How To Write Your Own Business Plan

Chapter One

Business Ownership

A business is primarily an enterprising entity that engages in commercial, professional, or

industry activities. It could also be referred to as the organized activities and efforts of
individual in producing and selling goods and services for profit. While businesses can be
for-profit entities, they can also be for non-profit organizations that operate to further a social
cause or fulfill a charitable mission. Businesses range in scale from a sole proprietorship to a
partnership and ultimately an international corporation.

The following classifications of business are obtainable:

 Agriculture, which includes domestication of animals and livestock, oil and mining
businesses.
 Financial services businesses, which include companies that generate profit through
management of capital and investment such as banks, credit unions, insurance
companies, among others.
 Entertainment companies and mass media
 Industrial manufacturers
 Real estate businesses
 Retailers, wholesalers, and distributors
 Transportation businesses
 Utilities, which include public services such as electricity, water, or waste
management
 Service businesses, such as hair stylists, make-up artists, dry cleaners, pest controllers,
among others
Generally, a business starts with the conception of an idea and a name. It is the first step in
setting up an organization. Depending on the business type, permits, registration
requirements, and licenses may be required to operate legally. Businesses organize
themselves around hierarchy or bureaucracy, with the establishment of roles and
responsibilities for positions in a country. Examples of major business ownership include sole
proprietorship, partnership, corporation, cooperative, limited liabilities companies, and
franchises. These forms of businesses would be elaborated later in this book.
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Most business owners may decide to manage their businesses themselves. Some other
employ managers to do that on their behalf. Whether the managers are owners or employees,
they administer three main components of the business’ value: capital, financial, and human
resources. Where two or more individuals own a business but lack a more specialized or
organized form of vehicle, they are treated as a general partnership. In partnership, the terms
are governed partly by partnership agreement (if created) as well as the law of the jurisdiction
of the partnership’s location

Factors that determines the organization of a business

Certain factors determine how a business is organized. In fact, most legal jurisdictions
indicate the forms of ownership that can be taken by a business by creating a body of
commercial law for each type. Some of the factors include:
 Business size and scope: Generally, a small business is more flexible while a large
business or those with wider ownership will either be organized as corporations or
partnerships. Also, a business that seeks to raise money on a stock market will usually
be required to adopt a particular form to do so.
 Tax advantages: Various structures are treated in a different way in tax law. While
some may be placed at a greater advantage, others may not get similar treatment.
 Sector and country: Private profit-making businesses vary from government-owned
bodies. Some countries oblige certain businesses to be organized in certain ways.
 Compliance and disclosure requirements: Different business structures may be bound
to comply with a variety of rules and regulations. In the same way, they may also be
required to make certain length of information public (or transmit it to appropriate
authorities).

Factors that determines the operation of a business

 Liability: Partners in a partnership (apart from a limited liability partnership), and
anyone who owns and runs a business without the creation of a distinct legal entity,
are accountable for the obligations and debts of the business.
 Tax payment: Corporations, generally, are required by law to pay tax. Some tax
systems may result in the corporation paying double taxes. The corporation first pays
tax on the profit it makes and the owners as well pay an income tax.
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  Existing laws: Laws vary from countries. Some laws, in most countries, often treat
small corporations distinctly from large ones. Small corporations may be exempted
from fulfilling certain legal filing requirements.
 Initial Public Offering (IPO): “Going public” implies that members of the public will
own a part of the business. Thus, the organization is required to disclose information
to the public as well as adhere to a stricter set of procedures and laws. A general
partnership cannot “go public”. The internal governance of such businesses, such as
mode of determining the compensation of executive officers, and how and when
information is divulged to shareholders as well as the public, is subject to regulations.

Forms of Business Ownership

Sole Proprietorship

A sole proprietorship is a business that is owned and operated by one individual. It is the
basic form of business ownership and has the simplest business structure. The sole owner is
responsible for the obligations of the business and all its assets and debts. Thus, the sole
proprietorship is not a legal entity that separates the business from the owners. In other
words, the business does not have any separate legal existence apart from the owner.

In exchange for the liability of this type of business, the owner takes all the profits and
proceeds from the business. This form of business ownership is easy and economical to
create with a few government regulations. This makes it a more flexible form of ownership
whose complete control is at the discretion of the owner. Furthermore, profits are taxed once,
and certain tax breaks are available if the business is struggling. Sole owners often are limited
to the resources they can bring to the business. These reasons make sole proprietorships the
most appropriate at the early stages of a business especially where the owner has only little
capital or resources to work with as well as few debts to pay.

The operation of sole proprietorship may be:

 Under your name, or

 Under another name that has been registered by you (as long as there is no addition of
any of the legal designations associated with other forms of business, such as Inc. or
Ltd.)

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Other characteristics of a sole proprietorship include:

 Relatively easy and cheap setup. For instance, a sole proprietorship business that is
operated under your own name do not have to be registered.

 No annual filings requirement.

 Tax simplicity – You should state your business income on your personal income tax
form, instead of having to file a separate tax form, (as required in the choice of the
corporate form of business ownership).

 It only has to be renewed every three years, especially if you do reserve a business
name.

