Owning a business is a dream for millions of people across the globe. Entrepreneurs envision being their own boss, but few successful businesses can get off the ground without a little financial help. That help is often not available without a business plan.
What is a business plan?
A business plan is a valuable tool for entrepreneurs looking to start a business. Self-funded entrepreneurs who won’t be seeking seed money or assistance from external sources, such as banks or investors, can still benefit from writing a business plan, which is a detailed guide that can serve as a road map for prospective business owners.
Self-funded entrepreneurs can make their business plans as formal as they prefer, but aspiring business owners who are seeking funding will need to make their business plans formal, as lenders and prospective investors are more likely to read and respond to formal documents than informal requests. The U.S. Small Business Adminstration notes that many lenders and investors will want a traditional business plan before they offer any financing or decide to invest. Traditional business plans are formal documents that lay out the goals for the business, how owners plan to achieve those goals and how much time they anticipate they will need to achieve them.
What are the key components of a traditional business plan?
Traditional business plans include a number of components, all of which do not necessarily need to be included in a plan. The SBA recommends that entrepreneurs include as many of the following components as necessary. In regard to how many of these to include, individuals must make that determination on their own or with the help of an advisor.
• Executive summary: The executive summary is what your business is and why it will be successful. This summary should include a mission statement, the product or service being provided and basic information about the business, such as its employees and location. The SBA also recommends that entrepreneurs seeking funding include financial information.
• Company description: This should be detailed information about the company, including the problems it solves. List the consumers or businesses the company will serve.
• Market analysis: Market research is vital, and this information should indicate that entrepreneurs have a strong grasp of their industry and target market.
• Organization and management: This tells readers how the company will be structured, including who will run it. This section also should include the legal structure of the business (i.e., LLC, C corp, S corp, etc.).
• Service or product line: This section indicates the products the business will sell or the services it will provide. Any plans for intellectual property, such as patent filings, should be included here.
• Marketing and sales: This section should aim to describe how the business will attract and retain customers.
• Funding request: This section outlines the funding requirements, including how much money is needed, and how funds will be used over the next several years.
• Financial projections: The SBA recommends supplementing funding requests with financial projections, including a five-year financial outlook as well as more immediate terms, such as quarterly projections.
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