Innovation
1. Executive summary
The executive summary is an overview of your business and
your plans. It comes first in your plan and is ideally only one to two pages.
Most people write it last, though.
Ideally, the executive summary can act as a stand-alone
document that covers the highlights of your detailed plan. In fact, it’s very
common for investors to ask for only the executive summary when they are
evaluating your business. If they like what they see in the executive summary,
they’ll often follow up with a request for a complete plan, a pitch
presentation, and more in-depth financials.
Your executive summary should include a summary of the problem you are solving, a description of your product or service, an overview of your target market, a brief description of your team, a summary of your financials, and your funding requirements (if you are raising money).
2. Products & services
The products & services chapter of your business plan is
where the real meat of your plan lives. It includes information about the problem
that you’re solving, your solution, and how your product or service fits into
the existing competitive landscape.
Start the products & services chapter by describing the
problem that you are solving for your customers and what your solution is. This
is a description of your product or service.
Next, you should outline your competition. Who else is
providing solutions that try to solve your customers’ pain points? What are
your competitive advantages over other businesses?
If you happen to have any competitive advantages, such as
specific intellectual property or patents that protect your product—this
chapter is a great place to talk about those things.
Finally, review your milestones and metrics. This is an overview of the next steps that you need to accomplish to get your product or service ready to sell, with target dates. If you’ve already achieved some key milestones, such as landing a crucial customer or taking on pre-orders, discuss that here.
3. Market analysis
This section is where you will showcase all of the
information about your potential customers. You’ll cover your target market as
well as information about the growth of your market and your industry.
First, describe your target market. Your target market
is the group of people that you plan on selling to. Try to be as specific as
possible. With a solid target market, it will be easier to create a sales and
marketing plan that will reach your customers.
Next, provide any market analysis and market research that you have. You’ll want to explain how your market is growing over time and also explain how your business is positioned to take advantage of expected changes in your industry.
4. Marketing & sales
The marketing and sales plan section of your
business plan details how you plan to reach your target market segments, how
you plan on selling to those target markets, what your pricing plan is, and
what types of activities and partnerships you need to make your business a
success.
Some businesses that distribute their products and reach
their customers through stores like Amazon.com, Walmart, Target, grocery store
chains, and other retail outlets should review how this part of their business
works. The plan should discuss the logistics and costs of getting products onto
store shelves and any potential hurdles that the business may have to overcome.
The marketing & sales chapter of your business plan can also be a good place to include a SWOT analysis. This is purely optional but can be a good way to explain how your products and services are positioned to deal with competitive threats and take advantage of opportunities.
5. Company organization and management team
Investors look for great teams in addition to great ideas.
Use this chapter to describe your current team and who you need to hire. You
will also provide a quick overview of your legal structure, location, and
history if you’re already up and running.
Include brief bios that highlight the relevant experiences
of each key team member. It’s important here to make the case for why the team
is the right team to turn an idea into a reality. Do they have the right
industry experience and background? Have members of the team had entrepreneurial
successes before?
Your company overview should also include a summary of your
company’s current business structure. The most common business structures
include:
-LLC
-C-corp
-S-corp
-Sole proprietor
-Partnership
Be sure to provide a review of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.
6. Financial projections
Last, but certainly not least, is your financial plan chapter. This is often what entrepreneurs find most daunting, but it doesn’t have to be as intimidating as it seems. Business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. That said, if you need additional help, there are plenty of tools and resources out there to help you build a solid financial plan. A typical financial plan will include:
Sales and revenue projections
A monthly sales and revenue forecast for the first 12 months, and then annual projections for the remaining three to five years. Three-year projections are typically adequate, but some investors will request a five-year forecast.
Profit and loss statement
An income statement, also known as the profit and loss (or P&L), is where your numbers all come together and show if you’re making a profit or taking a loss.
Cash flow statement
A cash flow statement. While the income statement calculates your profits and losses, the cash flow statement keeps track of how much cash (money in the bank) you have at any given point.
Balance sheet
A balance sheet lists the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business.
Optional sections to include when seeking funding
If you are raising money from investors, you should include
a brief section of your business plan that details exactly how you plan on
using your investors’ cash. This is typically just called, “Use of Funds.”
Investors will also want to see a short section on your exit
strategy. An exit strategy is your plan for eventually selling your business,
either to another company or to the public in an IPO. If you have investors,
they will want to know your thoughts on this. If you’re running a business that
you plan to maintain ownership of indefinitely, and you’re not seeking angel
investment or VC funding, you can skip the exit strategy section.
For more information, read our guide on the different
types of exit strategies.
Finally, discuss any assumptions and important risks for your business. Knowing what your assumptions are as you start a business can make the difference between business success and business failure. When you recognize your assumptions, you can set out to prove that your assumptions are correct. The more that you can minimize your assumptions, the more likely it is that your business will succeed.
7. Appendix
An appendix to your business plan isn’t a required chapter
by any means. However, it is a useful place to stick any charts, tables,
definitions, legal notes, or other critical information that either felt too
long or too out-of-place to include elsewhere in your business plan. If
you have a patent or a patent-pending, or illustrations of your product, this
is where you’d want to include the details. For more details, read about what
to include in your business plan appendix.