A sole proprietorship includes unlimited liability. The implication of this is that you have
personal liability for all the obligations and debts of the business as a sole proprietor. In the
case of a legal action against your business, you and your private assets are at risk.
Furthermore, it may be quite difficult to raise capital as a sole proprietorship, and you may
have to use your money or secure a personal loan for the business.

Partnership

Partnership is a form of business ownership where two or more people agree to carry on a
business for joint benefit. These individuals (corporations) serve as the co-owners. Unlike
business corporations, this form of business ownership does not have any legal existence that
is distinct from the individuals forming it. Partnerships are common for service professions
like law, accounting, and dentistry. These can be seen as "unlimited liability partnerships" as
the professions involved cannot practice with a protection against liability for professional
malpractice claims made against their firms.

There are three forms of partnerships: general partnerships, limited partnerships, and limited
liability partnerships. These forms are differentiated primarily by the owners’ liability
coverage. A general partnership is the default form of a partnership that requires all owners
of the business to possess an unlimited liability in the business (as in the case of a sole
proprietorship). Each partner represents the organization with an equal right to participate in
the decision making, management, as well as control of the business. As much as profits are
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distributed equally among partners, also debts or liabilities that can impact the organization
are equally distributed.

However, a limited partnership requires a minimum of one of the partners to have a limited
liability. This implies that they are not individually responsible for the debts of the business.
Irrespective of the form of partnership, they are relatively easy and inexpensive to create, are
only taxed once (just like a sole proprietorship) and have few government regulations. The
limited partner(s) may invest in the business but they are not directly involved in
management and daily operations of the company, and are only liable to the extent of their
investments.

In a limited liability partnership, limited liability is given to each owner. Each partner is
protected from legal and financial mistakes of the other partners. This makes it have some
elements of both corporations and partnerships. Liability continues to apply in the case of a
person’s injury as a result of the negligent or wrongful acts or omissions of the partners,
including failure to supervise employee or another member of the firm, or negligence in
appointing or supervising, or where the partner was aware of omissions or the wrongful acts
and failed to take practical steps in preventing them. This form of partnership also requires
the partnership to file an annual return.

The additional benefit of a partnership is just the combination of resources, knowledge, and
experiences that are merged. However, profits have to be shared between owners and there is
usually the probability for conflicts to arise between partners particularly over business
decisions. Also, each partner is potentially responsible for all debts of the partnership form of
ownership.

This form of ownership is often beneficial during the early stages of the business which has
the involvement of multiple people. As a result of the sharing of profits and the
supplementary resources, this form of ownership tend to yield higher growth rates as
compared to a sole proprietorship.

Their individual acts are binding on all partners and each of them is personally responsible
for the total liabilities of the partnership in case of judgment against the business. Similarly,
the partners are liable for the actions of the other partners. The partnership may liquefy on
withdrawal or death of one of the partners.

Joint Ventures/Syndicates
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In addition, partnerships can be structured as a syndicate or joint venture, where there is
generally not a uniform sharing of liabilities or profits. For instance, each partner in a
syndicate or joint venture, while also operating under the same business name, generates their
income as well as liabilities.

Limited Liability Company (LLC)

This form of business ownership is taxed like a partnership. However, it enjoys the benefits
of a limited liability like a corporation. In contrast to a corporation, it is easier to organize and
receives no double taxation. In terms of gathering resources such as working capital, Limited
Liability Company simultaneously receives more credibility then a sole proprietor or
partnership. Unfortunately, it is typically reserved for a group of professionals such as
doctors, lawyers, and accountants.

Limited Liability Company as a more formal partnership arrangement requires articles of

organization in order to be filed with the state. These articles state the powers, rights, duties,
liabilities, and other obligations of each member constituting the LLC. The documents also
have names and addresses of members of LLC, the registered agent’s name, and statement of
purpose of the business.
Owners of LLCs are generally regarded as members. Many states do not restrict ownership of
LLCs. This implies that anyone, including individuals, corporations, foreigners, and foreign
entities, can be a member. However, some entities, including banks and insurance companies,
cannot for LLCs. When compared to a corporation, it is much easier to establish. LLCs don’t
pay taxes themselves. Rather, profits and losses are on the owners’ personal tax returns. In
the detection of fraud or a company’s inability to meet legal requirements, creditors may go
after the members. The wages of members are operating expenses and are deducted from the
profits of the company.

Business Corporation

A corporation is a business or organization that is established by a group of people, and has

its rights and liabilities distinct from those of the individuals involved. In other words, it is a
legal entity that is isolated and distinct from its owners. It enjoys most of the rights and
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responsibilities possessed by an individual: enter contracts, sue and be sued, own assets, pay
taxes loan and borrow money, and hire employees. Some regard it as a "legal person."

A business corporation may be a nonprofit organization that is involved in activities for the
public good; a private corporation, which has been organized for the sole aim of making
profit; or a municipal corporation, such as a town or city.

