The Business Plan

This is a section in the business plan where you work out the details of what your business will look like, how it will behave, what it will value and how it will be set up legally. In this section, you will answer questions like: What business will you be in? What will you do?

This is a component of the overall Company Description as it is used as a guiding principal for the organization as well as a means to describe the business in one or two sentences. Many companies have a brief mission statement, usually in 30 words or fewer, explaining their reason for being and their guiding principles. If you want to draft a mission statement, this is a good place to put it in the plan.

Goals are destinations—where you want your business to be. Objectives are progress markers along the way to goal achievement. For example, a goal might be to have a healthy, successful company that is a leader in customer service and that has a loyal customer following. Objectives might be annual sales targets and some specific measures of customer satisfaction.

In this component, describe what industry/market you are trying to enter. Is it a growth industry? What changes do you foresee in the industry, short term and long term? How will your company be poised to take advantage of them? Describe your most important company strengths and core competencies. What factors will make the company succeed? What do you think your major competitive strengths will be? What background experience, skills, and strengths do you personally bring to this new venture?

Sole proprietor, Partnership, Corporation, Limited liability corporation (LLC)? Why have you selected this form? Read how to choose the right legal structure.

Here is where you give detailed information about the products or services your company is offering to your market. This is the place to answer the following:

Describe in depth your products or services.
What factors will give you competitive advantages or disadvantages? Examples include level of quality or unique or proprietary features.
What are the pricing, fee, or leasing structures of your products or services?

What qualities do you need in a location? Describe the type of location you’ll have. You will also want to note how much space (square feet) you will need and what type of building (office, warehouse, etc.)

Is it important that your location be convenient to transportation or to suppliers? Do you need easy walk-in access? What are your requirements for parking and proximity to freeway, airports, railroads, and shipping centers?

Estimate your occupation expenses, including rent, but also including maintenance, utilities, insurance, and initial remodeling costs to make the space suit your needs. These numbers will become part of your financial plan.

Businesses have a wide variety of legal needs, which varies amongst the different types of businesses. Businesses also need to be aware of legal parameters that may restrict their businesses. Areas that businesses need to be aware of in regards to the legal environment include licensing and bonding requirements, permits, workplace regulations, employee manuals, industry regulations, zoning and building code requirements and intellectual property protection. Legal council may be needed with the following: incorporation papers, contracts, employee manuals, nondisclosure agreements, patents and more.

Will the business sell on credit? If so, what kind of credit will be offered and at what terms?

What are the current and future personnel needs for the company? What would an organizational chart look like? Will job descriptions be created and what sort of talent will be needed for the company. How will the company manage compensation and fringe benefits?

If you are manufacturing a product, can you provide a flow chart of how the product will proceed through the manufacturing process? What sorts of machines are needed for production? What are the production techniques and costs? How will quality control be maintained? How will the company engage in new product development?

What kind of inventory will be kept? Where will pre-production and post-production inventory be stored? What is the projected rate of inventory turnaround? Is seasonal inventory needed? What lead time does the vendor need in replenishing inventory?

Who are your suppliers? What are their payment/credit terms? What do they supply? Do the suppliers have references or a record of performance?

What is the total size of the market/industry you wish to enter? What percentage of the market do you wish to capture (is it locally, nationally, internationally)? What is the current demand for your product/service in the market? What are the barriers to entry into the market (what would keep you from starting your business)?

Please describe your product/service from the eyes of your targeted customers. What are the features/benefits? What is special about your product/service? What will the product/service do for the customer? Will you provide any after-sale services? What makes you different from the competition?

Who are your targeted customers? What are their key characteristics? Where are they located? What is their annual income? What are some of the related products that they buy? The more you know about your customers (income, gender, age, social class, education, type of business, size of firm, industry etc.), the better equipped you will be to make advertising and sales decisions for the company. You will need to do this research for each customer group your business will have.

Who are the companies that will compete against you? What products/services will compete against you? What secondary items will compete against you for your customer’s money? Where are your competitors located? How will your product/service compare to the competition?

In developing advertising/promotion plans, seek to answer how will you get the information out to the customers? What media, why and how often? Will you engage in traditional or social media advertising? Will a mixed media or tiered advertising approach be planned, why or why not? How will you track progress/success with your advertising efforts? What is the image you want to project? Will you need to hire a marketing/graphic design firm? When will your website be launched? What other graphic elements do you need (business cards, stationary, etc.)? What technologies will you utilize in advertising? What type of website do you need? Who will develop your website? When will you launch your website? What is the mission of your website, and how will you track success?

How much will you or can you spend on advertising? What are your priorities with your advertising plan?

Explain your method or methods of setting prices. Does your pricing strategy fit with what was revealed in your competitive analysis? Compare your prices with those of the competition. Are they higher, lower, the same? Why? How important is price as a competitive factor? Do your intended customers really make their purchase decisions mostly on price?

Now that you have described your products, services, customers, markets, and marketing plans in detail, it’s time to attach some numbers to your plan. Prepare a month-by-month sales projection for the first 12 months, then project year two sales. The forecast should be based on your historical sales, the marketing strategies that you have just described, your market research, and industry data, if available. You may want to do a “best guess” forecast as well as a “worst case scenario” projection as this will give you a realistic picture of what can happen both good or bad. Remember to keep notes on your research and your assumptions as you build this sales forecast.