The Sections of a Business Plan

Business plans are complex documents that usually have anywhere from seven chapters to nine chapters of information that are presented to a potential business partner, funding source, or a related entity that is going to be reviewing a business. This article is going to focus on the varying chapters of the business plan and certain points about how they should be developed so that the business can be clearly understood by the reader of the document.

First, every business plan starts with an executive summary. In this portion of the business plan and overview of how much money is looking to be raised or the nature of the business plan is provided. Beyond that there should also be a discussion regarding what products and services offered by the business, how much capital is being raised if any, a brief overview of the anticipated profit and loss statement of the business over a three year to five year period, and an overview of the management team. Usually, a well-written executive summary runs about two pages to three pages in length. This is the most important section of the business plan given that many readers will go through the section and depending on what they see will continue to go through the rest of the business plan. In fact, the way that most people read a business plan is that they first start with the executive summary, flip to the financial section, and then read through the rest of the document once they see the potential growth of the business. An executive summary should focus modestly on the products and services being offered unless this is a business that offers a highly unique and patented piece of technology or related product.

The second section of the business plan should discuss the amount of money that is being raised by an entrepreneur. Here, many business plan writing firms will insert a table that clearly showcases the usage of the funds being sought. This section of the analysis also provides preliminary terms as it relates to the amount of the business being sold in exchange for the capital, the management teams equity positions, who sits on the board of directors, and the potential exit strategies that can be used by the business. Most importantly, the exit strategies should be reasonable in length and should discuss with the potential value of the business would be over a three-year to five-year period. Some businesses will side to take a ten year approach to this, however – usually a five-year valuation overview is sufficient as it relates to varying exit strategies.

The third section of the business plan often encapsulates H the products and services that are being offered by the business. Usually, this section shouldn’t range anywhere from one page to three pages depending on the number and types of services being offered with the products being sold. For proprietary products this section can include images of prototypes and schematics for the actual production.

The fourth section of the business plan usually discusses the overview of the organization as it relates to its corporate structure. Common corporate structures that are used for these types of for profit making entities include limited liability companies, corporations, partnerships, sole proprietorships, limited liability partnerships, and related corporate entities in order to carry out business operations. As always, if an entrepreneur is determining what type of entity to use than it would be in their best interest to speak to a business attorney or a certified public accountant as to what types of corporate entities are appropriate given the backgrounds of the management team, investors, and the nature business operations. This section of the business plan often discusses the mission statement and vision statements of the business as well is well as any organizational values and objectives.

Fifth, this section should outline the industry research, economic overview, customer profile, and competitive issues that the business will face on a day-to-day basis. For many people, this is the most difficult part of the business plan to write as a number of reports and information must be sourced in order to complete the section. This is especially true as it reads relates to local and regional demographic profiles of individuals that are going to be the customers of the business. However, as it relates to industry research a substantial portion of this information can be found online through both private and publicly available information sources.

The sixth section of the business plan often focuses on the competitive advantages that the business will have over other market agents. This section usually lasts about one page and is usually in a bullet point format showcasing why people will use this service over other competitors in the industry. One of the things is also frequently included in this section is an overview of the ways of the business will grow over the first five years of operation.

The seventh section of the business plan discusses marketing. Here, organizational objectives as it relates to increasing the brand-name visibility of the business can be provided in-depth. A three page to four page overview of the different marketing strategies that will be used should be included as well and this should discuss print advertising, social media management, online sales operations, and the relationships of the business were developed with potential customers over a significant time frame. This is usually one of the easier sections of the business plan to write given that the owner typically has a number of ideas that allows the business to easily reach its potential customer base very quickly. In some cases, an entrepreneur that is developing a business plan will also have the section of the document overview the pricing for any products and services that are being sold.

The eighth section of the business plan should include a discussion regarding the personnel and employees of the business. Here, an organizational chart is provided to showcase the varying hierarchies of management within the organization. A table showcasing the employee headcount, payroll per employee, and total payroll expenses should be included here as well. In some cases, an entrepreneur will also provide extensive job titles and job descriptions within the section so that the reader understands exactly who is being employed and what their role will be within the organization or corporation.

The ninth section of the business plan is the financial model. As has been discussed at this website thoroughly, the financial model is usually the most difficult section of the business plan for most entrepreneurs to create given that pro forma financial models are forward-looking. This financial plan should include a three-year profit and loss statement, common size income statement, cash flow analysis, balance sheet, breakeven analysis, and business ratios page. General assumptions regarding the growth of the business as well as underlying information regarding federal tax, estate tax, and personnel taxes should be included within this section of the document as well.