The law bequeaths to a corporation the same rights and responsibilities as an individual. It
may own, buy, and sell property; enter into leases and contracts; and file lawsuits. It can be
prosecuted and punished (usually with fines) in the case of legal violation. It pays taxes. The
main advantages are that it can exist ad infinitum, that is, beyond the lifetime of the founder
or any one member. It also provides its owners with the protection of limited personal
liability.

Almost all businesses across the globe use corporations. While its exact legal status may vary
from jurisdiction to jurisdiction, one of the most essential aspect of a corporation is limited
liability. This implies that though shareholders may partake in the profits through dividends
as well as the stock appreciation, they are not personally responsible for the debts of the
company.

Most famous businesses, including Microsoft Corporation, Toyota Motor Corporation, and
The Coca-Cola Company, are corporations. Some others do business under their names as
well as under business names. One of such is Alphabet Inc., which famously does its business
as Google.

Creation of a Corporation

A corporation is formed when it is incorporated by shareholders possessing ownership of the

corporation, and as represented by their common stock holding, to pursue a shared goal. The
goal of a corporation may be either for profit or charities. However, a large number of
corporations aim to provide one form of return for its shareholders in terms of profits.
Shareholders, who own a percentage of the corporation, are simply responsible for paying
their shares to the treasury of the company upon issuance. A corporation can have one or
several shareholders. Publicly traded corporations often have the number of their
shareholders run to thousands.

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The creation and activities of corporations regulated under corporate laws operated in their
jurisdictions of residence. For instance, in Canada, the operation of corporations are
established under federal or provincial authority with for-profit corporations governed under
the Canada Business Corporations Act.

Day-to-Day Activities of a Corporation

The shareholders generally receive one vote per share and conduct an annual election of a
board of directors in charge of appointing and overseeing management of the day-to-day
activities of the corporation.

The board of directors executes the business plan of the corporation and must undertake all
necessary means to do so. Even with this, the members of the board are not normally
responsible for the debts of the corporation. Rather, they are indebted to the corporation and
can suffer personal liabilities in the case of the neglect of this duty. Many tax statutes provide
for the board of directors’ personal liabilities.

Liquidation of a Corporation

Upon the attainment or fulfillment of its objectives, the legal life of a corporation can be
terminated with a process referred to as liquidation or winding up. Basically, a company hires
a liquidator who sells the assets of a corporation, and then pays any creditors as well as gives
any outstanding assets to its shareholders.

The liquidation process can either be voluntary or involuntary. In case it is involuntary, the
creditors of an insolvent corporation might have prompted it, and this may result in the
corporation going bankrupt.

Facts about incorporating:

 Incorporating restricts the liability of corporation shareholders. Basically, a

shareholder of a corporation is only responsible to the extent of their investment in the
corporation.

 Incorporating allows for laying claims on real property and entering into contracts.

 Incorporating promotes continuity of existence. In other words, the existence of a

corporation is not threatened by the death or bankruptcy of a director or shareholder.

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  Business Corporations are expected to file an annual return which may be done
online.

 Incorporating may also come with tax advantages. However, it is advised to seek a
professional advice or check with your accountant to determine the best form of
incorporation or taxation for you.

Cooperatives

Cooperatives are organizations owned and controlled by an association of members. They

allow for a more democratic approach of control as each share is worth the same number of
votes, in relation to a corporation that has common stock. It also provides limited liability to
its owners as well as equal distribution of profit based on percentage of the ownership.
However, the democratic approach of cooperatives to decision making often lead to an
extended decision making process. The reason is not farfetched from the required
participation from all association members. Also, conflicts between members can arise and
this can have a significant impact on the efficiency of the business. This form of ownership is
often used when businesses or individuals decide to pool resources together to satisfy a
common need or achieve a common goal, such as meeting employment needs or provision of
a delivery service.

S Corporation

This is a lesser known type of business ownership that allows its owners to avoid double
taxation as the organization is exempted from paying corporate taxes. Rather, all profits or
losses are passed on to the organization’s owners to report on their personal income tax.
Though it shares a form of similarity in allowing for limited liability, it is without the double
taxation. Its requirements include being a domestic corporation, with a maximum of eligible
100 shareholders, and having only one class of stock. Its shareholders must be individuals,
certain tax-exempt organizations, and specific trusts and estates. Corporations, partnerships,
domestic international sales companies, insurance companies, and certain financial
institutions do not qualify as shareholders.

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An S Corporation has the benefits of establishing credibility with employees, potential
clients, suppliers as well as investors by revealing the formal commitment of the owner(s) to
the company. It is also exempted from paying federal taxes. Other advantages include the
streamless transfer of interests with no adverse tax consequences.
The disadvantages of this form of ownership include the restrictions on the type and number
of eligible shareholders and increased level of government regulations. The S Corporation is
usually used by private organizations in the mature stage of a business’s lifecycle as a result
of the restrictions placed on its ownership.

Franchise

Franchising is a form of ownership that allows a franchisee (a party) to acquire or borrow the
franchisor’s (a business) model and brand (in terms of proprietary knowledge, trademarks,
and processes) for a certain period. This is to allow the party sell a product or render a service
under the business’s name. It often involves the payment of an initial start-up and annual
licensing fees by the franchisee to the franchisor.

