Dear Lifehacker, I've got a great idea for a new business, but I want to make sure that I set it up right and I might need some financing help to get started. What do I need to include in the business plan? Is there an easy way to create one? Thanks, Self-Starter
Photo by plantoo47.
It sounds like you've given your business idea a lot of thought. The business plan can definitely help you get started on the right foot. Whether or not you actually use the business plan to secure financing, writing down the business plan will force you to think through all aspects of your business, much like creating blueprints for building a house.
As you know, starting a business involves researching and considering so many factors, such as legal requirements, pricing, competition and so on — but thankfully there are also a great many tools at our disposal now to help write a good business plan.
Essential Elements of a Good Business Plan
Whether you decide to use business planning software (more on that in the next section), a template, or create your own informal document, good business plans include the same basic general information that cover all aspects of your business's operation and success:
- Executive Summary: An overview of your company or "the business idea". Basically, the who, what, where, when, why and how of your business. It's the section you might want to write at the end, and the most important one that summarises why you think the business will be successful and what your business is all about.
- Company Description: This section should answer: What products and/or services will you sell? Who's behind it? Who are your customers and what needs are you fulfilling with your products and/or services?
- Organisation and Management: Include in this section your company structure (sole proprietorship, limited liability company, etc) as well as your background and years of experience. If you'll have employees, list them here with their titles or roles. For more on business structures, see the ATO's descriptions (most people working on their own will be sole traders, but there are benefits to forming a company or other structures).
- Products or Services: Detailed descriptions of what you're going to sell, including prices and specific benefits compared to your competitors. If you're selling products, you'd include here your sources and how much markup you're adding. For services, include your hourly rate or project rate (not sure what to charge yet? Here are some tips).
- Marketing and Sales: To grow your business, you'll need a sound marketing strategy — for the next three years at least. Plan on investing in corporate identity design (e.g. logo design, website development, business cards), expenses like advertising in newspaper or search engine listings, and think about other ways you'll reach your customers.
- Market Analysis: Research on your competitors — what they're charging, how they position themselves, what their products are compared to yours is also an important exercise. The more research you can do, the better (if there's a lot, just add it in an appendix).
- Financial Information: This is probably the most involved part of your plan. You'll need to know exactly how much you will need to start up and what the money will be used for — list every expense you can think of for the next three years at least; how much you expect to make each year (financial forecasts); and set some financial assumptions like your tax rate and how many days you'll give your customers time to pay your invoices (e.g. net 30 days). The business plan templates and tools in the next section will help you create these plans, but you may also need to research standard assumptions for your industry or sample rates similar companies use. Joining an industry association, such as the Graphic Artists Guild, might get you access to financial planning tools and industry-standard rates.
- Funding Request: If you're looking for a loan, create a funding request section where you outline how much you'll need, what the money will go towards, the terms you'd like to have applied, and any expected business developments that could impact your loan in the future (e.g. you expect to get a new partner in the future).
For more in-depth discussion of each of these sections, see the Small Business Administration's Writing a Business Plan site. A very useful book for starting a small business in general is Small Time Operator by Bernard B. Kamoroff; it's a little light on the business planning instructions but for good reason:
Entire books are dedicated to the many considerations, formulas, options and everything else you can conceivably fit onto graphs, charts, schedules, computer screens, and densely packed pages, to create some mighty impressive plans indeed, some of which are quite valuable and some of which are utterly useless. Sometimes, too much "information" will work against you, unable to see the forest for the trees.
That's a big problem with writing a business plan or a marketing plan even; you can get so mired in the minute details that you either never get started on the business itself or you paint yourself into too narrow a corner. Think about including enough details so a stranger would be able to read your plan and know what separates it from a similar business and a creditor would be convinced your business would be successful, but not so exact that the plan seems inflexible (and unachievable). Business planning software can help:
Business Planning Apps
Business Plan Pro: This is the classic business planning software from Palto Alto that's been around for over two decades. At $US99.95 for the basic version or $US159.95 for the premier option (which has more funding/financial tools), it's a little bit of an investment but worth it for the 500+ sample plans, easy forecasting and financial calculators. Available for Windows only. (Palto Alto has a LivePlan web app for $US19.95 a month that works for Mac and Linux but you're probably better off using the free business plan web apps below).
Enloop: Create a free and customised business plan with Enloop on the fly, complete with an evaluation score from Enloop to see if your business idea is a good one. The simple interface takes you through entering all the basic business plan information and creates automated financial forecasts. The free edition gives you one plan with forecasting for the first three years and a PDF download. Upgrading to a more advanced package gives you more features like removing the Enloop logo from the document footer and financial ratio analysis comparisons.
SCORE Templates: Also check out some business planning templates and financial statements tools from this network of small business entrepreneurs who volunteer their time and expertise to help others get started.
PlanCruncher: One way to tell if you really have a killer start-up idea is if you can crunch your business plan into one page. PlanCruncher is a simple tool to write a one-page business plan with just the basic sections needed: Idea, Team, Product, Revenue, Funding. It's easy to read and concise, which might help you stand way above the other business plan creators.
There are loads of other websites, apps and books designed to help you create a winning business plan, but these are some of the easiest/best resources we've used.
The most important thing is to thoroughly map out your road to success, pass your plan out to as many people as possible to see what they think, and then go for it. Remember, too, that a business plan is a work in progress, so don't forget to revisit it every year or so to re-map your future. Good luck!