that product better than those against which it will compete
Why will people buy it
Price how much can you charge
How do you balance between sales volume and price to maximize income
Promotion how will your product or service be positioned in the marketplace
Will your product carry a premium image with a price to match
Will it be an inexpensive no-frills alternative to similar offerings from other businesses
What kinds of advertising will you use
When will ads be run
How will the product be packaged
Place which sales channels will you use
Will you sell by telephone or will your product be carried in retail outlets
Which channel will let you economically reach your target audience
The marketing portion of a business plan addresses how you will get people to buy your product or service in sufficient quantities to make your business profitable It consists of a market analysis which assesses the market environment in which you compete identifies your competitors and analyzes their strengths and weaknesses and identifies and quantifies your target market your marketing strategy which explains how you will differentiate your business from your competitors businesses and what approach you will take to get customers to buy from you
your marketing and sales plans which specify the nature and timing of promotional and other advertising activities that will support specific sales targets
Market Analysis
How do you determine if there are enough people in your market who are
willing to purchase what you have to offer at the price you need to charge to
make a profit The best way is to conduct a methodical analysis of the
market you plan to reach The market analysis presents your conclusions
regarding external market factors that will affect your business It examines
the totality of the business environment in which you will compete
Topics addressed in the market analysis include the existence and type of
competitors the characteristics of your target customers market size
distribution costs trends in your industry and in the market in general etc
Much of the information that will be included in the market analysis will be
derived directly from the SWOT analysis that you performed early on in the
planning process The purpose of the market analysis is to set the stage for
presenting your marketing strategy That strategy sets forth your plan for
successfully competing in your selected market
Marketing Strategy
The marketing strategy portion of your business plan presents the approach you plan to take in providing products or services to your customers It explains at a high level what youve determined to do to get your customers to buy in the desired quantities Someone who reads your market strategy should come away with a big picture view of how your business will present itself to the market segment in which you will compete You should assess both the merits and the risks of your enterprise in the marketing strategy
In the marketing strategy section of your plan youll address issues such as
identification of your target buyers
the market segment in which youll compete
the reasons why the product or service you offer is unique
your pricing philosophy
plans for market research
ongoing product or service development plans
Youll find it useful to keep in mind the 4 Ps of marketing product price promotion or advertising and place distribution as you
define the scope of your marketing strategy And be sure to stress what is unique about your business
Marketing and Sales Plan
Your marketing and sales plan explains how you plan to reach your targeted customers and how you will effectively market your product or service to those customers For example the marketing plan specifies the types of advertising that you will use and the timing of those advertisements In essence the marketing plan takes the marketing strategy that you developed to a tactical level It sets forth the specific steps you will take to sell your product or service and provides a timetable for those actions to occur
For example how will you advertise your business If you decide on radio ads which stations will you choose and at what times of day Can you afford enough repetitions of the ad to make it memorable How will you assess whether youre getting your moneys worth from the radio spots
The marketing and sales plan usually includes a calendar that ties marketing and sales activities to specific operational events For example an advertising campaign may begin some months before a new product is ready to be sold As the date of the new product introduction approaches the ad campaign would be stepped up Once the new product hits the market additional advertising is used to support specific sales objectives
Sales plans An integral component of any business plan is a strategy for getting your product or service to your targeted customers There are many ways to reach your customers One challenge that you face in developing your business plan is selecting the sales channel that is most effective For instance if youre in a business where you provide services personally your participation in the sales process can be extensive
Many good home improvement contractors make all their sales pitches in person and they
count on referrals from satisfied customers to generate new sales prospects It would be difficult
to rely on a separate sales organization when the essence of the job includes creating estimates
and selling the prospective customer on your ability to deliver what the customer wants
In contrast if your business deals in the sale and production of large quantities of product with little associated service then you face a different challenge Customers may not know or care who you are
A coffee distributor roasts and grinds coffee for resale to a number of local convenience stores
The stores brew and sell the coffee by the cup The people who buy and drink the coffee are
the end users of the product But the convenience stores are the target market for the
distributors product The sales plan must address how to reach them as intermediaries
between the producer and the end user
Planning for selling is therefore based on the particular mix of goods and services that you plan to offer and on the way you intend to reach potential customers If you are going to have a sales force of some kind be sure you know what you will expect them to do When making hiring decisions do your best to find people who can do what you want If you will be the entire sales force try to quantify the activities and time involved For example a remodeling contractor wont spend all of the time actually working on houses In addition to the back office tasks the contractor will also spend time meeting with potential customers discussing the job preparing and submitting bids or estimates etc These are vital sales activities and are essential to keeping work lined up
Action Plans
The action plan is our name for the portion of the business plan in which you account for business operations that werent covered in the marketing and sales plans The marketing and sales plans spell out the steps your business will take in an effort to achieve its financial and sales goals The action plan explains how you will operate and manage your business It also addresses the back office activities that dont relate directly to providing goods or services to customers These include activities such as
employee hiring and management
obtaining and working with vendors for needed materials and supplies
ensuring that production takes place as planned
providing customer service and support after the sale
