A business plan is one of the most important steps when starting a business. It is like a company's resume, clearly defining your business and identifying the mission and vision of the company. The purpose of a business plan is to facilitate allocation of resources, handling of risks, and making decisions.

A good business plan should answer the following questions:

• Who are you and why are you in business?
• What are you selling?
• Who are your customers?
• How will you make money?
• Who is your competition?
• Who will manage your business and how are they going to manage?
• How much money do you need and what will you do with it?
• Why should someone invest in your business?

Researching and developing a business plan takes time; the more time spent planning the business from all angles, the better will be the future of the business. A good plan results in fewer surprises during implementation and has a greater likelihood of successful business.

A typical business plan usually contains following sections:

• Executive Summary
• Mission Statement
• Origins and vision statement
• products and services
• The Market and Marketing Strategy
• The Competition
• Operations
• Management
• Financials
• Exit Strategy
• Supporting Documentation

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The executive summary is the most important part of the business plan, its purpose is to excite the reader about the rest of the business plan and convey a clear idea of your business and the document. After reading the executive summary, if the reader is interested in knowing more about your business, it means the executive summary has served its purpose.

The information that is presented in the executive summary should be a balanced summary of all parts of your business plan. The length of the executive summary section should be as short as possible, but at the same time convey information that is key to the business plan.



Click on the sample introduction and executive summary template link to download word template file.
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A mission statement should be a clear and concise description of the company's function. A good mission statement needs to capture the essence of the company. It should convey the company's purpose for being in the industry in an easily understandable way. Once a mission statement is established, it should be used as a source of direction for the company and its leadership.

Some example Mission statements are:

Company Name	Mission Statement
3M	To solve unsolved problems innovatively
Merck	To preserve and improve human life
Walt Disney	To make people happy
Google	To organize the world's information and make it universally accessible and useful.

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The origins section should clearly explain the details about why the company was created, how long it has been in business, what ideas led to the company's creation and who is involved.

A vision statement is similar to mission statement but it serves a different purpose. A vision statement communicates the purpose and values of the company. It gives a direction to employees on how they are expected to behave and inspires them to give their best. For the customers it provides a reason to work with your company.

The vision statement usually follows mission statement, once mission statement is created, the following steps can help creating a vision statement.

1. Identify the real human value in the company's mission (e.g., Merck's mission is all about human life)

2. Next identify the values that you, your customers and others related to your business care about ( e.g., Fairness, honesty and integrity)

3. Combine the company's mission and values and derive a vision statement that will inspire and energize people inside and outside your company.

For Example 3M's vision statement consists of elements that conveys company's social responsibility and inspire its customers and investors.

"3M's commitment is to actively contribute to sustainable development through environmental protection, social responsibility and economic progress. To us, that means meeting the needs of society today, while respecting the ability of future generations to meet their needs."

Once the vision statement is established,  the business plan goes into details about products, market, competition and financial plan.   Following sections provides details about what is involved in each of these sections.

Click on the sample mission and vision statement template link to download word template file.
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This section should explain what products and services your company offers and where they can be purchased. Care must be taken to include the proper level of detail about products. ,

The following questions should be answered in this section.

• What is unique about your products or services?
• What benefits do your products or services bring to the customer?
• Where can a customer buy your products or services?
• How are your product or service better than your competition?
• What advantages does your product have over your competition? ( e.g., Patents )
• How can a customer obtain your product or service? ( e.g., Buying, Leasing)
• Who are your main and alternate suppliers?
• Are any patents or trademarks involved with your products, what are their advantages or disadvantages?
• If you plan to pay royalties, how do royalty payments impact the financial aspects of the plan?

In addition to the above questions this section should cover the scenarios in which there are sudden increases or decreases of product demanded how your company will handle the situation.

Click on the sample product strategy template link to download word template file.
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Identifying the target market is a very important step in a business plan. The target market is the set of potential customers that you expect to buy your product. Your research to identify target market should focus on questions like

• What is the age, gender, and income of the customers to which your product may appeal? ( e.g., High-end cars appeal to higher income, middle-aged, white customers)
• To what kind of family structure your product appeal? ( e.g., Families with children need big houses, Families with no children prefer small houses)
• What kind of jobs are more attracted to your product?
• What is the size of your target market?
• Does your target market already use any similar products ? If not, how are you going to educate the customers about your product? If so, how will you deal with the competition.
• What is the effect of government policies (e.g. SOX) on your product or market?
• Do your target markets prefer to shop with mega retailers(e.g.,: Walmart) or they prefer small retailers?
• What are your strengths and weaknesses relating to products and potential markets?

Once these questions are answered, you can position your self in market based on following following 4 key elements called "Marketing Mix". These elements are

1. Products and services : The details about product or service should be listed here. These details must describe the characteristics of the product like appearance, packaging, branding, support and quality. What factors were considered in packaging the product in a particular way?

2. Pricing: Pricing details should include the profit margins, your response to competitors price changes, what purchasing options are available for the customer? ( e.g., leasing, financing), what discounts are available for the customer?

3. Promotion : The decisions must describe the way you are going to communicate with the potential customer in order to convince them to buy your product. This section should detail about what communication medium will be used, why it is being used and how much money will be spent on promoting the product.

4. Distribution : All the details about how the products will be distributed to the customer will be listed here. These details include, who are we going to partner with to ship the product, how are we going to stock the product at different facilities, so that they can reach customer fast? How much market can be covered with available resources? Are we going to partner with anybody else to resell our products?

More details about marketing can be found at the following link Marketing plan instructions


Click on the sample market stragety template link to download word template file.
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This section should start with careful analysis of the competition. Once the analysis is complete, details about the competitors should be specified so that the reader of the business plan understands the competitive environment and can understand how it is being addressed.

Competitive analysis should focus on analyzing following questions:

1. What market segments are served by competitors?
2. What are competitors' strengths and weaknesses?
3. What benefits do competitors provide and why do customers buy from them?
4. What products do competitors have and what is their marketing strategy?
5. Did the company's competition ignored any specific customer segment?
6. What are the opportunities in the market that competitors over looked?
7. What advantage does your business have over your competition?
8. How can you give clear picture of advantages of your product to the customer?

Once the analysis is complete, this section should detail how your business will capture market share and survive in the market.

Click on the sample competitive analysis template link to download word template file.
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The operations section demonstrates your understanding of how your product is made and delivered to your customer. This section should include all the details of your business operation. These details include

• What days your business is open?
• Where the product is manufactured and facility details.
• What equipment is needed to make your product?
• How will Inventory management be performed to track units made and units sold?
• Who are the suppliers for raw materials? ( e.g., If you sell antique books on Amazon.com, who supplies the books for you?)
• What costs are involved in making your product? (e.g., building rents, Internet, Computer rentals, Subscriptions, Raw material costs)
• What is shipping responsiveness (in hours) once a product is ordered?
• How delivery choices does the customer have?
• How will you ensure product quality?
• How will you handle product returns?

Another set of major activities related to operations are focused on long-term business decisions. These activities include

• New product launches
• New partnerships
• Financial events (e.g.,: Revenues cross million dollars, when new funding is needed)

For more details on operational plan information click on following link operations plan

Click on the sample operations plan template link to download word template file.
Click on the sample risk analysis template link to download word template file.
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Management section describes about company's staff. Its focus must be on the key management team who is responsible for making decisions. A typical management section should list the details about

Ownership Structure: Talks about if your business is sole proprietorship, partnership or a corporation. Depending on the type of ownership, list out further details about who owns what percentage of the business.

Management Structure: This section should talk about the responsibilities that your management team. For example: who is responsible for Sales?, who is responsible for Administration?. In addition further details about your management teams skill set should be listed in this section. This section should give a clear picture of the capabilities of your management and their responsibilities.

Another key topic to focus on is any management team outside of your company. Many small businesses will take advice from experienced external resources. This expertise from external management can provide initial guidance needed for your business. If an external management team is being used, the details about that team members also needs to be listed here.

Human Resource Needs: This section should specifically list your human resource need to run your business. Specific details like 'We need 10 personnel in sales department, 5 personnel in administration department� Once the current need for personnel is listed, human resource forecasts must be made depending on your business growth. Once the details about human resource requirements are listed out, details about any employee benefits and the costs involved related to your personnel must be listed out.

Click on the sample management plan template link to download word template file.
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Financial plan is an important section which can be used to determine if the business is viable. One of the major benefit of financial plan is, it helps the business owner demonstrate quantitatively, how the business is going to make profit and survive for a long-term.