A typical franchise contract agreement encompasses three sets of payment the franchisee
must make to the franchisor. The first one is for the purchase of the controlled rights or
trademark in the form of an upfront fee. The second is payment for training, equipment, or
advisory services and the last one involves an ongoing royalties or a certain percentage of the
business’ sales.

A business that seeks to increase its market share or geographical reach within a low cost can
create a franchise for its brand name or product. It is a very popular method of starting a
business, particularly for those who intends to operate in a greatly competitive industry. One
of the advantages is that it provides you access to an established brand name of a company;
implying that you do not have to spend extra resources in getting your name and product out
to customers. Others include training on franchise operation and financial planning, guidance
on advertising, marketing, and other business requirements, and a system of franchise owners
with whom to share experiences.
The main disadvantages of this ownership structure include heavy franchising fees, ongoing
royalties on sales or profits, lack of creativity, and tight restrictions to maintain ownership.
Owners of franchises also have limited territory control over the suppliers from whom they

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can purchase. A franchisee who seeks to sell their business requires the approval of the new
buyer by the franchisor. However, franchises serve as a great platform for owners who seek a
ready-made business operation.

Form of Business Advantages Disadvantages

Ownership
Sole Proprietorship  Easy and cheap to  Unlimited liability,
create that is, business debts
 Flexible and can be are personal debts
controlled to your  Limited resources
liking  Limited source of
 Tax advantages (if funding/financing
struggling)
 Few government
regulations
 Profits taxed once
Partnerships  Combined skills,  Likely conflict
(General/Limited/Limited resources, and development between
Liability Partnerships) knowledge or among partners
 Easy to organize  Unlimited liability for
 Taxed once some partners
 Few government  Shared profits
regulations
Limited Liability  Flexible in nature  Only available to
Company  Simple organization service professionals
and mode of operation such as accountants
 Taxed as a partnership and lawyers
Corporation  Easier to raise capital as  More expensive to set
a result of greater up
sources of funding  Double taxation (as
 Limited liability an owner and a legal
entity)

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  Greater and stricter
government
regulations to adhere
to
 Extensive record
keeping needed
Cooperative  Limited liability  Extended decision
 Democratic control making process
 Equal profit distribution  Conflict possibility
between members
 Participation of all
members needed
 Extensive record
keeping needed
S Corporation  Limited liability for  Restrictions on type
owners and number of
 No double taxation shareholders
 Greater credibility for  Greater and stricter
financing government
regulations to adhere
to
Franchise  Superior training and  One-time franchising
systems offered fee for the possession
 Franchise networks to of a franchise location
share experiences, that  Strict restrictions that
is, great network base limit control
 Guidance on financing,  Recurring royalty fees
accounting, marketing, as a proportion of
advertising, etc. profits or sales
 Purchases must be
made from certain
suppliers

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Chapter Two
Introduction
Starting a business is not an easy task as it involves a whole deal of things. The herculean
task at the point of brainstorming the business idea, business name, method of funding,
getting it registered and certified, how to get customers, how to stand ahead of other
competitors, among others. The major purpose of establishing a business is to generate
revenue. This implies more visitors as well as qualified leads. Business is not an “if you
establish it, people will come” syndrome.

It is one thing to be keen to explore certain business opportunities or have brilliant business
ideas, it is another thing to be able to implement it. Whether you are just starting a business or
expanding one you have run for quite some time, you need a roadmap in the business. Getting
your business off the ground or building a successful business requires a meticulous plan, an
appropriate organization of materials, and right priority. This roadmap is known as a business
plan.

Without a well-thought-out business plan, the success chance of your business is on a red
line. A business plan not only guides you as well as other key stakeholders as you grow your
business, but also shows potential partners, investors, or lenders the direction of your
business. Even though, many entrepreneurs see a business plan as intimidating, the good
news is that it is just as simple as you can ever image. You only require a great commitment
and reasonable level of research.
There are certain essential details that are required in a business plan (these would be
discussed later). Just as a race has a starting and finishing point, a business plan follows a
similar pattern. It is not a long, complex and scary document you imagine it is. Depending on
your target audience (investors or banks), a business plan can be simple or complex. You
only need to assess your finances, pick your partners, complete all necessary legal paperwork,
conduct a research for startups growth, select the best method or tools that will improve your
marketing strategy, and a whole lot more.
This ebook will provide you with the easy start you require to write your own business plan.
Samples will be given to enable you tweak it to suit your business idea.

What is a business plan?

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A business plan is a strategic map. It provides the framework on which you and your business
currently stand—your abilities, goals, and resources, abilities—and maps out your position in
the future and how you will get there. It is a living document that covers what your business
will sell or the service it will render, its structure, what the market looks like, your proposed
method of selling your product or service, the type of funding you require, your financial
projections, and what other documentation (permits, leases, etc.) will be required.

At its core, a business plan assists you to prove to yourself and other people (investors, banks,
etc.) whether or not your business idea or goal is worth pursuing. It serves as the best way to
take a step back, examine your business idea holistically, and resolve issues years down the
road even before you venture into the business.