Once the nine chapters are complete usually many business plan writers will include 3 to 4 appendices that showcase where the information for the business plan came from and other relevant statistics. Usually, the first appendix is the SWOT analysis. Here, there is a focus on the strengths, weaknesses, opportunities, and threats that are normally faced by any organization. This portion of the document is about 1 to 2 pages in length and is done in a bullet point format.

The second appendix is usually the critical risks and issues page. It is naïve to think that every business is going to run smoothly at all times. As such, many entrepreneurs take to developing this section of the business plan so that the reader understands that the individual comprehends that there will be ongoing issues and problems that must be dealt with on a day-to-day basis. In this section of the document there is also a risk scoring table that discusses any of the issues on a points based system so that these more important matters can be dealt with as a priority.

The third appendix usually focuses on the reference sources that were used in the business plan. This includes appropriate citations and other information that should be included.

The last appendix of the business plan is usually the expanded profit and loss and cash flow statements. Generally, most business plans provide for month-to-month profit and loss and cash flow analysis statements while the remaining years are done on a quarterly basis. For an entrepreneur or business person that is looking to raise capital this is imperative given that most financial institutions want to see a month-to-month and quarterly financial statements is a standard yearly profit and loss is showcased within the business plan.

Overall, a well written business plan will contain all of those elements in one way or another. Usually, if all these elements are included within a business plan appropriately the length of the document usually ranges anywhere from 35 pages to 45 pages. However, there may be times where it is appropriate to have a shorter business plan or longer business plan depending on need. The key is not to make it too short for any longer than it has to be.

Pitch Decks and Business Plans

One of the frequent questions one of the frequent questions that we get is whether or not it is better to have a business plan or a pitch deck to provide to potential funding sources. Generally, if the individual entrepreneur is seeking a bank loan then a business plan is almost always going to be required. This is primarily due to the fact that the business plan needs to contain all the appropriate market research, industry research, as well as a three-year to five year financial model in order for a bank to make their decision. In most cases, and investors also going to want to see a full-scale business plan for the render an investment decision. As such, most entrepreneurs actually take to developing both a business plan as well as a pitch deck.

As it relates to the pitch deck, these are usually presentations that run 15 to 25 slides in length and provide a number of talking points that the individual entrepreneur can bring up during a presentation to an investor. These pitch decks are often distributed as standalone documents so that a potential funding source can review it on her own time as well. However, it should be noted that most pitch decks to contain language that allude to the fact that a business plan is available upon request. One of the things that is often not put into a pitch deck is highly technical information that is very proprietary. This is primarily due to the fact that most pitch decks do not have a nondisclosure agreement embedded with them. However, an entrepreneur can have any individual or organization sign a nondisclosure agreement before a pitch deck is distributed. In some cases, especially as it relates to companies that have very proprietary technology, a numbered system will be used when issuing a pitch text to an individual that way that in the event that the pitch deck was missing was found on the Internet can be determined which individual lost the file.

This system of numbering can also be applied to a business plan. The system is often used in business plans that are specific for film productions as specific drafts are given to specific people.

Many people actually start with developing the pitch deck before they develop the full-scale business plan. In our experience it seems that it is much easier to actually develop the business plan first given that many of the talking points are actually extrapolated from the business planning document and then put into a PowerPoint presentation. Additionally, many of the images and financial charts that are developed in conjunction with the business plan are often embedded in the PowerPoint presentation. Generally, the financial model from the business plan is typically inserted towards the end of the PowerPoint presentation document. This allows for natural progression as it relates to describing the company, products and services will be provided, the size of the market, and ending with the anticipated financial results of the business over a three-year to five year timeframe.

One of the more significant issues that people do have when developing a pitch deck is inserting all the appropriate images into this presentation. A graphic design firm can be hired to provide both original and stock images that can be used in conjunction with a pitch deck presentation. It should be noted that many investors do not like to see a pitch deck that has a substantial amount of stock images within the document given that it sort of cheapens the look and feel. As such, a graphic design firm can provide unique images that are specific to the business. This substantially enhances the quality of the overall presentation and provides for a much more professional look. These images, if they are produced by a third-party graphic design firm, can also be embedded within the business plan where appropriate. One of the things that we have found over the years is that many people go overboard as it relates to the images that they use in conjunction with both their business plan and PowerPoint presentation documents. Real important factor in any of this type of documentation is the anticipated financial results and how the business will reach profitability once a capital investment is made.

