Writing a Knockout Business Plan for Your Startup
With preparation, knowledge and these insider tips, you'll be able to create a business plan built for success.
Editor's note: This article is excerpted from Rule's Book of Business Plans for Startups , from Entrepreneur Press
For a startup business, creating a business plan is like creating a game plan in sports. You need to scout out all the information to create a winning strategy for the game. While business plans for existing companies may have a special focus, such as setting overall goals, reviewing specific operations, evaluating new products, assessing new technology in the industry, or some other specific purpose, the business plan for a startup company is the blueprint for its formation, its operation, and its success. A business plan exposes a new company's strengths and weaknesses. It reveals ways to capitalize on the strengths and minimize the weaknesses, uncovers every facet of the business that can be developed, and points to the best method for that development. It provides a structure for the company's pursuit of the winner's trophy.
Even though creating a business plan takes time, thought and effort, and may seem like an impediment to getting on with opening or growing your new business, it is imperative in today's competitive business climate for you to have all relative information available and evaluated before opening your doors. With a thoughtfully prepared business plan you will enter the business world prepared, ready to run your business and ready to compete.
Although researching and writing your business plan may seem like a monumental task, with preparation it can be quite painless. As you go through the process, you will develop your knowledge and understanding of your business, improve your chances of success, and diminish your risks of failure as a startup owner.
Prior to writing your business plan, there are several issues you must resolve. It is beyond the scope of this text to cover all of these in depth; however, a basic checklist with a few recommended reference books is provided, so you can explore some of the subjects more thoroughly. As an entrepreneur of a startup company:
- Are you prepared to operate a business?
- Have you already decided upon your product(s) or service(s)?
- Have you investigated other types of businesses? Have you explored the broad economic business sectors: manufacturing, wholesale, retail, service ...? Have you considered other industries within the sector of your choice? Have you thought about what types of businesses are strongest now and for the future?
- Have you checked out franchises? To check out the possibilities and benefits of becoming a franchise outlet owner or franchisor, read Erwin Keup's Franchise Bible and my books, No Money Down: Financing for Franchising and The Franchise Redbook.
- Do you have a location in mind? Have you researched the principles of site selection: physical site needs (address, neighborhood, interior lot, corner lot), cost effectiveness, interior space, exterior space, visibility, traffic volume (which side of the street and times of the day), and accessibility? Are you familiar with the advantages and disadvantages of types of sites, such as freestanding buildings, storefronts, regional malls, and many others? Are you familiar with the principles of lease negotiation? See Luigi Salvaneschi's Location, Location, Location.
- Have you located the necessary business consultants--accountant, attorney, banker, and others? One resource is The Small Business Insider's Guide to Bankers by Suzanne Caplan and Thomas M. Nunnally.
- Do you know your financial position, your credit rating, your investment costs? The author's No Money Down: Financing for Franchising covers these topics in detail for any business, not only franchising.
Before going forward, it is assumed you have done the basic homework for each of the elements above and that:
- You are ready to go into business
- You have your basic business concept
- You have decided on your basic product(s) or service(s)
- You have your location and facility
- You have a business accountant and attorney
- You understand your financial position and your investment costs
While you may have already explored the following business concepts during your startup stage, you will be reconsidering and reevaluating these as you develop your business plan:
- Business objectives
- Mission statement
- Keys to success
- Industry analysis
- Market analysis
- Competitor analysis
- Marketing plan
- Organizational structure
- Financial pro formas
- Break-even analysis
- Financial requirement
Don't be concerned if you aren't familiar with all of these concepts. Writing a business plan for your new business is a straightforward process that you can move through step by step to completion. The whole process can be accomplished in two to four weeks, depending on your business.
A Professional Presentation
In surveying many successful business plans, you will find thatno one format fits them all. Depending upon the nature of thebusiness, certain topics take precedence over others. Often theowners write their business plans, since they know the most abouttheir business operation and management and they have learned whatelements to include to make the best impression.
A complete business plan for a startup company is best organizedaccording to the logical development of the business and iscomprised of at least 12 basic components.
1. Executive Summary: By definition, to summarize theelements of your business
2. Company Description: For identification, to introduceyour readers to your company and your business concept
3. Industry analysis: To provide a picture of yourindustry and of the position of your business within the largerframework
4. Market and Competition: To evaluate what you aregetting into. While some business plan proponents separate marketand competition, it takes an examination of both, together, to cometo one very important final conclusion: your market share.Consequently, it is best to examine and present them together.
5. Strategies and Goals: To analyze the market and yourcompetition in order to determine how and where your company orproducts or services fit and to maximize your position with yourtarget market
6. Products or Services: To describe your products orservices and how they match your findings of your strategies andgoals
7. Marketing and Sales: To market your products orservices with the best positioning and to forecast your sales basedon the findings of categories four, five, and six, in thatorder
8. Management and Organization: To present the managementand personnel who will run the show. This section can be separatedinto two sections for more complex companies.
