What is a Business Plan?
A business plan outlines your ideas for your business - what you want to do and how you are going to do it. It doesn't have to be a long, intimidating document with countless charts and graphs. Rather it is a concise, coherent report that organizes all the information from your research. It explains how you will start and operate your business. Your business plan provides you with the opportunity to assess whether your idea will work and how you will make that idea a reality.
Remember, the important point of your business plan is the quality of the information you gather not quantity of information you include.
Once you have created your business plan, don't put it on a shelf and forget about it. Review it regularly and revise it when necessary. As your business grows and evolves and as market conditions change, you will need to make adjustments to your strategy. Your business plan will help remind you of your initial goals and guide you as you make adjustments in your business.
Why Do I Need One?
There are several reasons to write a business plan:- The planning process helps you think through your business idea carefully and in detail.
- Planning motivates you to gather as much information as you can.
- Planning provides you with the opportunity to evaluate your entire business idea. Is it likely to be successful?
- Planning helps you recognize your proven strengths and management abilities and where you need more help, information or experience such as training, skills, industry experience, knowledge, education or outside expertise.
- Planning helps you stay organized and focused on what you are doing and what you want to accomplish.
- Planning helps you be clear about your vision and ideas. This will allow you to communicate them clearly to anyone connected to your business, or to outsiders such as suppliers, investors or financial institutions.
- Planning decreases the risk of oversights, errors and unpleasant surprises and increases the opportunities for business success.
- A business plan provides important information required for the process of obtaining the necessary financing from outside sources.
What Does a Business Plan Include?
How much information you include in your business plan depends on the kind of business you are starting, its size and complexity, the type of products or services, location and the business structure. The following are elements common to most business plans:- Cover Page - Identifies the business name and lists the principals (name, address, contact information)
- Table of Contents - Identifies page-by-page what is included in your plan
- Executive Summary - This is a one- or two-page overview that briefly describes the business, highlighting how the business will operate and why it will succeed. Complete this section once you finish the business plan.
- Business Concept - A concise description of your business – it identifies the product or service you provide.
- Marketing Strategy - Identifies your customers, competitors and your market. It also outlines the methods you will use to reach your customers. There are two components of your marketing strategy:
- Market Research and Analysis
Helps determine if your business idea can be profitable by gathering information about the market, potential customers and your competition.
- Marketing Plan
This is the 4Ps of Marketing: this plan identifies your product, how you will let your customers know you have something for sale (promotion), how you will distribute it to your market (place), and how it will be priced.
- Operations Plan - Describes the nuts and bolts of how you will operate your business. It includes location, equipment requirements, name registration, management structure, company structure (sole proprietorship, corporation, partnership), hours of operation, licenses and permits required.
- Financial Plan - Also known as your cash flow. It shows how much you will make each month by selling your product or service. It also shows all the expenses associated with producing and marketing your product/service.
- Risk Analysis - Outlines your strengths and areas of potential weakness. It shows how you will address weaknesses or changes in your market.
- Appendices - Includes supporting documents such as:
- Resumes of the management team and key personnel
- Copies of certificates, diplomas, degrees, professional certification
- Pictures of your products and technical data
- References
- Press releases
- Legal documents including lease agreements, franchise agreements, licenses, contracts
- Incorporation documents, partnership agreements, copy of registered trade name (if applicable), business name registration
- Personal statement of financial affairs (if applying for financing)
- Projected financial statements
- Plan to Purchase an Existing Business
If you are planning to purchase an existing business, you still require a business plan. In addition to the points outlined above, you will also be required to:
- Provide completed, accountant prepared financial statements, including the last two years of Balance Sheets and Income Statements.
- Obtain an independent appraisal of the value of assets, excluding goodwill and other intangible items.
- Negotiate legally binding terms with the vendor. The vendor must be willing to accept repayment terms that allow for positive cash flow for the purchaser.
- Obtain legal purchase agreement from the vendor on the following:
- Non-competitive clause
- Management support and non-financial assistance (Letter of Undertaking)
- Confirmation that no legal action is pending or threatened which could negatively impact the assets being contemplated for purchase (Sworn Statutory Declaration)
- Renegotiate the lease if commercial premises are involved.
Applicants are responsible for all legal, accounting and appraisal costs. However, these expenditures will be considered as part of their equity contribution.