In closing, it is really up to the entrepreneur whether or not they include a pitch deck in conjunction with their business plan. If someone is looking to raise capital from an investor as it was necessary to have a pitch deck given that it is going to be provided to a number of different people in order to generate investment. If the entrepreneur is seeking a bank loan any pitch deck is not nearly as important unless the loan committee requested a formal presentation is made in front of them before dispersing any debt funds.

Do You Need a Business Plan?

One of the frequent questions we get is whether or not an individual actually needs a business plan in order to start a new business. The short answer is no if the owner-operator is not seeking any capital from a third-party. Although there may be some handshake deals or a relative may provide a limited amount of startup capital for a new company without a formal business plan, any financial institution, professional investor, or other funding sources going to require a full scale business plan in order to render their lending or investment decision. One of the other things that should be noted is that it is very difficult to manage all the aspects of starting a new business keeping track of these matters in a person’s head. As such, even a very small business plan that is almost like a skeleton document can be very beneficial towards an entrepreneur that is looking to develop this business on a professional basis. One of the key elements to developing a business plan that is not geared towards capital raising is that it can be treated very much as a free-form roadmap as to what the entrepreneur will do in each month that the business is being launched. Most importantly, a well written business plan does feature a timeline of events that the entrepreneur will engage in order to boost the visibility of the business of providing a comprehensive amount of services and products to the general public.

One of the other benefits to having a business plan is that it can be continually modified and expanded as new things within the business occur. When an individual is starting a new business they are often going to run into situations, both good and bad, that need to be addressed that will impact the way that the business will operate moving forward. As such, many entrepreneurs take a look at a business plan is actually a living document that grows alongside the business. Many business plan writing firms will often take this view as well and will provide for the fact that the business is going to change shape as new money comes in, as new customers are acquired, and as economic circumstances change. One of the important things to focus on within a personal business plan as well is the fact that there will be recessions from time to time more the business environment will change and will require a significant amount of work on behalf of the entrepreneur.

As it relates to a small roadmap business plan there can be a section dedicated to what would happen if a regulation changes, if the economy does very well, if the economy does poorly, and other circumstances that are generally outside of the entrepreneur’s control. Good entrepreneurship is substantially about risk management and what to do when a risk becomes a reality. In a business plan that is going to only be developed specific for the entrepreneur, the management team, were key employees – in overview of how each risk can be handled and mitigated can be included and will be an invaluable source of the business over the life of its operation. This is something that is not often included in a formal business plan that is written specifically for funding source, but it can be great so that a very specific and detailed game plan can be enacted for each potential scenario that may occur. Of course, it is difficult to predict every single thing that can occur with the business but it does help to have in overview of what could be done in the event that there is a significant problem. This is especially true if the business is not generating as much revenue that will was anticipated in a formal pro forma financial statement.

One of the key issues that many people have when developing a business plan – whether it’s for a bank or just for the growth of the business – is that they often get distracted and will leave the document unfinished. It is difficult to write these documents and it can be kind of boring at times. One of the key things to know is that it really should just focus significantly on the current situation at hand and how to grow the business over a five-year period. Many people often take the entire vision of the company and put it directly within the document but this can lead to a lot of confusion and a scattered business planning document. As such, it is important that a laser sharp focus is applied when you are developing this type of documentation so that it is very clear not only to you but also to any reader as well as to the vision of the business, how certain matters are handled, and how the company will grow over a specified period of time.

This website has a significant amount of information as well as a number of different templates that can be used in conjunction with business planning activities. We thank you for taking the time to review our website and if you have any questions please feel free to contact us anytime via the contact us page.

Business Plans for Technology Businesses

Developing a business plan for a technology business is a little bit more complicated then producing one that would be specific for a general service based business or a retailer. This is primarily due to the fact that technology businesses have highly proprietary technology that can be patented. As such, special additional precautions need to be taken when developing this type of business plan given that you do not want to have the reader given too much information regarding anything that is highly proprietary. For these types of business plans, an attorney will often be hired in order to have a nondisclosure agreement developed so that anyone who is reading the document will be bound by a legal agreement that they will not disclose anything that they have seen within the documentation. One of the keys to writing a business plan specific for a technology business is that you want to be able to provide an understanding of exactly what the new technology does without being a huge overview to the operating process were underlying patent. In many cases, a qualified business writer can be hired so that they can gain an understanding of exactly with the technology does and providing insights as to how it can be beneficial to businesses and individuals without disclosing the exact operating nature of the patent worthy to be patented technology.