Financial section must cover the following details:

• Funding required to start the businesses
• Funds needed in next 2, 3 or 5 years
• How the funds will be used
• How much funding is needed to run daily business activities. (e.g., salaries, insurance, equipment costs, taxes, advertising costs)
• What is the sales volume you need achieve to recover the costs involved in making the product?  This is done using Break-even analysis

There are three major financial statements that should be part of your financial plan:

• Balance Sheet -- Shows the relation ship between the business assets, business liabilities and owners/stockholders contribution. Assets usually go on the left side and liabilities + owners/stockholders contribution on the right side. Once the balance is completed for a particular day, the totals on both sides must match. Example Balance sheet can be found at sample balance sheet

• Income Statement or Profit/Loss statement -- It is used to compute the money a business makes or looses over a period. In this statement all the income made by sales is matched against the expenses and the difference is shown as Profit or Loss. Example Income statement can be found at  sample income statement

• Cash flow statement -- This statement is similar to income statement, but it only deals with transactions that involve cash. Cash flow statement is used to cash receipts and cash payments and is organized in three sections. First section for cash from operating activities, second section for cash from investing activities and third section for cash from financing activities. Example cash flow statement can be found at sample cash flow statement

When preparing these statements it is recommended the standard principles called "GAAP (Generally Accepted Accounting Principles).  Following these principles will make bankers comfortable with your business, and your financial statements will be understandable for greater number of audience.

In addition to financial statements,  there is another aspect called "ratio analysis" that goes into financial plan.  This analysis is used to check the performance of business and provides key indicators if the business is troubled.  There are various ratios that needs to be calculated and analyzed.  Three common rations that are useful are:

• Current ratio = Current Assets/ Current Liabilities
• Total debt ratio = Total debt / Total assets
• Profit Margin = Net income/Sales

All the inputs to calculate these ratios can be gathered from 3 financial statements above.  Here is a detailed list of ratios that can be used to check the health of business.

Following links can provide more information about financial statements.

• Break even analysis

• Sample Financial plan
• Information about financial statements
• Another set of ratios for ratio analysis
• Beginners' Guide to Financial Statements

Click on the sample financial plan template link to download word template file.
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Planning for how to exit from the business when things are not favorable is also a very important part of business plan.  A good exit strategy should maximize the value of the company when cashing out  and minimize the time that is needed to do it.  The time required to exit is dependent on how complex the business is and a process must be followed to exit out of a business.

Following steps gives an overview of what is involved in an exit strategy:

• Owners agree and authorize to dissolve the business
• Prepare a list of assets and account for physical inventory
• Perform business valuation.  Following business valuation link provides more details on what business valuation is and what methods are followed for business valuation.
  
• Plan and determine how assets can be used to realize cash or pay off creditors
  
• Divide the business dissolving process into steps. These steps involve
  
• • Sending a notice to customers, suppliers,vendors, creditors, contractors.
  • Closing the operations
  • Sell or transfer the ownership of assets as determined in planning
    
  • Pay off debts
  • File business dissolution papers with state licensing departments
  • Settle any insurance related issues
    
  • File taxes as calculated and get tax clearance notice
    
  • Close bank account
  • Store the business records according to legal requirements.
    

The checklist provided at this link provides a detailed list of what needs to be considered when writing an business exit strategy. 

Even though the goal of writing a business plan is to plan for a great sustainable business, it is always important to plan for worst case.  A lot of events that are not accounted for when preparing business plan can lead to a business failure.  For example a small business can run into problems because of death or disability of its primary owners.  If exit strategy is not planned,  the stakeholders of the business  may enter into legal risk issues, which is much worse than a failed business.

• Exit strategy details link 1
• Exit strategy details link2

Click on the sample exit strategy template link to download word template file.
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The purpose of business plan is to present enough information to convey your business idea and prove the success factor in your business.  But sometimes more detailed information is needed for some of the topics in business plan.  For example resumes of your management,  monthly financial statements,   details about competitive products. This detailed information must be provided in this Supporting documentation section of business plan as appendixes.  Each appendix must be referenced from corresponding section of business plan, so that reader can relate the information. 

Also it is important how much detail you provide in this section.  Depending on the audience, this section can be customized with relevant documentation.  This section must serve as a information repository to the reader.  It should not overwhelm the reader with too much or unrelated information.

Click on the sample supporting documentation template link to download word template file.
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When doing research for business plan, one of the best resources is internet.  Use internet to find following information.

• The industry your company belongs to
• The NAICS(North American Industrial Classification System) code information
• NAICS information is a starting point for finding
• The industry your company belongs to
• The industry that your suppliers belong to
• The industry that your distributors belong to
• Using the industry information you can do research about other players in the same industry
• NAICS codes (454111,519190) information for internet based retail businesses is at following link
• Searching "census website" will provide more information about NAICS codes for suppliers and distributors.
  
• Find Market Size, Sales and Competition information in your related industries
• Do research on operations and financial ratios of successful companies in your industry
  
• Do research about customers and their habits
• Do research about developing a marketing strategy
• Use "Edgar" and "Hoovers" websites to do research about companies
  

This "business plan research link" provides more detailed information about how to research for business plan.  Another resource that can be useful is this "small business plan guide"

Click on this useful links repository for additional information on business plans.

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