Mapping Your Route

Parts of the Plan

When you've gathered all the background material, it's time to write your plan. While plan formats differ, most share common elements arranged in logical order. Sections usually include the following:

1. Executive summary. Gives an overview of the business. Explains the company's position (or proposed position) in the marketplace. States the purpose of the plan--for example: To attract investors who will put up the money to purchase equipment, inventory and property.

2. Business description. Explains your business, including its location, the product or service sold, hours of operation (if applicable), and history, as well as your personal work experience as it relates to the business and growth potential. This is a good place for you to emphasize the quality of your operation and your vision for the company's future.

3. Marketing analysis. Includes a description of the industry, its historic size and future growth potential. Delineates target markets, explains their characteristics and how you propose to reach each one. Lists demographic, geographic and seasonal activity. Includes pricing strategies and gross margin targets, media purchases, market test results, competition (advantages and disadvantages of each competitor), barriers to entering the market, and regulatory restrictions.

4. Management and ownership. Uses an organizational chart to show the management structure of your business, usually taking the form of a flow chart with the owner(s), board of directors or CEO at the top (depending on how your business is structured), followed by your vice presidents, then department managers. Under each department manager, list the job title of anyone reporting to that manager. Along with this graphic representation of your company's organizational structure, include a narrative description of each position. Lists key personnel (resumes and curricula vitae belong in the appendix), compensation amounts, skills they bring to the company, and primary responsibilities. Includes legal structure of the business, and lists the board of directors.

5. Financial plan. Gives historical and current financial data, five-year funding projections, and analysis. This would include your income statement, balance sheet, and statements of current and projected monthly cash flow. It should cover your current funding sources, projected start-up costs (for a new business), a break-even projection, and yearly expected profit or return on investment. Include comparisons between your business and industry standards, both current and projected. Assuming your goal is to secure a loan, describe why the loan is necessary and explain specifically where you've targeted the money. If you use professional outside advisors, mention their level of involvement.

A hint for new entrepreneurs: If the financial side of the business is a weakness for you, seek help. Without accurate data and realistic projections, you're unlikely to land the financial support you need. It's even more important that you learn what the figures mean. Remember, you are the one who will be responding to bankers' or investors' questions, not your CPA.

6. Appendix. Includes resumes of company officers and key personnel, photos of products, market studies, articles, book references, patents, contracts, detailed financial information and charts, product information sheets, price lists, brochures, newsletters, technical drawings, operations and technical manuals, and any other materials that support the narrative portion of the plan.

Like this article? Get this issue right now on iPad, Nook or Kindle Fire.

This article was originally published in the December 1996 print edition of Entrepreneur with the headline: Mapping Your Route.

Loading the player ...

Tim Ferriss on Mastering Any Skill

Ads by Google

Share Your Thoughts

Connect with Entrepreneur

Most Shared Stories