Guidelines for Writing a Good Business Plan

It can be intimidating to write a business plan. You might never have paid such serious or
close attention to the potential or future growth of your business. The good news is that your
business will be a lot stronger upon the completion of the process. When you keep the
following pointers in mind, writing a business plan becomes easier.

 Narrow down what makes you unique – Mostly, the business idea you have is already
being exploited by other entrepreneurs. Therefore, before you whip up a business
plan, you may have to think wisely about what makes your business different or stand
out from others. Do you seek to make clothing for certain sports or athletic activities,
like hiking or yoga? Are the materials used environmentally friendly? Do you give a
certain percentage of your proceeds to charity? Does your brand support positive body
image? One point to note is that you are not only selling your service or product but
rather a combination of product/service, value, and brand experience.
 Limit the pages between 30 to 50 – Business plans are more concise nowadays than
they used to be. Anything longer than this won’t be read by potential investors and
lenders, and anything shorter may not be detailed or comprehensive enough. A range
of 30 to 50 pages is a good spot to aim for. As much as it might be tempting to add all
the results of your market research, only include details that explicitly discuss your
idea and are in a direct relation to it.

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  Tailor it to your audience – While you only need to write one business plan, you may
need to adapt or tailor the master version slightly to suit the audience, that is, the
reader. For instance, while investors tend to place more emphasis on your service,
product, and marketing plans, small business lenders will be most interested in
financial projections.
 Make it flexible – Have it in mind that your business plan is a living and breathing
document. This implies that you can update it as things change. For instance, you
might want to update it get it updated a year or two down the road, especially if you
are about to apply for a new round of funding.
 Try business plan software – There are a lot of business plan software tools, such as
LivePlan or business plan writer, which offer business plan templates. However, for a
simpler template, you can try an easily editable writing tool such as Google Docs.

When to write a business plan

Planning is required for any activity; it determines the level of success or otherwise such an
activity will produce. Similarly, the success rates for entrepreneurs who plan are higher than
those who do not. A business plan requires the synchronization of the plan with other
essential startup activities or complex interdependencies such as customers, operations,
competitors, logistics, sales, and marketing. Thus, writing a business plan is an essential step
for entrepreneurs who seek to frame their primary purpose and goals. It answers basic
questions such as “Where are we now?”, “What is our destination or target?”, and “How do
we get there?”. Planning helps to schedule out actions as well as strengthen the link between
performance and actions for a startup or new venture.

However, there is an ideal time and a bad timing for planning. Timing in business plan
writing is crucial as businesses that first formulate a plan may be heading towards the rock. It
is pointless to write a plan when the entrepreneur had already gotten external funding or even
hired workers. Apart from the timing, another important key to succeeding in business is
flexibility and responsiveness to opportunities. It is observed that environmental changes may
necessitate the need to change course, such as a service or product being more suited to a new
or alternative market than the one for which it was originally intended. Also, entrepreneurs
may have to change their business plan once it becomes apparent that their original customer

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turned out to be the wrong customer or target. Thus, entrepreneurs are responsive to such a
need.

However, the time consumption while writing a plan could prevent the entrepreneurs from
pursuing other opportunities, or seeing actual opportunities – as opposed to imagined ones.
According to a US research, the most successful entrepreneurs were the ones that got their
business plans written between six and 12 months after their decisions to start a business.
Writing one earlier tend to have no special impact of the business’s future success.

Therefore, it is recommended that a good and an effective business plan should spell out
opportunity, the target customers, the need for competitors to become fearful, and how the
company operates as well as makes money.

How long it takes to write a plan

It is not unheard of that business owners or founders take months to write a professional
business plan. However, the time you will spend depends on the degree of needed research as
well as the level of detail the respective business plan recipient demands. If on the
assumption that you have the adequate knowledge of writing a business plan, you will require
maximum of a month. If using a business plan template, it takes less than an hour.

The tasks involved include information gathering and feedback, writing of non-research
components, research, financial planning, writer’s finalizations, quality assurance, and
correction loops. During the process of sequencing, entrepreneurs should that their planning
coincides with their complementary business activities. According to a discovery, the sweet
spot for writing a plan revolves around the time the entrepreneur was talking to customers,
preparing their product for market, and thinking through their marketing and promotional
activities. When a plan is committed along these activities, the startup’s chance of venture
viability gets increased.

Who should write a Business Plan?

The individual(s) to be responsible for the implementation of the plan should be profoundly
involved in its development. While some people hire professionals or consultants draft the
plan, the fact that you will be accountable for the decisions based on the plan makes it
necessary to have your involvement. Though, there might be input from experts during the
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development of the plan’s background and analysis, as an entrepreneur and owner, the
business venture is an extension of your goals, desires, skills, philosophies, and abilities. If
not directly involved, the plan may not end up in becoming an effective document.

Why do you need a Business Plan?