One of the more difficult aspects of writing a technology focused business plan is also discussing the valuation of the business within this document. This can be optional given that many technology businesses will often undergo a formal valuation of the patent or technology by someone who is qualified to make that determination. Most business plan writing firms do not engage in doing business valuations given that there is a significant amount of liability that is associated with rendering the service. However, there are number of specialty firms – known commonly as business valuation experts – that can render an opinion as to what they feel that the technology would be worth in the open market. Most venture capitalists, private equity groups, and highly seasoned angel investors are going to want to see that a formal valuation is done and either have this as part of the business plan or as a stand-alone document. One of the other things that many of these firms can do is to develop an economic viability analysis that shows whether or not this specific piece of patent technology would be in demand within the marketplace. One of the common issues that occurs when an individual is developing a new technology business is that with the rapid increase in the way that technology is developed these days – a competitor could easily copy what the company is doing and create a similar platform on their own. As such, speed to market is one of the key focuses that needs to be discussed within any type of business planning documentation that is going to be read by potential funding source.

One of the other key components to the business plan specific for a new piece of technology is the development of the financial model. More so than any other type of business, a technology focused business plans financial model can be difficult to draft given that there are a number of different revenue streams from which the business can produce profits. First, the entrepreneur needs to determine whether or not they are actually going to engage in the production of the technology or simply license it to a third-party. As many people have spent years developing these patents, they are often looking for a quick exit as it relates to either the licensing of the patent or the entire sale of the business along with the patent for a substantial price. However, many entrepreneurs are driven to see that they want to bring the product to market and therefore will develop an entire business around their patented technology. In these instances, the entrepreneur needs to make a determination as to what type of revenue model will be used in conjunction with their development. Frequently, technology as a service or software as a service (“SaaS”) business models are used that they produce highly predictable streams of revenue on a monthly basis. This is especially true among companies that offer general-purpose technology where the general public will pay a monthly fee for accessing the service. These companies tend to have a much higher sales premium given the highly predictable nature of the revenues. Of course, certain technologies are based on product sales and in this case the revenues are not nearly as predictable as individual units need to be sold on a month-to-month basis. As such, the entrepreneur needs to have a complete understanding of the gross profit that will be generated from each unit of the technology sold. If this technology is going to use as a component for a standalone device then examination of what manufacturers will be incorporating the product needs to be examined as well.

One of the key focuses to developing this type of business plan is to discuss the speed to market. Most venture capital firms and other private investment groups want to have an understanding of how much capital is going to be needed before revenue generation occurs. This is commonly referred to as the burn rate. A very large table showcasing each month’s expenditures needs to be clearly provided to a venture capital group in order for them to understand exactly how much money is needed before they can gain a return on their investment. One of the other things that is frequently put into the business plan is a discussion as to whether or not the business will be sold in the event that revenue generation does not commence. As such, this is where the valuation of the technology can come into play given that this is a salable asset and can be divested in order to recoup any investment that may be lost if the business fails to produce revenues and profits.

One of the things that we have often seen as a relates the technology focused business plans is that these companies often focused far too heavily on with the technology does and its revolutionary nature rather than the business itself. While it is extremely important to provide moderate technical specifications regarding the company’s product, what is really being sold in the business plan is the business itself and its ability to produce a profit. As such, when we develop a business plan for a client we often focus no more than 50% of the documentation on the product itself. Many newer entrepreneurs or individuals that do not have a significant experience with business planning will often allocate 50% to 90% of the document on the technology itself while neglecting to properly mention how a business will be developed around it. One of the things that can remedy this situation is to have a standalone white paper or documentation regarding schematics and specifications that accompanies the business plan rather than putting all the information into one document. Given the complexities of technology-based businesses this is completely appropriate to do given that you do not want to overwhelm the reader with a substantial amount of technical information will not focusing enough on how the business will ultimately produce a substantial amount of profit for the management team and investors.

On this website we have a number of different resources that are specific for technology and e-commerce base businesses. We encourage you to review everything we have on the site as it will help you determine what direction to take when developing a business plan for a technology focused business.