order fulfillment
collections
dealing with a changing business environment
These types of issues can be conveniently grouped into three categories for purposes of dealing with them in your plan The categories are
operations plan
management plan
contingency plans
Planning Your Business Operations
Your marketing plan sets forth the details of promoting pricing advertising and physically reaching your customers These core business activities focus on getting to the customer and providing the product or service that will generate income But you also need to plan for the activities that support the primary business activities An operations plan summarizes how you will create and deliver your product or service to your customers
The types of operational issues that youll face will vary tremendously based on the type of business you operate For example a consultant who deals primarily in assisting customers with network communications isnt going to have an extensive manufacturing or inventory control plan A fast food vendor in contrast will have to carefully plan for inventory storage and turnover the cooking process wrappers bags and beverage containers employee sanitation etc
In most businesses there is a lot going on in addition to the primary business of providing products or services to customers You may find it useful to look at your business as if it were a linear process that starts with raw materials and ends with a delivery to a satisfied customer Youll probably be surprised at how many steps there are and how critical the timing and duration of each step is
While it is easy to relate to production issues in a manufacturing or other process where goods are fabricated grown or otherwise produced the concept is also applicable to other types of businesses
As a consultant you are engaged to help a company convert from a paper-based billing system
to a computer-based system The end product that you will deliver is assistance in selecting
the appropriate software and hardware training on that new equipment and supervision of the
process by which the data is converted to electronic format You can do a great job without
producing anything tangible beyond perhaps documentation of the process
This doesnt mean that you can ignore production Consider all the work that you would have to do First a working knowledge of the clients existing system has to be acquired Then software and hardware combinations are evaluated in light of the clients needs and budget A conversion process has to be developed so that those portions of the existing data that carry over to the new system are available in the new format Documentation must be prepared to train the clients employees in using the new system Whether you thought of them that way or not each of these activities would be part of your production process
Another production issue you may have to consider in drafting a plan is that there may be situations in which completing the job requires work outside your areas of expertise
A self-employed plumber deals primarily in pipes faucets and fixtures Those pipes have a
nasty habit of being inside walls and when the plumbing goes bad the walls frequently stand
between the plumber and the pipe A good plumber knows that his production process goes
beyond his primary area of expertise and will plan for the time and costs associated with the
non-plumbing activities such as plastering required to satisfy customers If you or someone else
has to do it to finish the job plan for the time and cost
Planning Management Activities
Small business owners have to orchestrate all of the different activities that are needed to make a business work These activities include providing goods or services to customers They also include managing any employees you have as well as performing the back office or administrative duties required to keep the business running Having a business plan helps to organize and prioritize these activities
Many large businesses have project managers whose job it is to track and manage internal corporate processes These managers work from a project plan which sets forth the timetable for all the events milestones deadlines etc that make up the project Frequently project managers have no other part to play except to ensure that the project stays on track
You however probably wont have the luxury of hiring a project manager Instead the difficult task of making sure all the diverse elements of your business come together as they should is left to you Of course you are also probably a major player in the process being managed This dual role is made much easier if you have a comprehensive list of what should occur and when
Its easy to overlook management as a major drain on your time and resources but even a very small business can present some complex logistical issues Almost every business relies to some extent on outsiders to contribute to the success of the business Keeping everything on schedule requires you to monitor all of the diverse activities and actively intercede when things arent going according to plan If you operate an existing business you know just how many balls you have to keep in the air at once If you are just starting out dont underestimate the demands of managing
Managing your employees Managing people is far more time-consuming than you might imagine Even if the people who work for or with you are talented and self-motivated some direction must be provided While you may have a fairly good idea about what needs to be done the people working for you are less likely to see the entire picture If some task falls through the cracks your entire business can be placed in jeopardy On the other hand if two or more workers are duplicating each others work your
business will be wasting time and money Its up to you to divide up the work in a reasonable manner and to assign particular tasks to those best equipped to handle them
Tracking progress is another important element of managing your business It isnt enough to divide up the work and assign it out You also have to see that the work proceeds at a reasonable pace If realistic deadlines were set at the outset you can keep tabs on whether individual activities will be completed when needed It is far better to find out half way through a project that some essential element is lagging behind than to be surprised later in the game You have to be aware of all the pieces of the plan including your own Managing your own time can be even more difficult than managing the people who work for you Dont put
pressure on yourself by taking on too much
Administrative activities Every business deals with a variety of operational issues that dont relate directly to providing goods or services to customers These back-office activities are part of the overhead of doing business Someone has to open the mail pay the bills keep the books remit taxes provide customer service handles collections and do the hundreds of little things that make up running a business It is a serious mistake to ignore the demands that these activities will place on you and your business
A good starting point is to make a list of all the activities that someone will have to perform to keep your business operating A house painter has to do a lot of things that are not directly related to applying a fresh coat of paint to a house Someone has to purchase the ladders tarps paint and brushes masking tape and other necessities Someone also has to bid on jobs bill customers when jobs are completed and deal with complaints if a customer isnt happy And those