Whether you’re a solo entrepreneur embarking on a new venture or a team that’s been at it for weeks, planning the eventual launch of a new business, planning is the conduit that turns an idea into a reality.
Everything from a macro-level market analysis to financial statements prepared by professional business accounting services, the more detail, the closer your business gets to no longer being only on-paper.
And, sadly, the cliché that a lack of a plan is a plan for failure is perhaps never truer than when it comes to a business plan. Having a course laid out can help you navigate known obstacles and unknown challenges and be the difference between survival and shipwreck.
So business plans are critical, and these four sections are essential to any business plan.
1. Business Description
This is a great place to start the story of your business:
- Why you started it, the need it fulfils, the products or services that fill that need.
- Detailed information on your product or service, its lifecycle, IP and trademark protections, R&D done and/or needed.
- How you will provide those products or services from a top-level viewpoint to a daily operational standpoint. Everything from supplies to suppliers to supply chain, manufacturing, equipment, personnel, distribution, etc., and the expenses associated with each.
- The legal structure of the business. What are the financial, tax, legal and regulatory advantages and liabilities based on your structure and how will the business be managed regularly and during emergencies?
2. Market Research and Strategies
This is where you crunch some numbers and use reliable data to describe:
- The size of the market.
- The audience and market share you’re targeting, your branding, marketing and social media plans to reach those targets.
- Competition, SWOT analysis, your unique value proposition, justification that your differentiators are desired by your target market.
- Pricing strategy and realistic sales forecasts based on the industry.
3. Management Team and Key Personnel
Include bios of the executives, directors, owners including their skillset, previous related experience and successes, financial investments and specific roles and expectations within the business. Also include an organizational flowchart with each department and key roles and a list of advisors, consultants, board members, lawyers and accountants.
This is where the numbers back up all your claims, goals and projections. That’s why it’s critical to input accurate numbers and account for all of your expenses mentioned earlier but also including:
- Permits and licences
- An emergency or contingency fund
A few financial statements to include in this section:
- A cash flow statement. Positive cash flow is crucial to most startups and show how much money you need and plan to have on hand to cover expenses.
- An income statement that takes a snapshot of the business’s income and expenses over a specific period of time. You may want to include income statements for both busy and off-peak periods if your business is seasonal.
- A balance sheet that details your company’s assets, liabilities, and equity. Among other things, balance sheets show how you plan to manage debt.
When startups use historical or industry-standard numbers for expenses to predict future financial results, the statements are known as pro forma and are fine to use if your business is still too early stage to have hard data. But having the financials prove out your predictions helps prove the viability of your business.