Apart from serving as a blueprint, a business plan is a headlight that gives your business
direction. It help to focus strategy, assign and track responsibilities and performance, manage
milestones as well as metrics, manage money using sales, cash, costs, and expenses
projections. It starts small and grows organically. It is also an essential tool for a business
owner who has been in business for some time, and wish to grow or expand.
The following reasons make a business plan an essential document to run or establish a
business.
To start a business
You require a business plan to:
 Convert your ideas and capital into a viable business. A complete business plan helps
you attain your long-term business goals. It helps you work out the intended goal and
the strategies to be employed in order to achieve them. However, you may need to
regularly review and update it to adapt to any new environmental changes, assess the
potency of your strategies, and make the most use of new opportunities as they come
your way.
 Secure financing from lenders and investors. For instance, for a startup business, if
you seek to approach a banker probably for a loan and your loan officer success a
Small Business Administration loan, it will require certain sections of a business plan.
Even as such, investors or lenders will only risk their money and time if they are
confident of your business’s prospects to become successful and profitable.
 Identify strengths, opportunities, weaknesses, as well as threats.
To manage an existing business
You require a business plan to:
 Communicate your vision to both employees and external parties. A good business
plan has a section that shares as well as explains business objectives with employees,
management team, and new hires.
 Compare planned and actual performance.
 Develop exact financial forecasts.

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To grow your business
You require a business plan to:
 Raise capital for business expansion. If an existing business owner approaches a back
for business expansion capital, though a business plan may not be required, an
availability of one may be favorable on your application.
 Take advantage of opportunities while also mitigating risks. As much as a plan helps
you take advantage of opportunities, it also helps to identify potential pitfalls in your
idea. For invaluable opinions and advice on this, you can equally share your ideas
with professionals and experts.
 Create a strategy to manage growth. It helps to establish strategy as well as allocate
resources based on strategic priority.
To exit your business
You require a business plan to:
 Transfer business ownership, sell business, or shut your business down. It helps
buyers understand the business they want to buy, its worth, and the reason why they
want it.
 Identify financial and regulatory requirements.
 Provide a timeline for a business transition process.

Business Planning for Success

A successful business plan:
 is realistic, that is, can be implemented.
 is clear and specific. This is to be able to track results.
 fits the business need.
 clearly identities responsibilities for execution.
 communicates the information required by the intended audience.
 clearly identifies assumptions.
 sets a systematic review schedule as well as establishes a systematic planning process.
Other tips
 In case you are writing a business plan for a partner or colleague who seeks to expand
an existing business, the focus of that plan may require to be more operational than
financial.

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  A plan that is written to the bank will have its financials the major focus of the bank
manager. However, it should be able to prove beyond reasonable doubt how it will
generate enough revenue to repay the loan or cover expenses.
 If writing a plan for a venture capitalist, the most essential factor in a company’s
investment decision is most often than the quality of the people.

Common Elements of a Good Business Plan

1. Executive Summary

The executive summary doubles as both the first step and first chapter in writing a business
plan. It provides a high-level view of your company and the market to the readers. It doesn’t
need to go beyond one or two pages in length. However, the fact that is a short section of the
business plan doesn’t make it inconsequential. In fact, it might turn out to be the most
essential part of your business plan. Some investors may ask for your executive summary
when they intend to decide wither to work with you or your business – so you would want to
ensure it stands out and can stand on its own.

Executive summary explains what your business does, where it currently stands, when you
intend taking it in three to five years, and its plausibility of becoming successful. Thus, you
now know its importance. So, as a serious entrepreneur who is just starting a business, you
could talk for a couple of minutes why it is important and how you intend reaching your
goals. As already discussed that the executive summary of a good business plan should be
brief and to the point, any details provided that fail to answer the highlighted four questions
should be ruled out completely in this section of the plan.

For a concise business plan’s executive summary, confine the information to be provided to
the following six elements:

Mission Statement: Explain, in no more than a paragraph, what your business and principal
goals are, where it will be located, what you will sell, and your target customers.

Company Profile: Briefly state your business structure, when it was formed, the name of the
founders or owners and their roles, the prior skills/experience they will bring to the table,
their likely first hires, number of employees, and the location of the business.

Highlights: Next, briefly explain your main findings from the market analysis carried out.
Give examples (charts and graphs included) of any growth you have witnessed since the
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conception and commencement of the business. This could be anything ranging from key
milestones of the business to financial market highlights. This part of your executive
summary should be thought of as evidence to your increased success chances. For a startup,
you might not have any data to reveal here. In that case, provide information on your
experiences as well as highpoints from your past endeavors.

Products and Services: Briefly explain what you will sell, and who you will sell it to. In the
absence of any product or service, describe your proposed plans for your product offering.

Financial Information or Consideration: If you seek business financing, add your funding
goals at the end of your executive summary. Also, be sure to include any information
pertaining to lenders or banks you have worked with so far.

Future plans: Summarize where you plan on taking your business in the future.

As this is the first impression your reader has about the whole plan, you have to make it short
and compelling. You are only showing them what they are getting into. If you haven’t put
enough thought into your business plan, the flaw will be revealed at this section of the plan.

Pro tip: It is advisable to write your executive summary after you are done writing a business
plan from beginning to end. That way, you will have a solid grasp of the details and draw out
the key takeaways more easily.

2. Company Overview

This is the second section of your business plan. While this section of the business plan
sounds a lot like the content you have just written in the executive summary, there is a slight
difference. The company overview is a top-level look into your business’ structure, what you
do, your mission statement, the marketplace your business intends to meet, and how your
services or products meet those needs.

