Business Plan Format

It is important to write a comprehensive business plan when seeking funding. Both banks, and from private investors, will want to read a business plan that shows in detail how you are going to develop a successful business.

The Business Plan Format detailed here is very detailed – but you need every bit of it, if you want to convince those wealthy investors to part with their money!

Introduction page

1. Name & Address of the Business
2. Names & Addresses of the owners/major shareholders
3. Nature of the business – 1 or 2 lines about the business concept
4. Statement of financing you require
5. Statement of confidentiality of report

Executive Summary (3-4 pages)

The Executive Summary should be written last, but presented first. It should capture the essence of the business concept and opportunity in a few short pages. This is what will be read first – if you can capture the investor’s interest, they will read further to fully examine the opportunity.

1. Description of Business Concept
2. Description of the Opportunity & Strategy to profit from it
3. Description of the Target Market
4. Summary of Financial Projections
5. Competitive Advantages – why you will do it better
6. Description of the Key People in the Management Team

Description of the Company & Business Concept

It is essential that you can clearly and concisely explain the business concept in a manner that is simple for others to understand and visualise. Your investors will want to fully understand the business before they will be prepared to contribute financially to the concept.

1. Description of the features (physical description of the business) & benefits (what it will do for the customer) of your product/service
2. Description of Status of product/service development (eg prototype completed/product testing completed/reaction of market)
3. Description of Business Concept testing undertaken
4. Description of Patents/Trademarks held
5. Has their been any exploration of other potential products that may evolve out of the original product?
6. Use of the Internet and other technologies for the business

Market Analysis

This is your opportunity to show that you understand who your customer is likely to be. It is not enough to say “everyone who eats” if you are entering the restaurant trade or “everyone who wears clothes” if you are opening a retail clothing store.
You might be selling brand name surfing clothing in sizes 6-10 – in which case your target market is going to be teenage girls and women under 25 years of age who are a size 10 or smaller, who value brand name casual wear, and for whom price is less important than appearance; they are also likely to live in a certain geographical proximity to the store (perhaps a 10km radius). These assumptions give you a very specific market population upon which to base your sales forecasts.

1. Description of the overall Market & Primary Market Segments
2. Detailed Description of Market Segment/s targeted
3. Demographics of Target Market
4. Target & General Market Trends
5. Market Research
   • Evidence of input from potential customers during design
   • Evidence of Concept/Product testing
   • Customer Needs Analysis
6. Customer Profile
7. Customer Buying Process
8. Entry Strategy (initial market penetration)
9. Sales Process to be used
   • How do customers make the buying decision?
   • Role of branding, if important
   • How will branding be achieved?
   • How potential customers be reached?
   • How (and why) will the products be priced.
   • General statement on advertising and promotion
   • Customer Service Policies

Industry Analysis

It is important to have a solid grasp on the status of the industry – if you are estimating a 20% per annum growth in a maturing or declining industry, you must be able to justify your estimates. In order to convince investors to part with their hard earned cash, you need to show an excellent understanding of your industry.

1. Industry Size
2. Life Cycle Stage of Industry – Future outlook/trends
3. What is the profit potential – sales patterns and gross margins?
4. What are the barriers to entering this market? What might change these barriers?
5. What is the role of technology in the industry, and how might this change?
6. What is a typical Research & Development expenditure for the industry?
7. Are Raw Materials easily available?
8. Is labour easily available?
9. Are there any labour management issues?

Competitor Analysis

One of the traps many new business people fall into is thinking that their new widget concept has absolutely no competitors. This is rarely the case. Even if the widget or service IS truly innovative, it is likely that competition exists in terms of the “make-do” solutions people have found.
In the case of a new restaurant – there are the direct competitors of other restaurants in the vicinity – but there is also competition from the take-away shop on the corner, the pre-prepared meals in the supermarket freezer, or even the fresh products at the green grocer. Any other provider of foodstuffs is a competitor, and you need to understand this in order to work out how best to communicate YOUR product in a way that attracts attention.

1. Number of competitors
2. Nature of competition? (eg.Fragmented, Monopoly)
3. Conditions of entry/exit of competitors
4. How do competitors differentiate themselves?
5. Comparison of largest 3-5 competitors on both differentiators and key success factors in industry, using a matrix format

Operating Plan

Whilst not always a vital part of a plan, the operating plan will demonstrate an understanding of the resources you will need in order for your business to succeed – and it will also show your attitude to what is important as you work to become established. An investor will not be impressed if you intend to spend their cash on vehicles and drivers for management, if there is no benefit to the business for this. Likewise, if you suggest that 10 staff can work efficiently with 5 computers and a small office, it may indicate a lack of realism in your expectations.

1. Geographic location
2. Facilities
3. Office equipment and personnel
4. Management Team
   • Roles and Responsibilities
   • Resume attached in an Appendix
5. Production Plan
   • Manufacturing process (amount subcontracted)
   • Selection of Subcontractors
   • Quality Control Process
   • Management of subcontractors
   • Physical Location of Production Plant
   • Machinery & Equipment
   • Names and suppliers of raw materials
   • What will be required for growth
6. Timeline of Major Events – may be in an Appendix
7. Risk Assessment
   • Unreliable sales forecasts
   • Competitors’ ability to respond
   • Unfavourable industrywide trends
   • Skilled worker availability
   • Raw materials shortages
   • Other

Financial Plan

As a business owner, you do not necessarily need to understand the debits and credits of double entry accounting, but you do need to understand the implications of the information provided in cashflow statements, profit and loss, and balance sheets. This is your opportunity to discuss the forecasts you are making, and to demonstrate your understanding of the impacts of various financial assumptions and decisions.

Written summary discussing the financial data supplied in Appendix A

Appendices

Appendix A – Financial Statements (monthly for first 12 months, quarterly for next 2-4 years)

• Cash Flow Projections with assumptions in footnotes
• Statements of projected Profit & Loss
• Statements of projected position (Balance Sheet)

Appendix B – Sales Projections
Appendix C – Detailed Advertising and Promotional Plan
Appendix D – Market Research Data
Appendix E – Resumes
Appendix F – Leases or contracts
Appendix G – Price lists from suppliers

If you follow this business plan format, you will certainly cover all bases, and should have sufficient evidence to obtain funding from any source.