Business Plans for Franchises

Franchises are great because they provide the entrepreneur with the opportunity to participate in an already successful business while being able to establish a new location that they can own and operate. One of the downsides to franchising is that these businesses have very strict protocols and procedures as to what an individual owner-operator can do with their specific location or territory. In some respects, a franchisee is much more like a general manager of one store or several stores rather than a completely independent business owner. For some entrepreneurs, this can create somewhat of an issue given that they want to have a substantial amount of flexibility and creativity with how they develop and market their operations. While most franchise agreements to allow for some autonomy relating to business expansion, any type of individual undertaking as it relates to marketing or other operations usually need to be done in conjunction with the franchisor. It should be noted that most franchised businesses are great candidates for small business loans given that there is already an established operating history by the franchisor. Additionally, if this is a highly established franchise system and the brand name of the business is very well known within the market. As such, the start up risks that are normally associated with a new business are significantly ameliorated by working with a franchising business.

A business plan for a new franchise is very similar to that of a startup company. The primary exception is that there is usually a thorough discussion regarding the operating history of the franchise or, its market base, and how these off businesses operate on a day-to-day basis. Financial institutions love to provide loans to franchisees given the very low risk nature of these businesses. This is especially true for an individual is buying into a highly established franchise that has been around for several decades. As such, the strong demand among vendors to provide franchise business loans is going to remain steady over the next 10 years to 20 years.

Much like any other business plan, one that is specific for the development or acquisition of a franchise should have a three-year profit and loss statement, cash flow analysis, balance sheet, breakeven analysis, and business ratios page. Within this document, there should also be significant amount of industry research as it pertains to the specific service at the franchise he is going to be providing to the general public. An economic analysis should also be included so that it properly discuss is what happens to the revenues during times of economic recession or during times of economic prosperity. Most private investors and financial institutions want to see a diligent overview of what the entrepreneur will do when economic times are more difficult. This is one of the key factors when a bank is determining whether or not to provide a loan for the development or acquisition of existing franchise.

If the entrepreneur is looking to acquire an existing franchise than they should be able to showcase at least two years of operating history within the business planning documents as well. These documents should be provided by both the existing owners certified public accountant as well as their attorney to ensure their accuracy. One of the key things that needs to be discussed as well as whether or not the existing franchise can properly sustain a large debt capital undertaking for the acquisition. Usually, a small table showcasing the two years of operating history are included within the business planning document. The full tax returns are usually submitted in conjunction with the business plan as standalone documents.

One of the key things to discuss in the business plan as well as the amount of fees that are commonly associated with any specific type of franchise. Usually, there is an upfront fee that allows the individual to acquire the initial franchise license. There are also usually ongoing royalty fees that are a function of the gross revenues. For most service and products based franchise systems the monthly royalty fee is usually 5% to 8% of sales. However this can vary depending on what type of services the franchisor provides to the franchisee. In some cases, these fees may be lower or higher depending on the specific gross margins generated from each product or service sold.

When obtaining the necessary financing for a franchise, within the business plan – franchisors will often provide some level of financial support for entrepreneurs. This is especially true if the individual is going to be developing a number of different locations or territories within the franchise system. A discussion of this within the business plan is important because many third parties are going to want to see that the franchisor is very committed to ensuring the success of each individual location or territory.

Within the franchise focused business plan a thorough examination of the marketing that is used promote the business should be included as well. This includes discussing the national level print advertisements, television advertisements, radio advertisements, and expansive online marketing campaigns. Most large-scale franchisors have very large and dedicated marketing departments to ensure that they are able to reach the general public very quickly. One of the best aspects of owning operating franchises that the marketing is usually handled by the parent company. While there is some level of local marketing that is done by the franchisee, almost all national level and regional level marketing and advertising activities carried out exclusively by the franchisor. This is one of the benefits to paying the monthly royalty fees that are associated with the type of business. In some cases, beyond the royalty expense and entrepreneur that owns a franchise may be required to put up some additional money on a monthly basis to contribute to a national pool of advertising funds.

In closing, a franchise business plan is very similar to that for any other type of company. The specific differences that there are a number of mentions of how this is an existing operation as it relates to being a franchise system. These are all very secure businesses given that they are able to effectively ensure that visibility and revenues are generated from the onset of operations. Most entrepreneurs that are looking to develop franchises or little bit less risky than their traditional new business startup counterparts. Franchises are expected to remain popular given their strong economic stability.