When writing your company overview, start off with a few details (short sentences)
describing what your business does. This part is intended to provide your readers and
investors with a general idea of your business. Thus, it could be considered as your elevator
pitch. After that, explain the nature of the industry in which your business fit as well as the

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marketplace. What specific needs do your business seek to meet or address, and how do you
intend to meet such needs? This part should also be short.

Upon the explanation of your value proposition, you can then lay out the legal structure of
your business – S-Corp or C-Corp, or LLC. Explain this and also provide an overview of
your ownership structure. This section is more of a deeper section of the business plan
details.
Remember that you are providing potential investors with prevailing legal and ownership
structure of your business so they know what they are getting into.

3. Market Analysis

The next step or section is to analyze your market’s conditions. It reveals an in-depth analysis
of your market, industry, and competitors. However, you have to ask yourself if your
business idea has a place in the market. Where the first two sections are high-level overviews,
the details are presented here. The market will ultimately determine the level of success of
your business.

What is your target market, and what will trigger or stimulate them to buy from you? For
instance, if you will be selling bedding, you can’t just include every individual who sleeps in
a bed in your target market. Your target should be firstly a smaller group of customers, such
as teenagers from low-income families. From there, you identify the estimate of teenagers
from low-income families in your environment or country, the type of bedding they typically
require, and the level of market growth.

Readers and investors critically observe this section to have a solid understanding of you, the
business owner, and the changing aspects of your industry, market, and competitors. Include
both the analysis of primary research that you have collected yourself – whether through
interviews, customer surveys, or other methods as well as an analysis of research that have
been carried out by others. Therefore, to prove to them that you know your onion, you should
include the following sections in your market analysis:

Industry Description: Provide the reader with an overview of your industry. Describe how
large it is, the rate of its growth in the past, the prediction by industry leaders about its growth

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in the future, and other essential characteristics and trends. Then highlight the key players in
the industry.

Target Market Overview: After examining your industry as a whole, you may now zoom into
your target market.

Target Market Characteristics: In this section, you are expected to highlight the features of
your target market. Who are the customers (as well as their needs) in your target market?
Who is currently trying to meet those needs? What is the location of your target market?
What key demographic do you serve? These are the questions that require answers as you
provide in-depth information on your target market. With this, you are on a good track to
other aspects in the same category.

Target Market Size and Growth: You are expected to pay close attention to the size of your
target market. Make sure to provide as much data as possible into your target market’s mode
of making purchases in the overall industry—the quantity, frequency, and time or period.
Once you have looked into the present state of your target market, you are expected to
provide a sense of the project growth of your market. For information on how to carry out a
good market research, you can check out the SBA’s guide.

Market Share Potential: Now it is important that you have a vivid understanding of what
your target market looks like with or without you and how much market share you should
expect to gain in geographical area you have targeted.

Market Pricing: Market research provides you with the necessary information to give the best
estimate of your products pricing, how your product should be distributed, and how you can
get ahead of the market or industry with promotional strategies.

Barriers: Every business is always faced by certain challenges. Therefore, be sure to include
likely barriers to market entry you might encounter. This might be regulation, shortage of
personnel, changing technology, or high investment outlays.

Competitor Research: Having observed your target market as a whole, you should equally
narrow in on your top competitors. Observe their market share, strengths and weaknesses,
any obstructions they present, and strategies that will give you a competitive advantage.

This section tends to take the longest part of a business plan. It serves as the most in-depth
section of your business plan and, thus, requires the most research to be conducted.
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4. Business Organization

This section entails the organization and management structure of your business. However,
you have to keep in mind that you may change it later. It explains who does what in your
business, the background of everyone involved in it, what their education and past
experiences will bring to the team, the mode of assigning tasks and responsibilities to each
person or team, etc. However, if you are yet to hire people for the planned roles, make sure
you identify the gaps and explain what the people in the roles will be responsible for.

This section can be broken down into the following units:

Organizational Structure: Before diving into the details of each stakeholder, explain where
and why they fit into the assigned role. At the start of this section, provide an organizational
chart of the structure of your business. This will indicate to readers that you know who is
managing what part of your business.

Ownership Structure: Though this has been mentioned in your company overview, however,
you need to go into a little more depth on the legal structure of your company. This explains
who owns what as well as how much they own.

Background of Owners and the Board of Directors: The next thing is to explain the
background of your team, partners, managers, as well as board of directors. These
backgrounds will demonstrate to potential investors that you have endeavored to surround
yourself with individuals who can and will launch your business into a pedestal of success.

Hiring Need: If the case that your team isn’t that big at the moment, it doesn’t make it
impossible to expand someday. Have this in mind and highlight any key hires you will need
to make to achieve your goals when such an expansion occurs.

5. Products and Services

After laying out the organizational structure of your business, you can then dive into the
product your business provides or the service it renders and how it will benefit your targeted
customers. In other words, this is the section to position your product and highlight the need
it will specifically fulfill. Every business idea aims at solving one problem or the other. If you
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are unable to articular how you will help your customers with your product or service, it
simply indicates that your business idea may not be a worthy one.

