How to Describe Your Business

When writing a business plan, an important task is to clearly describe your business and exactly what it will involve. This can be will be crucial to writing your business plan. Experience tells that you need a written document -- even if you're sure you know exactly what your business will do. To write a complete description of your business, follow these simple suggestions.

Legal Entity and Ownership

Describe the ownership and legal establishment of the company. This means to specify whether your company is a corporation, partnership, sole proprietorship, or some other kind of legal entity, such as a limited liability partnership. You should also explain who owns the company, and, if there is more than one owner, in what proportion.

If your business is a corporation, specify whether it is a C (the more standard type) or an S (more suitable for small business without many different owners) corporation. Also, specify if it is privately owned or publicly traded.

Many smaller businesses, especially service businesses, are sole proprietor businesses. Some are legal partnerships. Professional service businesses, such as accounting or legal or consulting firms, may be partnerships, although that kind of establishment is less common these days.

Identify Your Type of Business

Find the business category listed below that most closely matches your business. You'll use the description that follows as a reference when you describe your own business.

  • Retail. Retail businesses buy merchandise from a variety of wholesalers and sell it directly to consumers. Supermarkets, mail-order catalog merchants, computer stores, dress shops, department stores, and convenience marts are retailers.
  • Wholesale. Wholesalers buy merchandise from manufacturers or brokers and resell the goods to retailers.
  • Service. People with a particular skill sell it to consumers or to other businesses, depending on the skill.
  • Manufacturing. Manufacturers assemble components or process raw materials into products for consumers or other businesses.
  • Project development. Developers create and finish a salable commodity by assembling resources for a one-time project.

Write a Problem Statement

Successful businesses share a common attribute: They do something useful for their customers. One way to determine what is useful for your customers is to identify and describe the problem that your business will solve. For example, a window washing service solves customers' problems of wanting clean windows but lacking either the time or physical ability to clean windows themselves. If you accurately understand your customers' problems and needs, your business will have a better chance of success.

Describe Your Business Operations

Next, describe how your business will solve your customers' problem. Take your time and do a thorough job. It's very likely that the first time you attempt this task, questions will occur to you that you didn't consider previously. If so, figure out a good answer and rewrite your description. The important thing is not how long it takes to do this, but that you end up with a realistic, well-thought-out business description. After all, it's cheaper to answer questions and solve problems on paper than it is with real money.

Your business description should explain exactly what you will provide for the customer as well as what you'll exclude. Each of the choices you make in your business description will affect the amount of money you'll need to start or expand and how much sales revenue you can expect.

Consider the following questions when writing your business description. These questions apply to most small businesses. Feel free to skip any questions that don't pertain to you.

  1. What problem do I solve for my customers? (You answered this question in detail above.)
  2. Who is my typical (target) customer?
  3. How will I communicate with my target customer?
  4. What products and/or services will I provide? Are there any products or services my customers may expect me to provide that I don't plan to provide?
  5. Where will my business be located?
  6. Where will I buy the products I need?
  7. What hours will I operate?
  8. Who will work for me, and how will they be paid?
  9. Who will handle critical tasks such as selling, ordering, bookkeeping, marketing, and shipping?
  10. How will I advertise and promote my business?
  11. What are the competition's strengths and weaknesses?
  12. How am I different from the competition as seen through the eyes of my customers? (Make sure that you answer this question from a customer's perspective and not from an owner's point of view.)


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