9. Operations: To explain how the business is run
10. Financial Pro Formas: To forecast successfulfinancial performance for all activities
11. Financial Requirement: To present the type and amountof financing needed, based on the previous sections, to accomplishthe whole plan
12. Exhibits: By definition, to close the plan andseparate any supporting materials that would otherwise interruptthe flow of the story
A professionally written startup business plan has all 12 ofthese basic sections presented in the order of the outline. Most ofthe segments listed will also be reflected in the same order ofpresentation, although there may be slight variances depending onyour type of business. When your business plan is written to obtainfinancing, the financial requirement section may be tailored eitheras a loan request or as an investment offering proposal, and thentitled accordingly.
A Winning First Impression
The saying, "There's no second chance to make a goodfirst impression," is highly appropriate when it comes to theopening sections of your business plan and its overall appearance.With current desktop publishing, business plans are looking moreprofessional--prospects are competing for neatness and animpressive presentation that sets them apart.
- Format. As to format, the norm is to bind your businessplan in booklet form with high-quality materials. Better ones havequality report covers in dark or rich colors and are labeled on thefront. The title page serves better than a label if laminated orpositioned behind a windowed cover or behind a full clear cover.Most types of binding are available at copy centers: Ibico and GBCpresentation bindings, Wire Bind, and Velobinder are a few of thebetter ones. Some businesses go the extra step to have printedcovers or printed binding strips. Three-ring binders have been usedfor years and are still acceptable, but you improve your odds formaking that favorable first impression by using the latest and mostprofessional-looking, high-tech materials available.
- Page layout. Make sure the layout of each page isbalanced and artistically pleasing, with a lot of open or negativespace--paragraphs, lines, and characters should not be too closelyspaced. With desktop publishing, many types of fonts are available.The text is generally easier to read if you use a font with serifs,such as New Times Roman, Charter or Garamond, and the margins arejustified. For a professional quality, use a sans-serif font, suchas Arial, Modern or Verdana, for titles, sideheads, tables andoutlines. Choose one of each and stay consistent throughout thepresentation.
Using the latest software printing design tools, such as boxes,borders, shadow lines, and enlarged and bold characters, can add aprofessional look if correctly done without drawing attention totheir use and stealing the show from the material itself. Colorprinting, judiciously placed, is being used more all the time.
- Tabs and titles. Each subject, with titled heading,should have its own section and be separated with indexedpartitions keyed to the table of contents. Tabbed index partitionsmake it easier to locate information, especially during a personalpresentation. Another feature is to use colored partitions,preferably muted or soft colors that coordinate with the color ofthe cover and with the colors of any charts or graphs inside.Instead of custom tabs, some plans are assembled with printed tabindices with miniature plastic covers, but if you have access topreprinted laminated tabs, they are preferable. Avery has IndexMaker dividers for ink-jet and laser printers that you cancustomize with basic desktop software. A recent innovation ishidden tabs that protrude past the pages but not the cover.
Within each section, set off subsections or segments withcrossheads usually set bold in a sans-serif font. When these arejustified to the right or left margin, they are referred to assideheads.
- Color and charts. Charts, graphs, and illustrations arecommonly acceptable if appropriate to the text. Color is oftenbetter than black and white; however, choose reds and blues, notchartreuses, yellow-oranges, or some other unusual color. In fact,if you are going to use extensive colored charts and graphs, choosea theme of three or four rich colors and use them consistentlythroughout the work. Reserve photographic prints for the exhibits.Even then, they should be presented in protective sheets orconverted to color copies and labeled or captioned in font stylesconsistent with the rest of the business plan. If needed in themain body of the business plan, pictures look more professionalwhen scanned and merged into the layout.
- Printing. Use laser or ink-jet printers to print onpaper of stationery quality. Paper should be the brightest whiteyou can find, laser quality, or one of the muted colorrésumé stocks in soft gray or ivory. Staying consistentby using the same type of paper for text, graphs, charts, andillustrations yields a quality professional look. Using bits andpieces of different paper gives the impression the plan was throwntogether.
- Proofreading and copyediting.Have your figures checkedby an accountant and the text proofread by an editor orproofreader. An accurate, easy-to-read, and well-organized textwill convey professionalism and credibility. Too often thisimportant step is avoided or forgotten: despite all the work thathas gone into creating an impressive presentation, typos, missingwords, poor sentence construction, and figures that don't addup become a significant part of that first impression made on areviewer.
Important Points to Remember
- An accurate, easy-to-read, and well-organized business planconveys professionalism and credibility.
- You improve your odds for making a favorable first impressionby using the latest and most professional-looking, high-techmaterials available.
- Don't necessarily try to balance the material from sectionto section. Place your emphasis in the proper perspective andaccent the features that are most important for your business.
- Always include a cover letter with your business plan, becauseit may get passed on to other staff members who won't knowabout your venture.
Excerpted from Rule's Book of Business Plans for StartupsbyRoger Rule, from Entrepreneur Press