To break this down clearly, this section may contain the following elements:

A general description of your service or product: Give the complete details of your product
or service here, and highlight what makes it unique. Be sure to state how your product seeks
to serve the needs of your customers, the solutions provided by your competitors to the
particular problem and what sets your solution different from theirs. In other words, this
section entails framing the problem as well as the solution your business offers.

Current status of products: Explain the current stand of your offering. Is it just in the
conception stage? Or is it already in a final product that is ready to go to market? Be sure to
provide a realistic and honest representation of the level of development of your core product
or service.

Product development goals and research: If your product is still in the creation or ideation
phase, describe how it will be brought to a finalized product. What development activities
and research are required to be done before getting to market? Also, in case you have any
plans for future products you would like to research and develop, this is the part in which to
note them.

Intellectual property: This section typically applies to scientific or technology companies.

However, if you have an intellectual property that is copyrighted to your business and is
essential for your success, you can explain it in the product development section. You should
be able to identify if you have patent or are in the process of applying for it.

Sourcing and fulfillment: If you rely on other vendors to deliver your product or service, be
sure to reveal it during the process of writing a business plan. Information regarding where
any materials or inventory is coming from, how you receive it/them, and how often you
require fulfillment should be included.

This section of your business plan makes the core of your business—your service or product
—shine.

6. Marketing and Sales Plan

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Now that the crucial details of your core product offering have been highlighted, the next step
is to explain how you will market as well as sell your product or service.

For the marketing, how do you intend to create customers as well as get them interested in
your business? Generally, the marketing part of this section looks thus:

Positioning: This first part covers the mode of positioning your products and business. The
way you position your brand defines how customers find and interact with you as regard to
your business. Are you the free service type? Or the service with guaranteed quality? This
position makes you be notable among your competitors when branding is concerned.

Promotion: After identifying how you seek to position yourself uniquely, there comes the
mode of reaching out to your customers. This involves plans you have for packaging your
product, penetrating the market, marketing the product (using online or traditional media
sources), relating with the public, or engaging in the practices of content marketing.

In the presence of a plausible and an effective marketing framework, you can then dive into
your sales plan:

Sales force: This involves those to whom you will be selling your product. If you require
sales force, what will your sales team look like? Or how big do you require it to be? Who will
have them trained or equipped with the necessary skills?

Selling strategy: Provide a summary of how you seek to sell your product or service. Will
your team attend sales meetings in person? Or be cold-calling potential customers? How
many sales calls are required to make a sale? What is the average price per sale? This is how
you will start and close the deal. It is important to describe the look of the sales funnel for
your business.

In some cases, you might lack the knowledge of how exactly this will play out just yet, or the
most effective marketing and sales channels that will yield success for you. Nonetheless,
provide a clear and concise summary of how you intend to sell your product.

7. Financial Plan and Projections

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This section comes is the final section of the business plan. However, it can be the most
essential part of the whole document. It provides, in details, your financial model, startup
cost, current state of finance, financial projections (where you would like to be financially in
the future), as well as a funding request if you seek to pitch to investors. Make sure your
financial model is completely precise for the best chance of convincing potential investors
and loan sources in supporting your business.

For those that have been in business for a little while, this section utilizes financial data from
past performance. In such a case, include the following:

 Income statements

 Balance sheets

 Cash flow statements

 Accounts receivable statements (if relevant)

 Accounts payable statements (if relevant)

 Documentation of debt obligations (if relevant)

Even without any previous financial data from your company, you have to add financial
projections in this section. Financial projections are either sustained by your previous data, or
they are projections determined by research as well as analysis on the industry and your
highest competitors.

While forecasting the financials of your business, here are the important documents you
should include:

 Statements of projected income

 Balance statements

 Capital expenditure budgets

 Cash flow forecasts

A detailed business plan has financial projections for the first one year (or twelve months) of
business, but may also takes an extended outlook and plan for the next three to five years.
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The last part of this plan should include any funding prerequisites your business has or may
have in the future. Whether this is through venture capital firms, equity financing with angel
investors, or debt financing with small business loans, a funding request should have the
following:

 The funding amount you require at the moment

 Any funding you will require in the future

 The purpose and impact of the funds (acquiring a business, equipment purchases,
working capital, franchising fees, etc.)

This way, if your business plan finds its way into the hands of a potential investor, they will
easily understand exactly how any financial contributions they make will impact your
business.

8. Appendix

Though optional, the appendix is usually attached to the end of your business plan. It holds
all the supporting information that you didn’t include in the part of your document.

If you have any specific data charts, points, footnotes, or further explanations that are
required in the creation of a complete business plan, you can include them in the appendix. It
is also a good place to include your own resume and the resume(s) of your co-founder(s) or
any key members of your management team, permits, leases, or any other legal information.
With that, your readers can refer to the appendix if they need more information while also
undistracted by the long text explanations or confusing numbers in the process of breaking
down the plan.

Logistically, the appendix is expected to start with a table of contents that delimits the
sections of your business plan, followed by the extra information that relates to each section.

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