Creating a Business Plan 101

A business plan is a document that spells out the direction the business will take and the actions that will execute the plan.

Creating a business plan is not an arduous effort, the challenge for an SMB/SME owner is to allow the process of the formulation to work as a true creative action.  That may require doing the planning in a different setting than the home office or the business office.

The critical work in putting together a solid business plan is to review the framework of the business model thoroughly with potential investors and other stakeholders so that there are no surprises in the middle of the process. Examples include: is the business a lead or a sub in its business model flow, are the critical roles in the business team formation substantial or do they need additional outside competence to execute the business, etc.   

Some steps are relatively generic when creating a business plan:  Gathering the business team should consist of the key stakeholders in the company, owner, key staff, not necessarily bankers and investors. Drafting and Outline of the business plan, creating the format of the business plan (see Appendix A below). 

Creating the material for each of the segments of the business plan: 

• • Describe the Business Model:

• • Who is the business team: What are their backgrounds and competencies? This information is most of the time required by investors.    

• • • • What are the ownership and the legal formations of the business? And why was it formed in that fashion?   
    • • SWOT – Strength-Weaknesses-Opportunities-Threats  Why is the business going to succeed – Additional analysis for proof of concept; 
    • • Contingency plans for identified challenges, e.g., if growth is more significant than capacity what are the options? 
    • Additional Opportunities

• • Sources of Revenue and the operational costs of providing the products/services:  E.g., personnel costs, contractor vs. full-time employees, how many exempt, how many hourly.  

• • Marketing Plan Overview: What segments will be addressed, what geography.  

• • Operational Plan overview: What will be produced and what will be bought,  where manufactured.   

• • Capital investments needed and how funding will be achieved  

• • Personnel Resources  

• • Future plans for the business: E.g., scaling the facility, move to a larger facility 

• • Attachments: See Appendix A  

• • • Introduction  
  • Executive Summary  

Reviewing the draft business plan with an outside ‘board’:  This does not have to be a formal board,  participants can be senior family members, trusted advisors in the community,  business leaders that have an interest in the success of the company.  The purpose of this review is to get other pairs of eyes and brains to test the business plan from a qualitative perspective.    

The benefits of creating a stable and sound business plan are that the company has a documented way of going forward which can be adjusted as challenges and opportunities change.  It is also a powerful tool to use for financial and operational targets to be measured in budgeting and project planning.   

Appendix A:  

Following is a structure that has the most critical parts for a business plan format:  

1. 1. Introduction 
   2. Executive Summary. The executive summary provides a one-page overview of the business plan.  
   3. What the business is – The Business Model
   4. Who is the business team – What background and capabilities do they bring
   5. What are the ownership and the legal formation of the business
   6. Why is the business going to succeed – Additional analysis for proof of concept;
   7. SWOT – Strength-Weaknesses-Opportunities-Threats
   8. Contingency plans for identified challenges
   9. Additional Opportunities
   10. Sources of Revenue and the operational costs of providing the products/services
   11. Marketing Plan Overview
   12. Operational Plan overview
   13. Capital investments needed and how funding will be achieved
   14. Personnel Resources
   15. Future plans for the business.  

Attachments:  

1. 1. 1. 1. Preliminary Profit & Loss Proforma 
      1. Preliminary Budget

1.  Funding sources:
   1. 1. Loans
   1. 1. LOC
   1. 1. Grants
   1. Owner investment 

While creating a business plan may seem overwhelming, it is critical for the growth and development of a small business in order to operate and obtain loans.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information: