Business Plan Structure

Completing a business plan leads you to estimate, to the best of your ability, the real figures that your business is based on.

These include annual figures for:

  • Expected revenue from sales
  • Total direct costs
  • Profit margin
  • Overheads
  • Break-even point
  • Profits

How to compile a business plan

To raise venture capital you must have a sound, well-structured business plan which gives potential sources of finance an insight into your current operation and future proposals. A good business plan is an essential management tool which allows you to forecast, and hence avoid, many potential pitfalls. Whether you are expanding an existing operation or starting a new venture the right plan, well presented, has a much stronger chance of success in securing the right funding.

Your plan must cover four basic stages of business development:

  1. Planning. Management's best estimate of future operations is set out in a logical, organised way. This crystallises ideas and identifies any problems and areas for further analysis.
  2. Financing. To determine when money is required and whether it needs to take the form of venture or loan capital, or other forms of funding.
  3. Implementation. Which provides management with guidelines for running the business efficiently.
  4. Monitoring. The means by which management can assess and control the company's progress by comparison with financial projections in the plan.

Putting the plan together

Resist the temptation to ask your accountant to write the narrative part of the proposal for you. It might seem to be a good idea for a more professional look, but more often than not the result will not convey your individual "spark", your character as an entrepreneur. In any event lenders and investors will ultimately deal with you directly. Here we give you the basics and some points to watch out for in presenting your business plan.

The plan should not be too verbose or too long - not much larger than 25 pages. Do not attempt to include every single detail. Be selective and do not bore the reader. If he wants further information he will ask you.

Arguably, the most important section of the plan is the introduction, or executive summary. This is the investor's first insight into your business. If it is not brief and clear, if it fails to highlight the target information, your plan will be rejected straight away. The majority are rejected at this point.

This is what a balanced business plan should contain:

  1. Cover Page. On the cover page goes the name of your company, its address and phone number, and the chief executive's name. That may seem obvious, but it's amazing how many business plans don't have a cover page or have an incomplete one. If the plan is going to be distributed to several bankers or investors, you will want to number each plan on the cover page--to allow you to track the plans and to inhibit recipients from copying or passing around the plan. You should also have recipients sign a nondisclosure statement.
  2. Table of Contents. This should include a logical arrangement of the sections of your business plan, with page numbers.Once again, this is something that seems obvious, but many business plans are put together with content pages and no page numbers.
  3. Executive Summary. This is the heart of the business plan. It is important to both the preparation and final effectiveness of the plan.
  4. The Company. The business plan must provide basic information about the company: its past, present, and future. There should be information about the company's history or, if it's a start-up, about the evolution of the market and product concept. Information is necessary as well about the company's current status. And what is the company's future strategy?What are its goals and what actions are required to achieve its goals?
  5. The Market. This is your assessment of the customer groups you've targeted, other customer groups you might pursue, the competition, and marketing efforts thus far. Is the market growing, how fast is it growing, and what evidence do you have that it is interested in your product or service?
  6. The Product/Service. This is where you describe your product and/or service and what makes it special. What are the components of the product/service? How much do you charge? What services don't you provide? What kind of warranty do you provide and what are its particular provisions?
  7. Sales and Promotion. This is your assessment of how you intend to carry out your marketing plan--how you'll reach customers and sell to them. Do you have an in-house sales force or will you use manufacturer's representatives, direct mail, or contracted telemarketers to sell your product/service? What kind of public relations do you have planned? Will it be done internally or will you hire a public relations firm?
  8. Finances. Here is where you detail your past results, if there are any, and your expectations for the future. This section should include cash flow projections, profit-and-loss statements, and balance sheets. All the figures should be cast in traditional accounting format.

The order of the subjects listed here is not random; they are given in order of importance.


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